Johannesburg - South Africa is making little progress in turning around the economy as political wrangling delays the implementation of reforms, raising the risk of a credit downgrade to sub-investment grade, S&P Global Ratings said on Thursday.
“If things deteriorate further it becomes difficult to continue believing that government can implement the things they say want to do, that they can turn around the economic situation,” said Gardner Rusike, the associate director for S&P global ratings.
On Tuesday, a Moody's representative said South Africa measures favourably in most indices bar economic growth, which the Treasury has forecast will be 0.5 percent this year.
Moody's rates South Africa two notches above subinvestment grade with a negative outlook and is due to publish its next review in December. Fellow ratings firms S&P's and Fitch have the country just a step above junk.
The three agencies have warned that increased political infighting along with slowing growth could trigger downgrades.
"South Africa is doing relatively well in a lot of the indices when you strip out growth... and when we look at a sovereign rating you've got to look through the cycle," Moody's country representative Sylvia Chahonyo told a business conference.
At his budget speech last week Finance Minister Pravin Gordhan called for an end to "political noise" to help the economy recover and avoid downgrades.
The state prosecutor on Monday dropped fraud charges against Gordhan, executing a U-turn in a case that has rattled financial markets and drawn accusations of political meddling.
Investors have worried that Gordhan - who had brought some stability to South African markets since returning to the post during a currency crisis in December last year - would be removed from his job if he was prosecuted.
Supporters of Gordhan and sympathetic financial analysts say all the charges could be a ploy by President Jacob Zuma and his allies to discredit a finance minister who stood in the way of their securing access to lucrative government contracts.
The president has denied that he is in conflict with Gordhan.
Deloitte's Managing Director for Africa and Emerging Markets, Martyn Davies, told the conference that with Gordhan still at the helm, Africa's most industrialised country would avoid downgrades by the "skin of our teeth".
REUTERS