Johannesburg - Fitch Ratings threw the South African government a lifeline yesterday, announcing that it had affirmed the country’s long-term foreign and local currency issuer default ratings at BBB and BBB+, respectively. It affirmed South Africa’s outlook as stable.
The announcement, in which Fitch said it expected South Africa’s gross domestic product growth to be 2.8 percent next year and 3.5 percent in 2015, averts fears of a downgrade for South Africa. A downgrade would have been a further blow to the country’s listless economy.
In January, Fitch was the last of three rating companies to downgrade South Africa’s debt, lowering it to BBB, the second-lowest investment-grade level.
It changed the outlook on the rating to stable from negative at the time, while Standard & Poor’s and Moody’s Investors Service had the rating on a negative watch.
At the time, slower growth in Africa’s biggest economy had “negative implications for debt dynamics”, Fitch said.
Yesterday’s announcement was welcomed as “fair” by the National Treasury, “in view of the global economic climate and the South African government’s commitment to its counter-cyclical fiscal policy stance”.
“Among positive factors influencing Fitch’s ratings affirmation were a strong banking system and deep local capital markets,” the Treasury said last night.
“The ratings agency said government debt was largely denominated in local currency and has a high average maturity and this limited exchange rate and financing risk.
“Weak economic growth and a widening current account deficit were downside drivers preventing the economy from achieving a more positive rating.
“The government is committed to consistently making efforts to address the concerns identified in Fitch’s rating review, which is aimed at improving investor confidence.” - Business Report