Cape Town - Despite a need for the growth rate of the economy to improve, a downgrade by rating agency Standard and Poor’s (S&P) is highly unlikely.
This is according to Econometrix chief economist Azar Jammine, who said Finance Minister Pravin Gordhan’s attempts to restore fiscal discipline and reduce the government’s expenditure would count in our favour.
Read: Weak rand sours mood ahead of ratings review
“Even if we are downgraded, the other two rating agencies (Moody’s and Fitch) also have to be considered.”
Black business chair Mohale Ralebitso agreed that while S&P would keep a watch on South Africa, they would not downgrade the country.
S&P was due to announce the country’s rating today. SA’s rating is currently one level above junk status.
“Our institutions by and large work. Revenue collection is also running ahead of forecast, with marginal but important reductions in spend growth. Government, business and labour are working together to tackle national issues, even if they are yet to deliver measurable impact, is an an important consideration in both a maintained and downgrade scenario.”
At a conference to measure the potential impact of an investment ratings downgrade, Nedbank chairman Mike Brown said numerous initiatives are under way to boost investor confidence and catalyse employment in key sectors. This came from an enormous effort by government and business.
Deputy director-general Monale Ratsoma said the Treasury had been taking steps to avert a downgrade.
“While South Africa is getting some things right, we need to re-engineer and shift our economy. Our challenges include a volatile global environment, lower commodity prices, little room for fiscal or monetary stimulus.”
The Treasury also planned to improve SMEs with a special fund. The private sector has already committed R1 billion towards this initiative.
“When we achieve growth, it is for our prosperity. Ratings outcomes are a positive affirmation, not an end in themselves,” said Ratsoma.
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