Johannesburg - S&P Global Ratings has said it saw little progress on economic reforms that the government promised in the past.
S&P’s associate director, Gardner Rusike, said yesterday that while the agency had seen how difficult it was for government to unwind its cyclical fiscal policy, there was still a need for destabilised debt coupled with the National Treasury implementation of fiscal consolidation plans.
Rusike told S&P’s fourth annual insurance seminar in Johannesburg that fiscal stance, political risk and economic growth were key concerns.
“We’d like to see government do the things they said they would do, and it will help us understand that the economy can improve,” he said.
The Treasury last week lowered its growth forecasts until 2018 and projected wider fiscal deficits. It expected a fiscal gap of 3.4 percent of gross domestic product in the current year, and that it would narrow to 2.7 percent by 2019.
In February, the Treasury targeted a deficit of 3.2 percent this year, 2.8 percent in fiscal 2018 and 2.4 percent in 2019.
Tax target
However, the forecast was declined by 0.4 percentage points for each year until 2018, with an expansion of 0.5 percent projected this year.
The stagnant economy has weighed heavily on tax collection, with the Treasury announcing that it would miss its February R23 billion target.
Rusike said the pressure on tax could result in a downward revision and push out debt stabilisation ratio into outer year.
He said state-owned enterprises, particularly Eskom and SAA’s weak balance sheets could contribute to economic risk and that political risks could influence ratings. “It is important that we see checks and balances are in place to enable government to pursue policies that grow economy.”
S&P, which rated South Africa’s outlook at BBB-, said despite the economic growth and political noise, banks continued to performed well.
Robert Vivian, an associate professor for finance and insurance at Wits’ School of Economic and Business Sciences, told the seminar the deteriorating balance of payments and use of state power for personal gain was problematic. He said the #FeesMustFall movement, to which the government last week allocated an additional R17bn over the next three years was an example of how students used state power for individual gain.
BUSINESS REPORT