Pretoria – President Jacob Zuma on Saturday welcomed the decision by Standard and Poor’s (S&P) to maintain South Africa’s investment rating.
“I congratulate Team South Africa constituted by government, business, and labour for the sterling work that has been done over the last few months to turn our economy around,” he said in a statement.
“The decision by Standard and Poor’s tonight [Friday], which follows on the footsteps of yet another encouraging decision by Moody’s [Ratings], demonstrates that working together we can reignite our economy, attract investment, and create jobs for our people.
“Let us use these positive developments to work even harder together to move South Africa forward,” Zuma said.
On Friday, S&P affirmed South Africa’s long- and short-term foreign and local currency bond ratings at “BBB-/A-3” and “BBB+/A-2” respectively, but warned that the outlook remained negative.
The foreign currency bond rating would remain one notch above sub-investment grade whereas the domestic currency bond rating would remain three notches above sub-investment grade.
At the same time, S&P affirmed the “zaAAA/zaA-1” South Africa national scale ratings.
S&P said in a statement South Africa’s low gross domestic product (GDP) growth was putting the country’s economic metrics at risk and could eventually weaken the government’s social contract with business and labour.
The ratings agency also said the rising political tensions were accentuating vulnerabilities in the country’s sovereign credit profile.
Still, S&P said the energy sector improvements would likely reduce some of the economic bottlenecks and pending finalisation of labour and mining reforms could engender a positive confidence shock.
On the fiscal side, S&P said the government was showing greater resolve to reduce fiscal deficits at a faster pace than expected.
“We are therefore affirming our ‘BBB-/A-3’ foreign currency and ‘BBB+/A-2’ local currency ratings on South Africa. The outlook remains negative, reflecting the potential adverse consequences of low GDP growth and signaling that we could lower our ratings on South Africa this year or next if policy measures do not turn the economy around.”
African News Agency (ANA)