Pretoria - The government was trying to address the concerns that led to the Fitch ratings agency downgrading South Africa's sovereign debt on Thursday, the Treasury said.
“The South African government is consistently making efforts to address the concerns identified in Fitch's rating review which is aimed at mitigating growth and socio-economic concerns,” the Treasury said in a statement.
Fitch announced it had downgraded South Africa's long-term foreign currency credit rating to BBB, meaning medium-class and currently satisfactory. This was a depreciation by one unit from South Africa's prior classification as BBB+.
South Africa's short-term credit rating also declined slightly, from F2 to F3. This meant the quality grade was reduced and that, while South Africa had adequate capacity to meet its obligations, present conditions could affect this in the short-term.
Fitch said diminished economic growth could affect the country's public finances and exacerbate social and political tensions. There had also been a decline in competitiveness, due to wage settlements being higher than productivity. In addition “infrastructure constraints” had contributed to a widening current account deficit.
“Fitch has indicated that the stable outlook is due to its belief that South Africa's credit strength will limit the speed, magnitude and the likelihood of a further potential downgrade over the typical two-year outlook horizon.”
The Treasury said the downgrade had its roots in economic troubles facing the Eurozone, one of South Africa's major trading partners. The government was aware of South Africa's twin problems of poverty and unemployment, and the National Development Plan, adopted by the ruling party, intended to address these.
“The (ANC's Mangaung) conference resolutions give certainty on economic policy, which the Fitch report does not seem to fully appreciate,” the Treasury said.
The 2012 Medium Term Budget Policy Statement showed the government's intention to maintaining debt and spending growth within sustainable levels. - Sapa