Finance Minister Pravin Gordhan arrives at Parliament in Cape Town to deliver his Budget speech on February 24, 2016. Picture: Schalk van Zuydam, AP

#Budget2016 / Johannesburg - Standard & Poor’s said South Africa’s budget targets were mainly in line with the company’s forecasts, and an immediate credit-rating action is not required.

South Africa’s rating of BBB-, one level above junk, is “not immediately affected by the National Treasury’s 2016 budget”, S&P said in a statement on Thursday. The fiscal targets outlined by Finance Minister Pravin Gordhan on Wednesday weren’t reviewed by a ratings committee for action, it said.

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Gordhan, 66, pledged in his budget to bring the fiscal deficit down to 2.4 percent of gross domestic product over the next three years by curbing the civil service and raising taxes. He said in an interview on Wednesday that the fiscal plan was a credible one to stave off a rating downgrade to junk.

“We need to demonstrate it to ourselves as South Africans that we can put a package together, both in terms of our plans and financing those plans, that are credible, that are sustainable and that are viable,” Gordhan said. “I think we’ve managed to do that.”

Investors had expected bolder steps from Gordhan in the budget, including more significant tax increases and state asset sales to boost revenue. The rand slid the most of all major currencies against the dollar on Wednesday, plunging as much as 3.5 percent versus the US currency, while bond yields jumped.

Standard & Poor’s has a negative outlook on its rating, while Fitch Ratings has a stable outlook on its equivalent assessment of BBB-. The two companies are due to publish reviews of their ratings in June and December. Moody’s rates the nation’s debt two levels above junk, with a negative outlook.

The rand erased earlier losses after S&P’s comments, gaining 0.3 percent to 15.5452 against the dollar as of 3.10pm in Johannesburg on Thursday.

“The key problem of South Africa is long-standing, slow growth experience,” Moritz Kraemer, chief ratings officer for S&P, said in an interview on Bloomberg TV on Thursday. “Without the growth, it is very hard to consolidate public financing.”

Gordhan forecast the budget shortfall will narrow from an estimated 3.9 percent of GDP this year, based on the view that economic growth will more than double from a projected 0.9 percent in 2016 to 2.4 percent in 2018.

“The announced budget lacks significant policy announcements that we think would immediately spur GDP growth, or provide much-needed business confidence to the private sector,” S&P said in its statement.

Gordhan was reappointed to his post in December after President Jacob Zuma was forced to backtrack on a decision to fire Nhlanhla Nene as finance minister and replace him with a little-known lawmaker. Gordhan had been in the job from 2009 until 2014.

“If we do not get above 0.9 percent growth in the next year or two, we will have to do more of this balancing act, more of cutting expenditure and more of raising revenue,” Gordhan said at a post-budget breakfast meeting in Cape Town on Thursday.