Pretoria - Government will engage ratings agency S&P Global on their areas of concern, while taking steps to restore South Africa's investment grade credit rating - a top priority, the National Treasury said.
"Government notes S&P’s decision to affirm South Africa’s long-term foreign and local currency debt ratings at "BB" and "BB+" respectively, and to maintain the stable outlook," the Treasury said in a statement.
According to S&P, the rating affirmation was underpinned by the following drivers:
- "Despite upward revisions, South Africa's economic growth remains tentative, and government's debt burden continues on a rising path.”
The ratings agency indicated that “South Africa’s ratings are constrained by the weak pace of economic growth, particularly on a per capita basis, as well as its large fiscal debt burden and sizable contingent liabilities”; and
- “After the recent political transition, authorities are pursuing key economic and social reforms, but we consider the economic and social challenges the country faces as considerable.”
The Treasury said the stable outlook reflected S&P’s view that “economic growth will pick up modestly over the next year, while government debt will remain above 50 percent of GDP. The outlook also reflects government commitment to pursue economic and social reforms”.
According to S&P, “the ratings are supported by the country's monetary flexibility, large domestic financial sector, and deep capital markets, alongside moderate external debt, with very low levels of external debt denominated in foreign currency”.
The Treasury said government noted S&P’s assessment of challenges and opportunities the country faced in the immediate to long-term and was determined to achieve improved ratings in the period ahead.
Since the elective conference of the governing African National Congress in December 2017, both business and consumer confidence had improved. The February 2018 budget further supported the improved investment climate in the country.
In support of inclusive growth, underpinned by the National Development Plan (NDP), the following progress, among others, had been achieved thus far:
- The appointment of a new board and permanent chief executive officer at Eskom in addition to the signing of all outstanding power-purchase agreements with independent power producers;
- The appointment of new boards at South African Express (SAX), Denel, and Transnet, coupled with ongoing appointments of competent individuals at executive management level;
- The appointment of an acting commissioner at the South African Revenue Service;
- The appointment of the new head of the Directorate for Priority Crime Investigation, also known as the Hawks;
- The parliamentary process under way on land reform;
- To date, the budget facility on infrastructure had considered 64 large infrastructure projects of which 38 had been assessed;
- Public sector wage negotiations were concluded on May 21 with the tabling of a multi-year wage agreement without disrupting the compensation ceiling. Parties had up to 21 days to sign the wage offer;
- The Financial Sector Regulation Act was signed into law in August 2017, which aligned the financial sector practices in South Africa with global best practice; and
- The Insurance Act was signed into law in November 2017 which made the industry more accessible to new entrants and aligned the sector with international standards.
"Going forward, government will engage S&P on their areas of concern. Taking steps to improve business confidence even further, achieving higher economic growth, fast-tracking the SoC [state-owned companies] reform agenda, and ultimately restoring the country’s investment grade credit rating remains a top priority.
"In pursuit of this agenda, government will enhance its collaboration with business, labour, and civil society in positioning South Africa as an attractive investment destination while also creating an enabling policy environment for inclusive economic growth," the National Treasury said.
African News Agency/ANA