Cape Town - Friday's downgrades by ratings agencies S&P Global and Moody's Investors Service is a vote of no confidence in the Presidential Fiscal Committee (PFC), the Democratic Alliance said on Saturday.
Finance Minister Malusi Gigaba’s strategy to delay the hard decisions necessary to hold the fiscal line and allow the budget to “blowout” with national debt ballooning to R3.4 trillion, or 60 percent of GDP in 2020/21, had backfired, DA spokesperson David Maynier said.
"The major ratings agencies, which used to give us the benefit of the doubt, have finally lost patience," he said.
On Friday, S&P Global lowered South Africa’s long-term foreign and local currency debt ratings by one notch each to "BB" and "BB+" respectively, citing weak real nominal GDP growth that had led to further deterioration of South Africa’s public finances beyond the rating agency’s previous expectations.
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Nonetheless, the rating agency changed the outlook to stable from negative, saying the stable outlook reflected their view that South Africa's credit metrics would remain broadly unchanged next year, and political distraction could abate following the African National Congress's elective conference in December, helping government focus on designing and implementing measures to improve economic growth and stabilise public finances.
Also on Friday, Moody's Investors Service placed South Africa’s long-term foreign and local currency debt ratings of "Baa3" on a 90-day review for a downgrade. The ratings carried a negative outlook.
According to Moody’s, the decision to place South Africa’s rating on review for a downgrade was prompted by a series of recent developments which suggested that South Africa’s economic and fiscal problems were more pronounced than Moody’s had previously assumed. According to the rating agency, growth prospects were weaker and material budgetary revenue shortfalls had emerged alongside increased spending pressures.
Maynier said the bottom line was that the ratings decisions of the two most important ratings agencies amounted to "a vote of no confidence in the new and mysterious Presidential Fiscal Committee’s capacity to stabilise public finances over the medium-term in South Africa".