President Jacob Zuma has welcomed the decision by Standard and Poor’s (S&P) to maintain South Africa’s investment rating at BBB-. However, the agency report also included a gloomy outlook.
“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 at the weekend.
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” but warned that the outlook remained negative.
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.
It added that the rising political tensions were accentuating vulnerabilities in South Africa’s sovereign credit profile.
Zuma is the problem
The agency’s pessimistic outlook was echoed by Nomura analyst Peter Attard Montalto.
“We still firmly believe that South Africa’s propensity to make policy mistakes, the lack of key reforms, and uncertainty in the economy mean that we are on a near inevitable path towards sub-investment grade,” Montalto said. “The politics just don’t allow National Treasury the space to be ‘good’ at growth-boosting reforms.”
Those ‘politics’ include President Zuma facing calls for his resignation amid nearly 800 corruption charges dating back 16 years.
bk/jm (Reuters, AFP)