Fitch Ratings affirms SA's rating at BB+

Fitch Ratings has affirmed SA’s credit rating of junk status‚ warning of low growth and “sizeable government debt”.

The rating agency also highlighted that SA had the “highest inequality in the world”.

“The affirmation and stable outlook takes into consideration signs of recovering governance standards and the prospect of a mild cyclical recovery but also indications that financial challenges at key state-owned enterprises (SOEs) remain substantial and the fact that government debt has yet to stabilise‚” it said.

Last month‚ SA received a reprieve from S&P Global Ratings‚ which left the country’s credit rating unchanged‚ in line with market expectations‚ affirming its long-term foreign and local currency sovereign credit ratings at BB and BB+ respectively‚ with a stable outlook.

Earlier in 2018‚ following President Cyril Ramaphosa’s election‚ Fitch said it expected growth to rise slightly on favourable sentiment from investors and business‚ but warned that it was still too low.

While SA has made strides in recent months‚ including a Cabinet reshuffle in which key positions changed‚ a focus on tackling corruption through changes in the boards of major SOEs‚ and an inquiry into tax administration‚ economic growth contracted in the first quarter of the year. Policy uncertainty around the Mining Charter and land reform has also continued to linger.

Despite the headwinds of recent weeks‚ which have raised questions about whether the shine is starting to come off Ramaphosa’s appointment‚ Johann Els‚ head of economic research at Old Mutual Investment‚ said SA would still see a recovery‚ providing a strong case for Fitch to maintain its rating.

“Eskom’s proposed wage freeze and South African Airways’ planned staff cuts‚ while negative for workers‚ show that SOE challenges are being faced. In addition‚ recent labour reform has been a positive step‚ and the public-sector wage negotiations have been resolved without strike activity. New SOE board appointments and the S&P ratings view are also encouraging signs‚” he said.

FNB chief economist Mamello Matikinca said as with S&P‚ there was unlikely to be a rating change apart from an acknowledgement that the outlook‚ following the ANC elective conference‚ had improved.

Fitch downgraded SA weeks after the firing of Pravin Gordhan as finance minister in 2017 but spared the country in its November review.

- BusinessLIVE