South Africa's budget was an exercise in 'fiscal control' - S&P Global Rating

South Africa's 2021 budget did not focus enough on economic reforms, making a sustained rebound in its gross domestic product unlikely, S&P Global Ratings said on Tuesday.

"There's been some new momentum on pushing structural reforms ... but it's still reasonably thin, and again the budget was more a sort of fiscal control exercise rather than a structural reform exercise," said S&P analyst Ravi Bhatia, during a webinar.

"So there is no reason to really expect a big, sustained rebound in the growth trajectory going forward. So that is concerning." In November, S&P affirmed its long-term foreign-currency rating of BB-, or three notches below the investment grade. It kept the country's local currency debt at BB, both with a stable outlook. Fitch and Moody's also rank South Africa's debt junk.

The response to Finance Minister Tito Mboweni's budget, where he promised a steady stabilisation of the country's yawning fiscal deficit and debt stock, has been lukewarm from ratings agencies and investors.

S&P said it could raise the credit rating if economic reforms materialised and boosted per capita incomes, giving government space to raise tax revenues. But it warned bailouts to state-owned companies, especially power utility Eskom, remained a big risk.

"South Africa has shied away from significant structural reforms, which would lead it to a big growth rebound," said S&P's Bhatia.

"There's been a slow, step-by-step approach ... and there hasn't been big labour market reform, either."