Fitch will lower the rating by only one level if it decides to reduce it on June 5, Richard Fox, head of sovereign ratings for Middle East and Africa, told reporters on Tuesday in Johannesburg. Weak economic growth is weighing on the rating, he said.
“The pressures on South Africa’s rating are slow-acting,” Fox said. “One possible outcome in June is to affirm the rating, just with a negative outlook, as we did December, or obviously we can consider negative rating action.”
Fitch rates South African debt at BBB, the second-lowest investment-grade level and on par with Moody’s Investors Service, with a negative outlook. Standard & Poor’s lowered its assessment for South Africa in June to BBB-, one level above junk.
“The pressures on South Africa’s rating are long-term,” Fox said. “It’s rarely one indicator or one event which results in a rating action. This concept of junk is something that is not on our radar screens at this stage.”
Power shortages are curbing growth in Africa’s second- largest economy, which the government estimates will expand 2% this year, down from a previous forecast of 2.5%.
The damping effect of power shortages on growth “has intensified in recent months,” Carmen Altenkirch, a director at Fitch, said. “It’s also clearly having an impact on investor confidence.”
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