S&P says SA rating not yet near an upgrade

Ratings agency forecasts GDP to grow at 2% in 2018.
Picture: Moneyweb

South Africa needs stronger per capita economic growth before its credit rating can be upgraded, S&P Global Ratings said on Tuesday.

S&P downgraded South African debt to junk last year, citing a deterioration in the economic outlook and public finances. The agency will publish its next rating review on May 25.

S&P said other factors that could contribute to an upgrade in South Africa’s rating included faster debt stabilisation than currently planned.

The rating agency said it now forecasts South Africa’s gross domestic product will grow 2% in 2018, up from 1% previously. Growth of 2.1% is expected next year, up from a prior forecast of 1.7%.

Economic growth of just above 2%, or 0.5% in per capita terms – is low for a country at South Africa’s income levels, and not enough to reduce its high unemployment, S&P said.

The growth forecasts were raised partly because investor sentiment has strengthened by a change in South Africa’s leadership and ensuing policy announcements, S&P said.

Cyril Ramaphosa replaced scandal-plagued Jacob Zuma as president this year. Zuma resigned in mid-February on the orders of the ruling African National Congress party.

“We are now probably in a good situation that supports our stable outlook, but we are not yet anywhere near going upwards as far as the rating is concerned,” said S&P Global sovereign analyst Gardner Rusike.

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We were downgraded end of last year and just escaped another downgrade now.Do you seriously expect an upgrade already??!!

This is a very expensive lesson that the ANC, EFF, BFLF, etc needs to learn. When a ruling party let loose despots like Jacob & company to make unsustainable government policies and to deplete the finances of the country, the result can only be quick government bankruptcy and a junk rating status.

To get out of such a mess are never fast or easy. It will take years to taper down the over-stretched budget, to rid the government and SOE’s of fraud and corruption, to get government debt under control, to invest in and expand the economy, to build up healthy financial reserves, to lower unemployment and eventually get the world to re-rate and re-invest in S.A. again. It cannot happen in 2018, it is not possible.

The BFLF takes NO notice of ratings agencies – they live in a space that only caters for ACTION (of the violent type) to grab land at all and any cost. Production on the land isn’t a big deal to them.

End of comments.

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