South Africa Needs Improvement in Next Six Months, S&P Says

Johannesburg, South Africa, Capital Markets in Africa: South Africa’s government needs to implement the reforms it promised to boost growth between now and December, S&P Global Ratings sovereign analyst Gardner Rusike said.

“We are looking at improvements between now and the next six months,” Johannesburg-based Rusike said on a conference call with reporters on Monday. If the “government moves on to clarify some of the policy areas, it helps on confidence and it helps on investment, which to us would ultimately help the overall growth level of the economy.”

S&P affirmed South Africa’s BBB- rating, on par with India and Italy, with a negative outlook, on June 3 and warned it could cut the assessment if the economy doesn’t improve or if institutions become weaker due to political interference affecting the government’s policy framework. The rating company’s next review is due in December.

Finance Minister Pravin Gordhan has met with business and labor leaders and investors to come up with measures to boost growth and improve sentiment. In his February budget the minister pledged to narrow the fiscal deficit and limit gross debt to 50.5 percent of gross domestic product by 2019.

Slow economic growth and political upheaval including court rulings against President Jacob Zuma and reports that Gordhan could be prosecuted have weighed on confidence in the South African economy. Gordhan was reappointed on Dec. 13 to the position he held from 2009 until 2014 after business and ruling party leaders forced Zuma to reconsider a decision four days earlier to replace Nhlanhla Nene as finance minister with a little-known lawmaker.

“It is important that we try and analyze the potential impact of the political risks on the economic assessment,’’ Rusike said. “The issues around the political risks increased since Dec. 9 and also around the issues of the Constitutional Court ruling.’’

Economic growth is an important part of S&P’s rating assessment for South Africa, Rusike said. While the rating company cut its forecast for 2016 expansion to 0.6 percent from 0.8 percent, it doesn’t expect a recession in Africa’s most industrialized economy, he said.

Moody’s Investors Service kept its assessment of the country’s creditworthiness at two levels above junk last month, after putting it on review for a downgrade. Fitch Ratings Ltd. has reviewed its BBB- rating, on which it has a stable outlook, in recent weeks and hasn’t said when it will publish the results of its analysis.

Source: Bloomberg Business News