South Africa’s credit rating could get downgraded deeper into junk status if political uncertainty triggered by the recent firing of the finance minister stalls reforms needed to grow the economy, an executive from S&P’s Global Ratings said on Wednesday.
“There are risks that potential growth outcomes could be weakened, especially with uncertainty that’s been brought along in a year where you may not get strong decisions for strong reform programmes,” said Gardner Rusike, the associate director and lead analyst for South Africa at S&P’s.
S&P’s downgraded South Africa’s sovereign credit rating to BB+ with a negative outlook from BBB- grade on April 3, saying the firing of its internationally respected finance minister Pravin Gordhan posed a major risk to fiscal policy.
New Finance Minister Malusi Gigaba has said Treasury is committed to fiscal consolidation plans outlined in the 2017 budget after S&P’s and Fitch downgraded the country to sub-investment grade.
Rusike said political jostling ahead of the ANC’s conference at year-end, where the party will elect leaders to contest general elections in 2019, was likely to distract government from implementing economic reforms.
“We’ve had three downgrades over the last four or five years which means that the credit story for South Africa has been deteriorating.”The country’s net debt currently sits just below 50% of GDP, at around R2.2-trillion ($165-billion), and in recent budgets the treasury has said the cost of servicing that debt has been one of the fastest growing items.
