SA’s ratings by Fitch remain one notch below investment grade

According to Fitch, South Africa’s ratings are constrained by low growth potential, high and rising government debt, large contingent liabilities, as well as the risk of rising social tensions due to extremely high inequality.

Government has noted rating agency Fitch's decision to affirm South Africa's long-term foreign and local currency debt ratings at 'BB+' and maintain the negative outlook.

The country's foreign and local credit ratings by the agency, therefore, remain one notch below investment grade.

According to Fitch, South Africa's ratings are constrained by low growth potential, high and rising government debt, large contingent liabilities, as well as the risk of rising social tensions due to extremely high inequality.

National Treasury in a statement said the ratings remain supported by strong macroeconomic institutions, a favorable government debt structure and deep local capital markets. The negative outlook reflects uncertainty about the ability of the government to stabilize public debt over the medium term.

"Government remains committed to the stabilization and improvement of its fiscal position. The agency acknowledges the government's plans to stabilize its finances in order to achieve a balanced primary budget balance.

"Further, the government will continue to work hand-in-hand with unions to manage the growth of the public sector wage bill in order to reduce government's debt burden," said National Treasury.

The ministry said the government is also cognizant of the pressures and risks that State-owned companies, particularly Eskom, present to the fiscal framework.

"Government is providing medium-term support to Eskom to secure energy supply and to honor the State's contractual obligations. National Treasury, in partnership with the Department of Public Enterprises, is instituting a series of measures to bring discipline to the utility's finances, and to step up the timeline for restructuring," said Treasury.

The ministry said continued collaboration between government, labor, business, and civil society is essential in order to successfully implement all fiscal measures and growth-enhancing reforms.

(With Inputs from South African Government Press Release)