S&P Global affirms SA’s rating and outlook

S&P Global Ratings has retained its positive outlook on SA’s credit rating, citing the country’s strong financial markets and an improved fiscal and debt position.

The rationale for the decision also highlighted progress being made on economic reforms which could help “cushion against rising external financing risks”, S&P said in a report released late on Friday.

“Although power and logistical bottlenecks continue to weigh on the economy, we expect that government measures to increase private sector activity and reform some key government-related enterprises could support stronger growth outcomes over the next two to three years,” it said.

S&P did however say SA was far from being out of the woods, with a number of threats remaining, including a slowing global economy.

In its downside scenario it warned: “We could revise the outlook to stable if external or domestic shocks subdue SA’s economic growth over the forecast period, or if fiscal financing or external pressures significantly increase. This could, for example, result from a sharper global economic downturn, particularly in China,” the agency said.

China is the largest buyer of the commodities SA mines.

The country’s energy crisis, which has resulted in more rolling blackouts this year than in any other, remained a threat as do ongoing public sector wage talks, S&P said.

The agency forecasts SA’s economy will grow 1.9% in 2022, falling to average 1.7% from 2023 to 2025.

The rand firmed following the decision and at the 12.05am close was 1.12% firmer at R17.16/$, its best close in more than two months.

The Treasury responded to the decision saying that S&P “notes that higher-than-expected tax revenue, relative to the agency’s expectations six months ago, will help to reduce the fiscal deficit as a proportion of GDP”.

“Government's medium-term fiscal strategy prioritises achieving fiscal sustainability by narrowing the budget deficit and stabilising debt; increasing spending on policy priorities such as security and infrastructure, thereby promoting economic growth; and reducing fiscal and economic risks, including through targeted support to key public entities and building fiscal buffers for future shocks,” it concluded.

lindera@businesslive.co.za