SA has at last emerged from the latest round of ratings agency reviews relatively unscathed and, crucially, with its investment grade rating from all three of the major agencies intact.

That is a most welcome reprieve, and Finance Minister Pravin Gordhan and the team of business and labour leaders he has been working with deserve to be commended for their collaboration and the intense effort they have put into averting a downgrade.

The tone of Friday evening’s rating report from S&P serves as a firm reminder, however, that they may have to work a lot harder next time. The report was remarkably negative given that the agency chose to affirm rather than downgrade SA’s foreign currency rating, which is just one notch above subinvestment grade and on negative outlook.

That negative outlook, which was put on SA’s rating a year ago, has a 24-month timeline. So we have just one more year for S&P to resolve it one way or the other — by either downgrading SA to subinvestment grade (junk status), or by putting it back on stable outlook. So the clock is ticking.

The negative tone of the report was in part why S&P did downgrade SA’s local currency rating, which, quite unusually, had been two notches above the more widely watched foreign currency rating. It said much about SA’s strengths that the local rating, which covers rand-denominated debt issued in the domestic market, was so high.

Now we are losing that advantage, in part because of our fiscal woes, but also because we are dependent on constant and large inflows of foreign capital to finance our deficit, at a time when SA is not particularly important or especially attractive to investors.

The move is a reminder too that while most of us watch the foreign currency rating, only 10% of SA’s government debt is foreign. And the local currency rating is quite important to SA, given that foreign investors own more than a third of our local currency debt.

SA has won out in the latest round thanks to its commitment to fiscal consolidation, despite a weak economy, as well as the strength of its institutions — S&P cited the judiciary and the Reserve Bank in particular. And though SA’s political "noise" has clearly been a concern in the latest six months, S&P and Moody’s have discerned at least some constructive signs amid the noise. That is in the release of the public protector’s State of Capture report, for example, and generally in the signs, however mixed, that SA still has some crucial checks and balances on the abuse of power.

S&P has taken it as a positive too that SA’s balance of payments position has improved somewhat since its last review in June.

Yet the concerns loom as large as ever. For S&P, as for the others, growth is top of the list. It is not just that SA’s growth rate is extremely weak but that there is little prospect of it improving even to the 2% level in the next few years. That will make it extremely challenging to fix the public balance sheet.

Nor is there much sign of the structural reforms that SA has long promised it will implement to boost the growth rate.

What is more, SA’s fraught political landscape is the big concern for S&P, as for the others, because there will not be much policy implementation or private sector investment in this political climate.

S&P sounded all the same warnings on Friday that it did six months ago and while things had not become any worse in the past six months — hence the rating reprieve — they had hardly improved. So the prospect of a downgrade to junk status in the next 12 months still looms. Unless the government starts to take decisive action on structural reforms, and it and the ruling party start to fix our fractious politics, chances are the ratings reprieve may be just temporary.

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