|SOUTH AFRICA REVISED TO JUNK STATUS BY S&P - PRESS RELEASE|
|Tuesday, 04 April 2017 17:14|
SOUTH AFRICA REVISED TO JUNK STATUS BY S&P
The South African Chamber of Commerce and Industry (SACCI) notes with disappointment, that on April 3, 2017, S&P Global Ratings lowered the long-term foreign currency sovereign credit rating on the Republic of South Africa from 'BBB-' to 'BB+' and the long-term local currency rating to 'BBB-' from 'BBB'. S&P also lowered the short-term foreign currency rating from 'A-3' to 'B' and the short-term local currency rating from 'A-2' to 'A-3'.
S&P has in their Rationale paragraphs, listed the following reasons for the downgrade:
- The divisions in the ANC-led government that have led to changes in the executive leadership, including the finance minister, have put policy continuity at risk. S&P further believes these delays could lead to fiscal and structural reforms, and potentially erode the trust that had been established between business leaders and labour representative
The government needs to be very clear and decisive to maintain stability in fiscal policy and provide monetary policy certainty. The changes at executive level, including at ministerial and deputy level, has raised doubt on whether this level of discipline will be maintained. We request the government to work with its social partners (labour, business and communities) to ensure that this area of policy uncertainty and stability is not compromised further.
The government needs to address issues of governance and contingent liabilities incurred in the energy sector. This is becoming an issue that the rating agencies have raised which can cause fiscal strain as the impact of commitments may not become fiscally prudent.
SACCI is further concerned about the implications for business confidence in these difficult economic conditions. We urge the government to redouble its efforts to work with business, labour and other key stakeholders in urgently addressing the gaps in governance, address issues of negative perceptions and restore confidence that the ratings agencies require in order to make South Africa a sustainable investment destination.