Fitch raises 'Ramaphoria' doubts


Fitch ratings agency on Friday revised the outlook on South Africa to negative from stable. The ratings agency said the outlook revision was partly due a strike at platinum mines.

JOHANNESBURG - Fitch affirmed South Africa’s sub-investment grade credit rating and kept its stable outlook on Friday, citing signs of improvement in governance standards and prospects of mild cyclical economic recovery.

Fitch rates both South Africa’s foreign and local currency debt at ‘BB+’, one notch below investment grade.

However, the ratings agency also noted “indications that financial challenges at key state-owned enterprises remain substantial and the fact that government debt has yet to stabilise”.

Africa’s most industrialised economy has barely grown in the past decade with fiscal missteps and government corruption contributing to weak business and consumer confidence.

READ: Fitch keeps SA at junk, outlook stable

Investor sentiment has picked up since President Cyril Ramaphosa pledged to clean up the graft and misgovernance that critics say bedevilled the administration of his predecessor Jacob Zuma, who was forced from office in February by the ruling African National Congress.

But Fitch doubted that Ramaphosa’s efforts would make a significant difference.

“Current government initiatives are unlikely to improve trend growth significantly, as their implementation and timeline is uncertain and their impact on growth ambiguous,” Fitch said.

The economy suffered its worst quarterly contraction in nine years in the first three months of this year in a cautionary reminder of the huge challenge facing Ramaphosa.

Government responds

National Treasury, in a statement on Friday, recongised the “challenges and opportunities” South Africa faced in the immediate to long-term.

Government said most of the 14 Confidence Boosting Measures were expected to lift confidence.

“Furthermore, the recent changes in governance in critical SOEs [state-owned enterprises] and the 2018 Budget, which outlined decisive and specific policy measures to strengthen the fiscal framework, are expected to improve the investment climate of South Africa.”

The department said inclusive growth plans were being prioritised.

“Collaboration with government, business, labour and civil society continues to yield necessary interventions to positioning South Africa as an attractive investment destination while also creating an enabling policy environment for inclusive economic growth,” the statement ended.