THE decision by ratings agency S&P Global to affirm South Africa’s long-term foreign and local currency debt ratings at “BB” and “BB+” respectively, and maintain the stable outlook, affords South Africa a chance to demonstrate further concrete implementation of measures aimed at turning around the growth trajectory, the National Treasury said.
According to S&P, the rating affirmation was underpinned by anaemic economic growth in 2018 and high contingent liabilities continuing to weigh on South Africa’s fiscal prospects, and the new government was pursuing a series of economic reforms that should help boost the economy from 2019, despite structural impediments, chronic skills shortages, and high unemployment.
The stable outlook reflected S&P’s view that ‘the South African government will pursue a range of economic, social, and fiscal reforms, albeit over an extended period of time.’
S&P now expected South Africa’s gross domestic product (GDP) growth to average 0.8 percent in 2018 and 1.8 per cent in 2019. These forecasts were slightly higher than the 2018 MTBPS assumptions.
‘Government notes S&P’s assessment of challenges and opportunities the country faces in the immediate to long-term and remains determined to achieve improved ratings in the period ahead,’ the Treasury said in a statement.
‘The decision affords South Africa a chance to demonstrate further concrete implementation of measures that are aimed at turning around the growth trajectory. These measures include the reprioritisation of public spending, the creation of the infrastructure fund, as well as partnerships for growth,’ it said.
S&P had highlighted a couple of risks, including subdued economic growth, which could lead to the rating being lowered. Government was mindful of these and fully aware that the next several months were critical.
Since the tabling of the 2018 Budget in Parliament, government had sought to reduce policy uncertainty and restore investor confidence by, among other things, finalising the Mining Charter and preparing to withdraw the Mineral and Petroleum Resources Development Act Amendment Bill; ensuring that Eskom concluded 27 outstanding power-purchase agreements with independent power producers. It also aims to re-establish a sustainable approach to energy planning by updating the Integrated Resource Plan for consideration by Parliament.
In addition, the government is revising the Public Procurement Bill, currently awaiting cabinet approval for public consultation, which will replace existing regulations and allow small firms and those operating in rural and township economies to participate more effectively in public procurement, while a panel is to be appointed to advise government on measures to effect fair and equitable land reform that would increase agricultural output and build self-sufficiency in food production.
Furthermore, to place public finances on a more sustainable path and contain the rising contingent liabilities, government had initiated measures to restore good governance and financial stability at state-owned companies (SoCs). New boards and executives had been appointed at Denel, Transnet, South African Express Airways (SAX), and the Passenger Rail Agency of South Africa (Prasa).
The boards of SoCs had initiated forensic investigations into allegations of corruption and were taking action where evidence showed employee involvement in maladministration. Several entities had recently updated their turnaround strategies, while the Eskom board was preparing its long-term turnaround strategy.
‘To position South Africa as an attractive investment destination, government will enhance its collaboration with business, labour, and civil society. Another objective of collaboration with other stakeholders would be the creation of an enabling policy environment for inclusive economic growth,’ the Treasury said.