S&P affirms SA sovereign credit rating

The National Treasury has welcomed the decision by ratings agency Standard and Poor (S&P) not to downgrade South Africa.

S&P on Friday affirmed the country’s sovereign credit rating at one notch above junk status and kept it at BBB with a negative outlook. This is investment grade rating.

S&P has been assessing South Africa’s economic and political outlook for the past six months.

The Treasury said the outcomes of the grading had been the result of hard work and partnership.

“This is the result of working together as South Africans to ensure that the country remains an investment grade. Rising risks have, however, resulted in the agency’s decision to lower the long term local currency debt rating from ‘BBB+’ to ‘BBB’, a rating that is still two notched above sub-investment grade,” said the Treasury.

It noted that the latest announcement by S&P means that all three rating agencies including Moody’s and Fitch have retained South Africa in an investment grade. The Fitch ratings firm last week kept South Africa one notch above junk, but dropped its outlook from stable to negative.

“South Africa presents a lot of opportunities and strengths which have been highlighted by the agency: The country has a large and active local currency fixed-income market. Government continues its track record of fiscal consolidation despite rising uncertainty.”

South Africa has a strong democracy with independent media and reporting, said Treasury.

“The country has high institutional strength particularly regarding the judiciary which provides checks and balances and accountability.

“The South Africa Reserve Bank has ensured independent monetary policy and the country’s banking sector’s performance has remained reasonably strong.”

According to S&P, the ratings are supported by their assumption that South Africa will experience continued broad political and institutional stability as well as macroeconomic policy continuity. The agency also takes into account the view that the country will maintain fairly strong and transparent political institutions and deep financial markets.

Source: South African Government News Agency.