Fitch ratings warning to SA: The risk of rising social tensions due to extremely high inequality
The South African government says it has noted the decision by international ratings agency, Fitch, to affirm South Africa’s long term foreign and local currency debt ratings at BB+.
Fitch is also maintaining the negative outlook for the South African economy’s foreign and local credit ratings – keeping it one notch below investment grade.
The American credit ratings agency announced its latest review on Wednesday.
In its reaction, Treasury says in a statement it notes the negative outlook that reflects uncertainty about the ability of government to stabilise public debt over the medium term.
“Government is also cognisant of the pressures and risks that state owned companies, particularly Eskom, present to the fiscal framework. Government is providing medium term support to Eskom to secure energy supply and to honour the state’s contractual obligations. National Treasury, in partnership with the Department of Public Enterprises, is instituting a series of measures to bring discipline to the utility’s finances, and to step up the timeline for restructuring,” reads the statement.
Treasury further adds that government also remains committed to the stabilisation and improvement of it’s fiscal position, by balancing it’s primary budget.
“Further, government will continue to work hand-in-hand with unions to manage the growth of the public sector wage bill in order to reduce government’s debt burden,” says Treasury.
According to Fitch, South Africa’s ratings are constrained by low growth potential, high and rising government debt, large contingent liabilities as well as the risk of rising social tensions due to extremely high inequality.
However, Fitch says its ratings remain supported by strong macroeconomic institutions, a favourable government debt structure and deep local capital markets.
The negative outlook reflects uncertainty about the ability of the government to stabilise public debt over the medium term.
Treasury concludes by saying continued collaboration between government, labour, business and civil society is “essential in order to successfully implement all fiscal measures and growth-enhancing reforms.“
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