S&P downgrades South Africa’s credit rating
International credit ratings agency S&P has downgraded South Africa’s credit rating outlook to stable from positive.
The downgrade is largely due to the load shedding crisis, which only saw the country’s GDP contract by 1.3% in the fourth quarter of last year.
Chief Economist at Econometrix Azar Jammine says the downgrade is due to the agency feeling less bullish about the country’s economy.
“About six months ago S&P had revised the outlook for its credit rating upwards from stable to positive that implied that it saw that a relative improvement in South Africa's fiscal situation in light of the big increase in government revenue emanating from the big taxes paid by mining companies making big profits as a result of a rise in commodity prices.
“However, clearly what had happened is economic growth has deteriorated since then and as a consequence there are fears that those high revenue intake will not be sustained and as a consequence the country's fiscal situation will not improve as much as previously anticipated.”
In response, government stated that it is taking urgent measures to reduce load shedding in the short term and transform the sector to achieve long-term energy security.
“Fiscal consolidation measures have positioned the public finances to absorb a portion of Eskom debt, maintain support for the economy and the most vulnerable, and make budget additions to fight crime and corruption,” the statement read.
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