Zuma congratulates ‘Team SA’ on maintaining rating status

“We congratulate Team South Africa, particularly government, business, and labour, for ensuring that the country’s sovereign debt credit rating status is not downgraded to junk status. Unity in action and hard work have paid off against a very volatile global economic climate.

“Working together as government, business, and labour we can overcome the current economic challenges and we must continue working hard and creatively to reignite growth so that jobs can be created for our people,” Zuma said.

He assured international investors that South Africa remained an important and strategic investment destination.

Following the announcements last week by Fitch Ratings and Moody’s investor Service to retain South Africa’s ratings status above junk level, Standard and Poor’s Financial Services on Friday downgraded South Africa’s long-term currency rating from BBB+ to BBB. The ratings agency affirmed South Africa’s A-2 short-term local currency ratings, affirmed the long- and short-term foreign currency ratings at BBB-/A-3. The outlook on the long-term ratings remained negative.

“We also believe political events have distracted from growth-enhancing reforms, while low GDP growth continues to affect South Africa’s economic and fiscal performance and overall debt stock.

“We are therefore lowering our long-term local currency rating on South Africa to ‘BBB’. We are affirming all other ratings. The negative outlook reflects the potentially adverse consequences of persistently low GDP growth for the public balance sheet,” Standard and Poor’s said.

On political tensions in South Africa, it said: “We think that ongoing continued tensions and the potential for event risk could weigh on investor confidence and exchange rates, and potentially affect government policy direction.”

In a separate statement, Democratic Alliance spokesman David Maynier welcomed the decision by Standard and Poor’s to maintain an investment grade sovereign credit rating, with a negative outlook, for South Africa.

“The fact that Standard and Poor’s has not downgraded its sovereign credit rating to ‘junk status’ amounts to a second stay of execution for South Africa. However, Standard and Poor’s once again raised serious concerns about political dynamics stating that ‘political events have distracted from growth enhancing reforms’ in South Africa.”

All the rating agencies had now raised concerns about political dynamics – “infighting within the ANC”, “ANC factional battles”, and “political infighting” – underlining the fact that it was the politics that was killing economics in South Africa.

It was time for the ANC government to get its act together and begin implementing the structural reforms necessary to boost economic growth and create jobs in South Africa.

“And, in in the end, contrary to what President Jacob Zuma thinks, it is a ‘big deal’ to avoid ‘junk status’, and the Minister of Finance Pravin Gordhan, together with the team at National Treasury and the South African Reserve Bank, deserve full credit for their hard work avoiding a sovereign credit ratings downgrade of South Africa,” Maynier said.