PRESIDENT Jacob Zuma, under pressure to save South Africa from a credit rating downgrade, has welcomed rating agency Standard and Poor’s (S&P) decision to maintain the country’s current investment rating.
He heaped praise on the government, labour and business for working together to turn the economy around in the face of a possible junk-status credit downgrade.
It also battles to attract much-needed foreign direct investment. S&P put South Africa’s long and short term ratings at ‘BBB-/A-3’ and ‘BBB+/A-2’ respectively.
“The decision by S&P, which follows on the footsteps of yet another encouraging decision by Moody’s, demonstrates that working together we can reignite our economy, attract investment and create jobs for our people,” said Zuma.
“Let us use these positive developments to work even harder together to move South Africa forward.”
While South Africa effectively dodged an “economic bullet”, S&P kept its negative outlook, citing “low growth” as the reason.
In its June 3 statement, S&P said its negative outlook showed potential adverse repercussions of low growth.
It also indicated that “we could lower our ratings on South Africa this year or next if policy measures do not turn the economy around”.
The agency suggested that the country risked losing its investment grade owing to poor economic growth, large deficits and political tensions within the ANC.
S&P added: “Rising political tensions are accentuating vulnerabilities in the country’s credit ratings profile.”
The government has promised to address the concerns of rating agencies through various programmes such as the Nine-Point Plans.
“Government is committed to cutting R25-billion spending over the next three years to ensure we implement the National Development Plan, which aims to achieve socio-economic growth and development,” said Acting Government Communication and Information System head Donald Liphoko.
He said current interventions were yielding progress for the country’s economic programme despite global economic challenges.
Added Liphoko : “S&P’s announcement must be seen as motivation to further improve the economic climate of our country. We will continue to have robust engagements with business leaders as well as labour in efforts to sustain progress to move South Africa towards a sounder economic level.”
The Treasury said it expected a review by Fitch, another rating agency, in the next few days.
Fitch has already placed South Africa one-step above junk status.