By Lehlohonolo Lehana.

Credit rating agency Fitch affirmed South Africa's "BB-" credit rating with a "stable" outlook on Monday, despite the economy that is not growing at all in real terms this year due to the power cuts.

South Africa maintained its current credit rating since end-2021, when Fitch upgraded its outlook from "negative" to "stable".

But where Fitch previously expected the local economy to grow by more than 1% in 2023, it now expects zero real GDP growth in 2023 due to power cuts.

"Strong investment in power generation after the deregulation of the sector should moderately improve energy supply from 2024 and support the recovery.However, real GDP growth will remain constrained by a poorly functioning transportation sector that drags on exports."

Fitch warned that South Africa's rating is badly affected by the weak economy, load shedding, high government debt and inequality. But in the country's favour: government bonds have long time frames and were issued mostly in rand, and South Africa's monetary policy is "credible".

It also noted that the implementation of structural reforms under the government's Operation Vulindlela initiative, launched in 2020, has "accelerated". This included the removal of licensing requirements for energy projects.

"The logistics sector should also see the effective separation of operations and infrastructure management functions by October 2023, boosting competition and third-party rail access," Fitch said.

"Nevertheless, the reforms are limited in ambition and we do not think they will significantly enhance South Africa's low growth potential."

It remains concerned about high unemployment and income inequality, which threatens socio-political stability, with frequent strikes and protests. 

National Treasury said in a response that the government was implementing urgent measures to reduce power cuts in the short term and reforming the sector to achieve energy security in the long term.

"Over the medium-term, the fiscal strategy aims to achieve fiscal sustainability by reducing the budget deficit and stabilising the debt-to-GDP ratio," the Treasury said in a statement.