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Saturday, 18 November 2023 17:04

S&P Global Rating Agency keeps South Africa's credit rating unchanged.

By Lehlohonolo Lehana.

S&P Global Rating Agency affirmed the South Africa's credit ratings and maintained a stable outlook, despite the daunting fiscal challenges confronting South Africa.

The decision comes amid an economic landscape marked by escalating levels of debt and fiscal deficits.

The government's debt, driven by consistent budget deficits and the monetary needs of state-owned enterprises, continues to climb. 

On Friday night, S&P announced that it is keeping its "BB-/B" rating on South Africa's foreign currency debt and a "BB/B" on local currency debt unchanged.

The rating agency also maintained outlooks on foreign and local currency ratings at "stable".

The agency in March downgraded its outlook on South Africa to "stable" from "positive", citing infrastructure constraints and a severe power crisis. But in May it held off from changing the country's sovereign credit rating or outlook.

Earlier in November, South Africa's National treasury outlined measures to stick to its fiscal path, but acknowledged that higher expenses than what was accounted for would require more borrowing.

In October, the World bank approved a $1 billion loan to help South Africa reform its energy sector.

S&P expects the removal of limits on private-sector power generation to ease the country's energy shortages from 2025.

Additionally, the rating agency expects some near-time upside to South Africa's inflation if the Israel-Hamas conflict escalates and affects oil prices.

In a statement following the S&P announcement, Treasury said, over the next three years, government will focus on raising GDP growth by improving the provision of electricity and logistics, enhancing the delivery of infrastructure and restructuring the state to be efficient and fit-for-purpose. Fiscal policy continues to support this approach by stabilising debt and debt-service costs. Additionally, fiscal consolidation will be implemented through spending reductions, efficiency measures across government and moderate tax revenue measures.

Furthermore, the South African Reserve Bank (SARB) is expected to hold its repo rate steady until May 2024.