S&P affirms South Africa rating, keeps stable outlook

S&P Global Ratings affirmed South Africa's sub-investment grade credit rating and kept its stable outlook on Friday, warning the country's improved economic growth remained tentative and the fiscal position was still weak. Africa's most industrialised economy has barely grown in the past decade with fiscal missteps and government corruption contributing to weak business and consumer confidence.
Investor sentiment has picked up after President Cyril Ramaphosa pledged to clean up the graft and misgovernance that critics say bedevilled the administration of his predecessor Jacob Zuma, who was forced from office in February by the ruling African National Congress (ANC). S&P rates South Africa's foreign currency debt 'BB' and its local currency debt 'BB+', having downgraded the country to "junk" status last year following a deterioration in the economic outlook and public finances under Zuma.
S&P said the stable outlook reflected its view that South Africa's economic growth would pick up modestly over the next year as the government pursues economic and social reforms, but warned government debt would remain above 50 percent of GDP. "South Africa's fiscal position is still weak, with a large debt burden and sizable contingent liabilities," S&P said in a statement.
The Treasury said restoring the country's investment grade credit rating remained a top priority and that the government would engage S&P on their concerns. Ramaphosa has pledged that his government would reform state companies that have plunged public finances into crisis in recent years, including heavily indebted power utility Eskom and South African Airways (SAA).