Global ratings agency S&P Global maintained its positive outlook on its credit ratings because of South Africa’s efforts with the country’s economic reforms under Operation Vulindlela that have seen positive results.
The agency revised the country’s credit rating from stable to positive in May this year. It had cited recent favourable terms of trade in the country that had improved the external and fiscal trajectory.
This time around, the agency cited the country’s strong financial markets and an improved fiscal and debt position as strong factors attributing to the rating.
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It believes that the South African government’s economic and fiscal reforms could improve the country’s medium-term growth and debt trajectory, S&P said.
The agency also sees the low external debt position, flexible currency, and deep domestic capital markets as fundamental credit strengths that should cushion against external rising financing risks.
SA’s higher than expected tax revenue
In October this year, Minister of Finance Enoch Godongwana announced during his Medium Term Budget Policy Statement (MTBPS) speech that the country had seen a higher than expected tax revenue.
As such, S&P noted that this higher-than-expected tax revenue, relative to the agency’s expectations six months ago, will help to reduce the fiscal deficit as a proportion of GDP. The agency was also impressed the government’s medium-term fiscal strategy.
Last month, Minister Godongwana stated that government would be prioritising achieving fiscal sustainability by narrowing the budget deficit and stabilising debt.
He said that it would be increasing spending on policy priorities such as security and infrastructure in an effort to promote economic growth and reducing fiscal and economic risks, including through targeted support to key public entities and building fiscal buffers for future shocks.
SA still not on solid ground
But even with a positive rating, S&P still delivered a few warnings. The agency said that the country was still contending with slow global economic growth and stated that it could revise the rating if external domestic shocks subdue SA’s economic growth over the forecast period.
Load shedding also posed another threat. As of today, 21 November 2022, the country will be back to Stage 5 this evening until Tuesday morning. The parastatal said load shedding was necessary “mainly due to high levels of breakdowns as well as depleted emergency generation reserves”.
The energy crisis has stifled the economy, as many businesses have been left to find alternative sources of energy.
ALSO READ: Stage 4 load shedding returns from 5pm, more blackouts expected next week – Eskom
*Additional reporting by Devina Haripersad
