SA credit rating

More junk? SA’s credit rating left unchanged by S&P, land concerns raised

Another piece of good news for the country.

SA credit rating

Rating agency S&P has reaffirmed South Africa’s credit rating as “stable” We may still be in junk status but the decision by S&P helps alleviate fears of a further downgrade.

SA credit rating: S&P lends a hand

S&P released their latest report on Friday night and held its credit rating on SA government bonds (rand-denominated) at one tier into junk status, BB+. Foreign currency bonds were held at two tiers into junk status, BB.

Read: Moody’s go easy as South Africa avoids a junk status downgrade

The agency had quite a few positive insights to offer into President Cyril Ramaphosa’s work and the country’s improvement.

“Since Cyril Ramaphosa’s election as ANC leader in December 2017 and appointment as the country’s president in February 2018‚ business and investor confidence have strengthened.”

“We anticipate a pick-up in private-sector fixed investment‚ while lower inflation could boost households’ disposable income‚ resulting in higher household consumption. We now estimate economic growth to average at least 2% over 2018–21‚ which is still below 1% per capita. We estimate that among the 20 major emerging markets‚ only Qatar will show slower per capita growth in 2018. We estimate SA’s GDP per capita at $7‚200 in 2018‚” the report said.

The agency did raise some concerns over the promised move to expropriate land without compensation. The report referred specifically to the decision taken at the ANC conference and how a motion has since been adopted in Parliament.

While S&P admits that it’s still “too early to tell” how the process will unfold. The agency “expects” the rule of law, property rights and enforcement of contracts will remain in place.

The report also stated that it does not expect the process to significantly hamper investment in SA.

“Our view reflects our consideration of the checks and balances embedded within SA’s institutional framework‚ which includes a constitutionally independent judiciary,” said the report.

While the rand may have recently hit its worst levels in five months, the optimism showed by S&P is something all South Africans and international investors can take comfort from.