CAPE TOWN: Major credit-ratings companies will probably only consider taking decisive action on South Africa’s junk assessment after the governing party elects a new leader and more detailed plans to tackle the state-owned power utility’s unsustainable debt burden are announced.
South Africa’s credit ratings are at their lowest levels since they were first assigned almost three decades ago.
Moody’s Investors Service and S&P Global Ratings are both due to publish reviews yesterday, with Fitch Ratings expected to follow soon after.
While last month’s budget update showed an improvement in the trajectory of government debt and fiscal deficit metrics, and recently announced energy sector reforms are expected to eventually revive economic growth, the outlook for public finances remains clouded.
Questions about pending debt relief for power company Eskom Holdings SOC Ltd will only be answered in February.
There’s also uncertainty over how the government will respond to pleas for increased support from other state companies, higher-than-budgeted pay demands by civil servants, calls to expand the social welfare net, and a potential deterioration in South Africa’s terms of trade and global economic prospects. “Better fiscal numbers are offset by global and local risks as well as slow progress on energy and transport reforms,” said Sanisha Packirisamy, an economist at Momentum Investments. — Bloomberg