S&P maintains SA’s positive credit rating



Global rating agency S&P Global maintained a positive outlook on its credit ratings as South Africa posted positive results as part of the country’s Operation Vulindlela economic reforms.

The agency revised the country’s credit rating to positive from stable in May this year. It had cited recent favorable trading conditions in the country that would have improved the external and fiscal stance.

This time, the agency cited the country’s strong financial markets and improving fiscal and debt positions as strong factors contributing to the rating.

ALSO READ: S&P upgrades South Africa’s credit outlook to positive – here’s why

She believes the South African government’s economic and tax reforms could improve the country’s medium-term growth and debt levels, S&P said.

The agency also sees low external debt, flexible currency and weak domestic capital markets as fundamental credit strengths that should cushion against rising external funding risks.

SA’s tax revenue is higher than expected

In October this year, Finance Minister Enoch Godongwana announced in his speech on medium-term budgetary policy (MTBPS) that the country had recorded higher than expected tax revenues.

As such, S&P noted that higher-than-expected tax receipts compared to the agency’s expectations six months ago will help reduce the fiscal deficit-to-GDP ratio. The agency was also impressed by the government’s medium-term fiscal strategy.

Last month, Minister Godongwana said the government would prioritize achieving fiscal sustainability by reducing the budget deficit and stabilizing debt.

He said spending on policy priorities such as security and infrastructure would be increased to boost economic growth and reduce fiscal and economic risks, including through targeted support for key public bodies and building fiscal buffers for future shocks.

SA not yet on solid ground

But even with a positive rating, S&P still issued some warnings. The agency said the country was still grappling with slow global economic growth and said it could revise the rating if external domestic shocks dampen SA’s economic growth over the forecast period.

Load shedding was also another threat. Starting today, November 21, 2022, the country will be back at level 5 tonight through Tuesday morning. The Parastatal said the load shedding was required “primarily due to high outages as well as depleted backup generation reserves.”

The energy crisis has choked the economy as many companies have been forced 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

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