Fitch says Ramaphosa crisis is a risk but SA policy should remain

President Cyril Ramaphosa.

Gallo Images/Moeletsi Mabe

  • US risk assessor Fitch Ratings says even if President Cyril Ramaphosa steps down, there should be broad policy Continuity in SA.
  • An eventual successor is likely to come from the party’s moderate wing, while the ANC would also likely be forced to work with smaller parties.
  • However, the scandal could hurt the ruling party and there is a risk that the ANC will respond by loosening purses to bolster support.
  • For more financial news go to go to tea News24 Business front page.

US credit agency Fitch Ratings says that while uncertainty about President Cyril Ramaphosa’s future poses a risk for SA, the most likely scenario is one of broad political continuity.

Findings against Ramaphosa by a parliamentary panel have raised questions about his future and spooked markets last week as investors and citizens pondered the impact of his exit on anti-graft efforts and the budget deficit. The panel noted the president may have an impeachment case to answer after a theft of at least $580,000 hidden on a sofa at a game farm he owns.

However, Ramaphosa has chosen to fight for his political position and win political support at a meeting of his party’s main political body on Monday, while ensuring a week’s delay of an impeachment trial in the Legislature, News24 reported.

Fitch, which BB- ranked SA’s long-term public debt three notches of junk status — 13th highest overall — said Monday political obstacles to completing the impeachment trial were high as reaching the required two-thirds majority number of ANC MPs voting against the President.

The ANC currently holds 58% of the seats in Parliament. The opposition also has the option to push for a vote of no confidence in the government, which requires a simple majority, the risk assessor said in a statement.

“Even if the President were to resign, we think it is more likely that a potential successor would emerge from the President’s moderate wing rather than the ANC [Jacob] Zuma-affiliated Radical Economic Transformation faction, which advocates more populist approaches,” the agency said.

Fitch had confirmed SA’s BB rating with a stable outlook in November, saying that while the ANC could lose its majority in 2024 at the time, he didn’t expect that to lead to immediate changes in economic policy as the ANC most likely would remain in government in alliance with smaller parties.

The risk assessor said on Monday that the phala-phala scandal could damage the ANC’s reputation, raising the possibility that the ruling party will respond by spending more than expected.

“The outlook for public finances and in particular the path of sovereign debt remains an important rating sensitivity for South Africa. Socioeconomic pressures against a backdrop of high unemployment and extreme income inequality are already limiting the pace of fiscal consolidation,” the agency said.

“Furthermore, ANC governments have no record of any significant pre-election policy relaxation to improve their electoral prospects – although their support has been firmer in the past,” it said.

Political instability and heightened uncertainty about the political outlook could further weigh on near-term investment prospects if they weaken business sentiment, she added.

“South Africa’s deteriorating energy supply and transport infrastructure are a key constraint on economic growth prospects. The country’s low growth potential, which we estimate at 1.2%, remains a key credit weakness.”

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