JOHANNESBURG, June 3 (ANA) – Big business on Friday welcomed Standard and Poor’s (S&P) decision to affirm South Africa’s long- and short-term foreign and local currency bond ratings at “BBB-/A-3” and “BBB+/A-2” respectively.
This means the foreign currency bond rating will remain one notch above sub-investment grade and the domestic currency bond rating three notches above.
In a statement issued on behalf of big business, the Banking Association South Africa (Basa) said business, labour, and government had worked together as a united front on various initiatives aimed at averting a ratings downgrade and creating higher levels of sustainable and inclusive growth over the past six months.
“The confirmation of the country’s sovereign credit rating at investment grade by S&P is encouraging news in this regard, and important as this is it is one milestone on the road to ensuring growth at levels necessary to meaningfully address unemployment, poverty, and inequality,” Basa said.
“We are thus energised by the ratings announcement to work even harder together to ensure inclusive growth. We also remain committed to working with social partners to support fiscal prudence and policy certainty as these are vital foundations for inclusive growth.”
Basa said the group of 90 CEOs that had been working with government and labour were invested in the economy for the long-term.
To this end, Basa said it had focused on critical initiatives of structuring a private sector-led entrepreneurship fund to provide equity to high growth small and medium enterprises, exploring investment opportunities, and inhibitors to growth in tourism, agriculture, and other sectors, as well as working on a nine-point plan to maintain the country’s sovereign rating.
“We have made significant progress in all these initiatives, but their ultimate success depends on the involvement of all social partners and it is critical that we all speak with one voice and agree that higher levels of inclusive growth and the increased jobs that it brings with it is the single most important goal we must work towards,” Basa said.
The Chamber of Mines of South Africa also welcomed the decision by S&P.
“The Chamber of Mines notes the decision by Standard & Poor’s to maintain South Africa’s debt rating at the BBB- investment grade. It has maintained a negative outlook,” the chamber said in a statement.
“We are pleased at this outcome as being in line with the reality of the situation,” CEO Roger Baxter said.
“But we are aware that it gives the country no room for complacency. The chamber will play its part in working with other elements of organised business, with government, and with organised labour to do what is necessary to sustain an investment grade rating and hopefully, ultimately, to improve that rating,“ he said.
Craig Sherman of Ashburton Investments said the move by S&P to keep South Africa’s rating on hold was largely the consensus market view reinforced during the week by Finance Minister Pravin Gordhan’s comments stating that he believed the country had done enough to stave off a downgrade.
“While we don’t see any material market action as a result, this could give the market some impetus to extend the rally in the bond and currency markets sparked by this afternoon’s [Friday] US jobs numbers,” Sherman said.
“In the longer term, this reprieve does not change the fundamental weaknesses in the South African economy and we see this as temporary with a downgrade still very likely to proceed in December,” he said.
– African News Agency (ANA)
