Fitch cuts South Africa outlook to negative.

By bne IntelliNews January 16, 2012
Fitch Ratings revised down on January 13 its outlook on South Africa to negative from stable, saying that limited progress on several long-standing structural issues have caused the countrys economic performance to fall behind its peers. "Not least of the problems that require urgent attention is the economy's inability to create sufficient jobs for its labour force. This inability has not only constrained growth and kept the tax base narrow but has also caused public finances to become increasingly redistributive in an effort to address the lack of social mobility. The resultant narrowing of fiscal space undermines a key support to South Africa's creditworthiness," Purvi Harlalka, Director in Fitch's Sovereigns group, said in a statement. Fitch affirmed South Africa's long-term foreign and local currency Issuer Default Ratings (IDR) at BBB+ and A, respectively, and maintained its short-term IDR at F2 and country ceiling at A. The agency said that South Africas economic growth, which was on average 2.7% over the past five years, was below the BBB peer group average of 3%. GDP growth outlook has been revised down to around 4%, but such a pace is unlikely to be achieved in the next few years without an acceleration of structural reforms. The agency pointed out that the employment rate is a low 40% and unemployment stuck at 25%. Fitch said also that the countrys external finances, although still better than those of its peers, were deteriorating and a failure to accelerate growth would weaken its credit fundamentals. South Africa's BBB+ rating remains underpinned by the strength of its institutions relative to its peers. These include a robust macroeconomic and regulatory framework, an independent and objective judicial system, and able governance, Fitch said. The rand fell 2% against the dollar to a one-week low of 8.21 after the move, while South Africa's five-year credit default swaps rose 10 basis points. Moody's downgraded the outlook on its A3 rating on South Africa to negative from stable in November 2011 on concerns about high unemployment and fears that political pressure could further erode state finances.

Related Articles

South Africas Exxaro mulls firing striking coal miners.

South African company Exxaro Resources said one of the options it currently considers is dismissing striking coal mine workers who fail to return to work in the week of March 25, fin24 reported ... more

South Africas Telkom says there is no decision to lay off 13,000 employees.

South Africas telecommunication operator Telkom said that it has not made a decision on retrenching 13,000 employees, or more than half of its staff, TechCentral reported quoting a company ... more

BP, Masana Petroleum Solutions sell LPG business in South Africa.

Oryx Energies, a major independent provider of oil and gas products and services in Africa, has agreed to buy the South African liquefied petroleum gas (LPG) distribution businesses of BP and ... more

Notice: Undefined index: subject_id in /var/www/html/application/controllers/IndexController.php on line 335