Fitch downgrades South Africa on power shortages, policies that hurt private investment

By bne IntelliNews December 5, 2015

Fitch cut on December 4 South Africa’s sovereign credit rating by one notch to BBB-, citing a further weakening of both GDP growth performance and growth potential estimates.

Even after the downgrade, Fitch’s assessment is more optimistic that S&P’s view, as both agencies rate Africa’s best developed economy one notch above junk, but while Fitch assigned a stable outlook on the ratings, S&P lowered its outlook to negative. Moody’s rates the country at Baa2, two notches above junk, with a stable outlook.

Fitch, which released its rating announcement a few hours after S&P, mentioned largely the same hurdles to growth - additional delays to the availability of new electricity generation capacity, which will likely constrain growth for another two years, and weakened business confidence due to various government policies.

The agency slashed its GDP growth forecast for South Africa to 1.4% for 2015 and 1.7% for 2016 from 2.1% and 2.3%, respectively, anticipated in June. It expects growth to accelerate to 2.4% in 2017, but underlines that this is still well below the country's growth trend before 2008 of around 4% and the government’s target of 5%.

Fitch warned that a negative rating action could be triggered by a potential fiscal policy loosening, a failure to stabilise the government debt/GDP ratio, an increase in external debt to levels that raise the potential for serious financing strains, or further weakening of economic growth, “for example due to a lack of policy changes to improve the investment climate”.

Related Articles

South Africa’s MTN to invest $350mn in Iranian broadband

South Africa’s MTN said it has agreed, on a non-binding and preliminary basis, to invest an initial $350mn into Iranian fixed broadband provider Iranian Net. The investment will give ... more

South Africa receives another downgrade to junk

Fitch Ratings on April 7 downgraded South Africa to junk status following the removal of Pravin Gordhan as finance minister and the enusing political crisis. Fitch's downgrade to 'BB+' ... more

S&P downgrades South Africa's credit rating to junk after cabinet reshuffle

Standard & Poor’s ratings agency has cut South Africa's sovereign credit rating to 'BB+' from 'BBB-' and the long-term local currency rating to 'BBB-' from 'BBB', both with a negative ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss