The South African National Treasury on Friday urged citizens to remain upbeat and sustain efforts in turning the economy around as two major global ratings agencies downgraded the country on economic indices in one week.
Fitch Ratings (Fitch) announced earlier on Friday that it has downgraded government’s long-term foreign and local currency debt to ‘BB+’ from ‘BBB-‘ with a stable outlook, a non-investment grade rating.
“We urge all South Africans to remain positive and continue to work hard in turning this economy around. This country has tremendous potential, by working together we can make South Africa an increasingly attractive investment destination,” said Treasury.
The ratings decision comes as another rating agency Standard and Poor’s (S&P) on Monday announced that it had downgraded South Africa to sub-investment grade.
On Friday, Treasury said while the announcement by Fitch is also a setback, government remains committed to making sure that its work with business, labour and the civil society continues. This is in order to improve the business confidence and implement structural reforms to accelerate inclusive economic growth.
“This downgrade reflects Fitch’s view that recent political events, including a major cabinet reshuffle, will weaken standards of governance and public finances.
“In the agency’s view, the cabinet reshuffle is likely to result in a change in the direction of economic policy, to undermine progress in state-owned companies’ governance, raising the risk that the contingent liabilities associated with these entities are realised and increase the prospect of a substantial increased issuance of guarantees in respect of a nuclear build programme,” said National Treasury.
In addition, government reaffirmed its full commitment to the policy stance contained in the President State of the Nation Address and the Budget 2017.
“Government remains committed to: The fiscal policy trajectory outlined in Budget 2017.Implementing reforms to improve governance in state-owned companies.
“Maintaining the expenditure ceiling and ensuring the stabilization of government debt. Ensuring that Nuclear procurement will be transparent and implemented at a scale and pace that the country can afford. Fast-tracking the implementation of structural reforms aimed at boosting economic growth as contained in the 9-point plan.
“To this end, and as acknowledged by Fitch economic growth is expected to be higher this year than in 2016 then rising further over the medium-term.”