South Africa foreign and local currency ratings affirmed at 'BB' And 'BB+'; Outlook stable

Ratings: Foreign Currency: BB/Stable/B Local Currency: BB+/Stable/B

Over view

• Despite upward revisions, South Africa's economic growth remains tentative, and the government's debt burden continues on a rising path.
• After the recent political transition, authorities are pursuing key economic and social reforms, but we consider the economic and social challenges the country faces as considerable.
• We are therefore affirming our foreign currency ratings at 'BB/B', our local currency ratings at 'BB+/B', and our national scale ratings at 'zaAA+/zaA-1+'.
• The outlook is stable.

Rating Action

On May 25, 2018, S&P Global Ratings affirmed its 'BB/B' long- and short-term foreign currency sovereign credit ratings and its 'BB+/B' long- and short-term local currency sovereign credit ratings on South Africa. The outlook is stable. The Transfer and Convertibility (T&C) assessment is 'BBB-'.

We also affirmed the 'zaAA+/zaA-1+' long- and short-term South Africa national scale
ratings.

Outlook

The stable outlook reflects our view that economic growth will pick up modestly over the next year, while government debt will remain above 50% of GDP. The outlook also reflects our view that the government will pursue economic and social reforms. We could lower the ratings if we were to observe fiscal deterioration, for example, due to higher expenditure pressures or weaker economic performance. We could also consider lowering the ratings if the rule of law, property rights, or enforcement of contracts were to weaken, undermining the investment and economic outlook. We could raise the ratings if economic growth or fiscal outcomes strengthen in a significant and sustained manner compared with our current projections. Ratings upside could also arise if the risks of a deterioration in external funding sources were to subside, and external imbalances declined. We could also take a positive rating action if policymakers were to introduce structural economic reforms that delivered improved competitiveness and employment.

For full details see PDF.