Fitch Ratings on Friday revised South Africa’s outlook to negative from stable, citing political risks, infighting within the ruling African National Congress (ANC) and weak economic growth as reasons for the review.
Fitch said political risks to standards of governance and policy-making had increased and would remain high at least until the electoral conference of the ANC in December next year, negatively affecting macroeconomic performance.
Also, in-fighting within the ANC and the government, according to Fitch, was likely to continue over the next year.
The ratings agency said this would distract policymakers and lead to mixed messages that would continue to undermine the investment climate, thereby constraining GDP growth.
Fitch said it expected only modest GDP growth of 1.3 percent in 2017 and 2.1 percent in 2018, an improvement from 0.5 percent this year, as business confidence remained depressed and investment continued to contract.
Fitch also noted that the impact of electricity shortages in 2015 and this year, as well as the worst drought in decades, and a sharp fall in international prices for some of South Africa’s main mining commodities also hit hardest on the country’s economy.
As a warning, Fitch said continued political instability,a failure to stabilise the government debt/GDP ratio, and a failure of GDP growth to recover sustainably, could, individually or collectively, result in a downgrade.
As a result, Fitch said it did currently anticipate developments with a high likelihood of leading to an upgrade.
Fitch also said it expected global economic trends and commodity prices to develop as outlined in its September Global Economic Outlook.
South Africa Today – South Africa News
