<div style="max-width: 100%;">
  <video-js
    data-account="1571595826001"
    data-player="c0AOssA7"
    data-video-id="6212676458001"
    data-embed="default"
    controls=""
    data-application-id=""
    class="vjs-fluid"></video-js>
</div>
<p><script src="//players.brightcove.net/1571595826001/c0AOssA7_default/index.min.js">
</script></p>
<p>Fitch Solutions says Ghana&#8217;s real GDP growth is expected to slow by 1.2 per cent this year and return to robust growth of 4.8 per cent in 2021. On the currency, Fitch says it expects the Ghanaian cedi to depreciate by 6.4 per cent against the greenback next year. Ahead of Ghana’s presidential election, William Attwell, Senior Country Risk Analyst for Sub-Saharan Africa at Fitch joins CNBC Africa for a focus on Ghana’s economy.</p>


Fitch: Ghanaian economy to grow at 4.8% in next fiscal

<div style="max-width: 100%;">
  <video-js
    data-account="1571595826001"
    data-player="c0AOssA7"
    data-video-id="6195962533001"
    data-embed="default"
    controls=""
    data-application-id=""
    class="vjs-fluid"></video-js>
</div>
<p><script src="//players.brightcove.net/1571595826001/c0AOssA7_default/index.min.js">
</script></p>
<p>Ratings agencies Moody’s and Fitch cut Angola’s credit rating further into Junk in recent weeks citing weak fiscal prospects, lower oil prices and a depreciating currency. Joining CNBC Africa for more and Angola’s MPC meeting is Rui Oliveira, CEO at BFA Asset Management.</p>


Moody’s

Moody’s, Fitch cut Angola’s credit rating deeper into junk

<div style="max-width: 700px;">
  <video-js
    data-account="1571595826001"
    data-player="c0AOssA7"
    data-video-id="6188433965001"
    data-embed="default"
    controls=""
    data-application-id=""
    class="vjs-fluid"></video-js>
</div>
<p><script src="//players.brightcove.net/1571595826001/c0AOssA7_default/index.min.js">
</script></p>
<p>Ratings agency Fitch has downgraded Angola’s long-term foreign currency issuer with no outlook assigned. The ratings agency sited that the large increase in government debt and reduced external financing as reasons for the downgrade. Angola is among the many African countries that are faced are with a great deal of fear due to the large sums of debt that will be harder to commit to amid the COVID-19 crisis. Ridle Markus, Africa Strategist, Absa Corporate and Investment Banking joins CNBC Africa for more.</p>


Fitch downgrades Angola’s rating to CCC


<p>Fitch Ratings-London/Hong Kong-26 June: The South African government&#8217;s intention to stabilise debt levels within four years, as set out in this week&#8217;s emergency budget, is unlikely to be achieved, Fitch Ratings says. This reflects persistent challenges in reducing expenditure, boosting growth and insulating public finances from struggling state-owned enterprises, as well as reflecting the impact of the coronavirus pandemic, which will drive a sharp rise in debt/GDP this year.</p>



<p>Wednesday&#8217;s emergency budget revised the consolidated budget deficit projection for the current fiscal year (FY21; ending March 2021) to 15.7% of GDP, over double the 6.8% projected in the original budget in February. The main factor is a sharp fall in tax revenues due to the economic fall-out resulting from lockdown measures, as well as the general hit to the economy and some tax relief. The government expects the main budget revenues to be ZAR300 billion &#8211; 6% of GDP &#8211; lower than previously anticipated.</p>



<p>South Africa has recorded 100,000 coronavirus cases and this number could rise substantially, according to government modelling. Nevertheless, the government expects non-interest expenditure to be just ZAR36 billion (0.7% of GDP) larger than projected in February, as the emergency budget plans to offset substantial additional spending on health and economic support through savings in other areas.</p>



<p>We view the government&#8217;s forecast of gross loan debt rising to 81.8% of GDP in FY21, much higher than the 65.6% in the original budget, as realistic. However, we believe its expectation that debt will peak at 87.4% in FY24 is optimistic. This would require sufficient fiscal consolidation to achieve a primary budget surplus in that year, which would be South Africa&#8217;s first since 2008, towards the end of the commodity boom.</p>



<p>The government aims to cut expenditure by ZAR230 billion over FY22 and FY23 relative to earlier plans and then implement additional cuts, complemented by small tax-raising measures. Details will be presented in the Medium-Term Budget Policy Statement in October.</p>



<p>Revenue projections beyond the current fiscal year appear conservative, and revenues may exceed government forecasts (the government predicts that revenues will still be ZAR202 billion below its February projections in FY23). However, Fitch believes planned expenditure cuts seem ambitious not least because they would significantly weaken the economic recovery. South Africa&#8217;s recent experience highlights the challenges of meeting fiscal targets. February&#8217;s budget abandoned the earlier target for a primary budget balance by FY23 (excluding support for state-owned electricity company Eskom).</p>



<p>Social and political factors, including exceptionally high inequality, powerful trade unions and deep divisions within the governing African National Congress, present significant hurdles for spending cuts. For example, the government has still not agreed the wage bill savings with public sector trade unions for FY21 that were included in the February budget. A comprehensive adjustment of the large public sector wage bill may not be possible until the current three-year agreement expires in April 2021, and negotiations then are likely to be difficult.</p>



<p>Key reforms to Eskom that would support the economy and reduce the burden on the public finances, and relatively minor measures to accelerate GDP growth, have also faced significant political hurdles. Although the challenges in restructuring state-owned flag carrier South African Airways, which filed for business rescue protection last December, are small from a macroeconomic standpoint, they illustrate the difficulty in addressing budget pressures from troubled state-owned enterprises in the face of trade union opposition. Our downgrade of South Africa&#8217;s Issuer Default Rating to &#8216;BB&#8217; on 3 April resulted from the lack of a clear path towards government debt stabilisation as well as the expected impact of the coronavirus pandemic-related shock on public finances and growth. The Outlook on the rating is Negative. A continued rise in government debt/GDP and failure to formulate a clear and credible path towards stabilising the government debt/GDP ratio could lead to negative rating action</p>


SA Finance Minister Tito Mboweni delivers his emergency budget

#SpecialBudget2020: Finance Minister Tito Mboweni delivers emergency budget (full speech)

South Africa unlikely to sort out its debt in four years – Fitch.

<div style="max-width: 700px;">
  <video-js
    data-account="1571595826001"
    data-player="c0AOssA7"
    data-video-id="6166314384001"
    data-embed="default"
    controls=""
    data-application-id=""
    class="vjs-fluid"></video-js>
</div>
<p><script src="//players.brightcove.net/1571595826001/c0AOssA7_default/index.min.js">
</script></p>
<p>Ratings agency Fitch has revised the outlook on Kenya’s B+ sovereign ratings to negative from stable, while affirming the rating. And the Financial Times reported that Senegal President Macky Sall, in an interview, disclosed that oil and gas projects in the country could be delayed by up to two years due to COVID-19. Ridle Markus, Africa Strategist, Absa Corporate and Investment Banking joins CNBC Africa for more.</p>


Fitch revises Kenya’s B+ rating to negative from stable

<div style="max-width: 700px;">
  <video-js
    data-account="1571595826001"
    data-player="c0AOssA7"
    data-video-id="6163414810001"
    data-embed="default"
    controls=""
    data-application-id=""
    class="vjs-fluid"></video-js>
</div>
<p><script src="//players.brightcove.net/1571595826001/c0AOssA7_default/index.min.js">
</script></p>
<p>We’re into the second month since South Africa was kicked out of the World Government Bond Index following the downgrade to junk status by rating agencies Fitch, S&#038;P Global and Moody’s.</p>


How the SA bond market is performing post WGBI exclusion


<p>Last Friday Moody’s, the last rating agency to rate South Africa investment grade, c<a href="https://www.cnbcafrica.com/sa-downgrade/2020/03/27/moodys-downgrades-sa-to-junk/">ut South Africa’s sovereign credit rating to junk</a>&nbsp;<a href="https://www.cnbcafrica.com/news/2020/03/27/moodys-to-cut-south-africas-sovereign-credit-rating-to-junk-economists/">in line with economists’ forecast</a>. Today Fitch further downgraded the country sending the rand plunging over 19 rand to the dollar. Below it gives its reasons&#8230;</p>



<p><strong>Fitch Ratings &#8211; Hong Kong &#8211; 03 Apr 2020:</strong> Fitch Ratings has downgraded South Africa&#8217;s Long-Term Foreign-Currency Issuer Default Rating (IDR) to &#8216;BB&#8217; from &#8216;BB+&#8217;. The Outlook is Negative.</p>



<figure class="wp-block-table"><table><thead><tr><td><strong>RATING ACTIONS</strong></td></tr><tr><td><strong>ENTITY/DEBT</strong></td><td><strong>RATING</strong></td><td></td><td><strong>PRIOR</strong></td></tr></thead><tbody><tr><td>South Africa</td><td>LT IDR</td><td>BB&nbsp;</td><td>Downgrade</td><td></td><td>BB+&nbsp;</td></tr><tr><td></td><td>ST IDR</td><td>B&nbsp;</td><td>Affirmed</td><td></td><td>B&nbsp;</td></tr><tr><td></td><td>LC LT IDR</td><td>BB&nbsp;</td><td>Downgrade</td><td></td><td>BB+&nbsp;</td></tr><tr><td></td><td>LC ST IDR</td><td>B&nbsp;</td><td>Affirmed</td><td></td><td>B&nbsp;</td></tr><tr><td></td><td>Country Ceiling</td><td>BB+&nbsp;</td><td>Downgrade</td><td></td><td>BBB-&nbsp;</td></tr><tr><td>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; senior unsecured</td><td>LT</td><td>BB&nbsp;</td><td>Downgrade</td><td></td><td>BB+&nbsp;</td></tr><tr><td>The RSA Sukuk No. 1 Trust</td><td></td><td>&nbsp;</td><td></td><td></td><td>&nbsp;</td></tr><tr><td>·&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; senior unsecured</td><td>LT</td><td>BB&nbsp;</td><td>Downgrade</td><td></td><td>BB+&nbsp;</td></tr></tbody></table></figure>



<p><strong>KEY RATING DRIVERS</strong></p>



<p>The downgrade of South Africa&#8217;s ratings is a result of the lack of a clear path towards government debt stabilisation as well as the expected impact of the COVID-19 shock on public finances and growth. The Negative Outlook reflects the prospect of further significant upside pressure on government debt and additional downside risks associated with the global shock.</p>



<p>The COVID-19 crisis, combined with a recession in 2H19, means South Africa&#8217;s GDP is forecast to contract by 3.8% in 2020 and Fitch expects only a moderate recovery by 1.7% in 2021. The contraction primarily reflects a 21-day lockdown, during which large parts of the economy, including most mines and manufacturing plants, have ceased operating. The government has stated that the lockdown will not be extended, but many sectors may see continued significant disruption and global demand will remain adversely affected for some time.</p>



<p>The crisis hits public finances in an already weak situation. We expect the consolidated fiscal deficit to surge to 11.5% of GDP in FY20/21, from 6.6% in FY19/20, with a recovery to a still high 8% in FY21/22. This means that general government debt (including about 1.7% of GDP of local government debt will rise from 64.5% of GDP in FY19/20 to 80.2% in FY21/22, well above the 2019 &#8216;BB&#8217; category median of 46.5%. In its 2020 budget published in February before the full onslaught of the crisis, the government projected gross loan debt (excluding local government debt) rising from 61.6% of GDP in the fiscal year ending March 2020 (FY19/20) to 71.6% of GDP in FY22/23, with the prospect of further rises after that. However, this relied on substantial savings on public sector compensation that are now unlikely to materialise as negotiations to open the three-year public sector wage deal from 2018, which expires in April 2021, have failed to reach a breakthrough. A new wage deal next year is also unlikely to result in the projected savings.</p>



<p>The coronavirus shock adds further pressure on public finances. Fitch expects revenues in 2020 to contract in nominal terms for the first time since 2009 due to the economic contraction. So far fiscal measures announced by the government to alleviate the impact on the economy remain modest, and will mostly be financed from accumulated surpluses of the Unemployment Insurance Fund. However, further significant support measures, as well as additional health spending, are likely to be necessary and we expect the government will only be able to make minor spending cuts in other areas.</p>



<p>Additional risks stem from liabilities of non-financial (15% of GDP) and financial (2.1%) state-owned enterprises (SOEs) and guarantees for independent power producers (4%). The government has already allocated SOE support of a cumulative ZAR129 billion (2.6% of 2020 GDP) over the FY20/21 to FY22/23 planning period, but more may be needed particularly as the COVID-19 shock will weaken already poor finances of many SOEs.</p>



<p>The &#8216;BB&#8217; IDRs also reflect the following key rating drivers:</p>



<p>Despite the severe disruption in global financial markets, we do not expect acute problems in fiscal financing, partly reflecting the unusually long-average maturity of government securities (15 years) and the low share of foreign-currency debt in total debt (10%). Foreign-currency debt repayments due are at or below USD1 billion in each of the three years to FY22/23. The government is considering borrowing from international financial institutions to diversify its funding sources.</p>



<p>The South African Reserve Bank (SARB) has reacted to the crisis by cutting its interest rates by 100bp in March, after a 25bp rate cut in January. It has also taken extensive measures to contain stress in money markets, including the purchase of treasury bonds on secondary markets to provide liquidity to banks. Some further monetary easing is likely as SARB expects the impact of lower domestic demand will reduce inflationary pressures. It has also allowed banks to let capital ratios decline below regular thresholds. While the crisis is likely to hit asset quality, Fitch considers the risk that the sovereign will need to provide support to the banking sector as low.</p>



<p>The current-account deficit fell to 3.0% in 2019 but is expected to deteriorate to 4.7% of GDP in 2020 on the back of reduced global demand as well as the impact of the coronavirus-related closures on production capacity, which will not be fully offset by a substantial import compression due to the weaker exchange rate and a reduction in incomes. Net external debt, at an estimated 18.9% of GDP in 2020, is still in line with the &#8216;BB&#8217; category median.</p>



<p>The SARB has maintained its commitment to flexible exchange rates, letting the currency absorb the shock as investors withdrew from South Africa as from other emerging markets in March. Relatively muted exchange rate pass-through means that the inflation risks from this strategy are contained. As a result, the risks associated with the relatively modest level of international reserves and the low level of international liquidity is contained.</p>



<p>ESG &#8211; Governance: South Africa has an ESG Relevance Score of 5 for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption, as is the case for all sovereigns. Theses scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model. South Africa has a medium WBGI ranking at the 57th percentile, reflecting relatively institution and well-entrenched democratic processes. However, exceptionally high inequality could lead to long-term challenges to social stability and complicates the government&#8217;s efforts to accelerate economic growth and consolidate public finances in an environment of rising calls for improving public services.</p>



<p><strong>SOVEREIGN RATING MODEL (SRM) AND QUALITATIVE OVERLAY (QO)</strong></p>



<p>Fitch&#8217;s proprietary SRM assigns South Africa a score equivalent to a rating of &#8216;BBB-&#8216; on the Long-Term Foreign-Currency (LT FC) IDR scale.</p>



<p>Fitch&#8217;s sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to rated peers, as follows:</p>



<p>&#8211; Macroeconomic Performance, Policies and Prospects: -1 notch, to reflect South Africa&#8217;s weak growth prospects relative to the &#8216;BB&#8217; and &#8216;BBB&#8217; category medians and to population growth, with important implications for public finances and risks to social stability.</p>



<p>&#8211; Public Finances: -1 notch, to reflect the continued upward trend in government/debt to GDP exacerbated by the COVID-19 shock and the absence of a clear medium-term plan for debt stabilisation, as well as high contingent-liabilities notably related to state-owned enterprises, such as Eskom.</p>



<p>Fitch&#8217;s SRM is the agency&#8217;s proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch&#8217;s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.</p>



<p><strong>RATING SENSITIVITIES</strong></p>



<p>Factors that could, individually or collectively, lead to negative rating action/downgrade:</p>



<p>&#8211; A continued rise in government debt/GDP and failure to formulate a clear and credible path towards stabilising the government debt/GDP ratio.</p>



<p>&#8211; A further deterioration in South Africa&#8217;s trend GDP growth rate.</p>



<p>Factors that could, individually or collectively, lead to positive rating action/upgrade:</p>



<p>&#8211; Formulation of a clear and credible path towards stabilising the government debt/GDP ratio over the medium term.</p>



<p>&#8211; A strengthening in trend GDP growth.</p>



<p> </p>


Fitch Ratings

Rand hits record low, goes over 19 to dollar as Fitch downgrades SA further into junk status


<p>JOHANNESBURG (Reuters) &#8211; Moody’s will cut South Africa’s sovereign credit rating later on Friday as a recession deepened by the impact of coronavirus frustrates economic reform efforts aimed at reducing government debt, a Reuters poll of economists found.</p>



<p>Taken in the last three days, the survey showed 12 of 18 respondents saying Moody’s, the only major credit rating agency that still rates South Africa’s bonds as investment-grade, will cut them to “junk” status. Standard &amp; Poor’s and Fitch both cut their ratings to junk nearly three years ago.  </p>



<p>Eleven economists who answered an extra question said the rating was “still relevant” despite a punishing market sell-off that has overshadowed the long-awaited decision, while five said it was “important”. Only two said whether or not Moody’s downgrades the bonds to junk was “irrelevant.” </p>



<p>“It may not be a market-moving event at this juncture but is important going forward as sub-investment grade from all three rating agencies will undoubtedly raise the cost of capital or funding in South Africa,” said economist Hugo Pienaar at the Bureau for Economic Research. </p>



<p>The rand, stocks and bonds have been under intense pressure as the pandemic hits asset prices. But many analysts say South African assets have been trading as though they are junk-rated for at least a couple of years already. </p>



<p>“In our view, the Moody’s downgrade itself has for some time been discounted by financial markets, though it remains uncertain exactly what impact the subsequent World Government Bond Index (WGBI) expulsion will have,” said Elna Moolman, economist at Standard Bank. </p>



<p>“Guided by global examples in this regard, it is possible that the bulk of the repricing has already occurred.”  </p>



<p>With the virus still spreading, in a worst-case scenario, median forecasts showed South Africa’s economy would shrink by 4% in Q1, 8% in Q2 and 5% in 2020 as a whole, according to the median forecasts from answers to an additional question. </p>



<p>The last Reuters poll prior to the announcement of the 21-day lockdown for South Africa that started on Thursday evening predicted the economy would shrink 0.4% in Q1, then grow 0.9% in Q2 and 0.3% for the year as whole. </p>



<p>“As the country enters a minimum of a three-week lockdown period it means domestic fiscal metrics are likely to get significantly worse this year, with sovereign debt ratios now almost certain to rise,” said Jeffrey Schultz, economist at BNP Paribas.</p>



<p>South African assets recovered on Wednesday after the central bank launched a bond-buying programme, seeking to drum up demand in credit markets as the coronavirus epidemic weighs on the ailing economy. </p>



<p>Christopher Shiells at Informa Global Markets said a downgrade to junk status would probably be seen as a relief by the government as it would free it up to make a significant fiscal response to the crisis. </p>



<p>“Rating agencies are expected to downgrade a number of sovereigns due to the coronavirus. Outflows and asset weakness have been occurring over last month, so the worst has already happened in that sense,” he said. </p>



<p>(Editing by Ross Finley and Catherine Evans)</p>



<p>This article was first published on Reuters Africa <a href="https://af.reuters.com/article/investingNews/idAFKBN21E150-OZABS">https://af.reuters.com/article/investingNews/idAFKBN21E150-OZABS</a> and is republished with its permission.</p>



<p>For more coverage on COVID-19 visit: <a href="https://www.cnbcafrica.com/covid-19/">https://www.cnbcafrica.com/covid-19/</a></p>


Moody’s to cut South Africa’s sovereign credit rating to junk – economists

<div style="max-width: 700px;"><video-js data-account="1571595826001" data-player="default" data-embed="default" controls="" data-video-id="6117012692001" data-playlist-id="" data-application-id="" class="vjs-fluid"></video-js></div>
<p><script src="https://players.brightcove.net/1571595826001/default_default/index.min.js"></script></p>
<p>Ratings agency Fitch affirmed its South African outlook as negative. In a note released late yesterday evening, the agency said the outlook reflects uncertainty about government’s ability to manage its high and rising levels of debt and pressure on policy-making. Joining CNBC Africa for more is Jan Friederich, Senior Director and Head of Middle East and Africa Sovereign Ratings at Fitch.</p>


Fitch affirms SA’s outlook as negative


<p>JOHANNESBURG (Reuters) &#8211; Ratings agency Fitch on Friday affirmed South Africa’s credit rating at ‘BB+’, in sub-investment grade, but downgraded the outlook from stable to negative, citing a widening budget deficit and spending on supporting struggling state firms.</p>



<p>Fitch said it believed significant progress in restructuring the state power firm Eskom would be challenging, and that downward revisions to economic growth forecasts in 2019 raised new questions about South Africa’s growth potential.</p>



<p>Reporting by Alexander Winning; Editing by Kevin Liffey </p>


Fitch affirms South Africa credit rating but downgrades outlook from stable to negative

<div style="max-width: 700px;"><video-js data-account="1571595826001" data-player="default" data-embed="default" controls="" data-video-id="6062655529001" data-playlist-id="" data-application-id="" class="vjs-fluid"></video-js></div>
<p><script src="https://players.brightcove.net/1571595826001/default_default/index.min.js"></script></p>
<p>With new digital entrants, banking has entered an era of disruption.  Fitch has warned that intensifying competition, particularly from digitally-led retail banks, will affect earnings for South Africa’s banks. With all these changes which banks should you be banking in your portfolio? Nolwandle Mthombeni, Investment Analyst at Mergence gives her picks.</p>


Mergence’s Mthombeni reveals which banking stocks she is banking on

<div style="display: block; position: relative; max-width: 730px;">
<div style="padding-top: 56.25%;"><iframe style="width: 100%; height: 100%; position: absolute; top: 0px; bottom: 0px; right: 0px; left: 0px;" src="//players.brightcove.net/1571595826001/default_default/index.html?videoId=6043996945001" allowfullscreen="" border=0 frameborder=0></iframe></div>
</div>
<p>International rating agency Fitch, has suggested that the victory of the ANC in this year’s general elections matches their view that a big economic policy shift is unlikely in South Africa. Jan Friederich, Head of Middle East and Africa Sovereign Ratings, Fitch Ratings joins CNBC Africa for more on Fitch ratings election highlights.</p>


Weak reform momentum weighs on SA’s sovereign rating

<p>By Fitch Ratings</p>
<p>Fitch Ratings has affirmed South Africa&#8217;s Long-Term Foreign-Currency Issuer Default Rating (IDR) at &#8216;BB+&#8217; with a Stable Outlook.</p>
<p><strong>KEY RATING DRIVERS<br />
</strong>South Africa&#8217;s ratings are weighed down by low growth potential, sizeable government debt and contingent liabilities and the risk of rising social tensions due to extremely high inequality. The ratings are supported by strong institutions, a favourable government debt structure, deep local capital markets and a healthy banking sector.</p>
<p>GDP growth was weaker than expected in 1H18, but Fitch expects a recovery of investment after a prolonged period of contraction to drive GDP growth to 2.1% in 2019 and 2020 from 0.6% in 2018. The president in September announced a package of measures to stimulate growth, focused on structural reforms as well as reprioritising expenditure. A revised mining charter has been approved, lowering uncertainty for the sector, but raising regulatory costs compared with the previous regime. Initiatives also include measures to strengthen the telecoms sector, raise competition, reduce bulk transport costs and boost tourism by easing visa requirements. However, in Fitch&#8217;s view the measures will take time to implement and are not sufficiently far-reaching to raise medium-term potential growth significantly. As a result, potential growth is expected to remain just below 2%. This is well below the historical &#8216;BB&#8217; category median of 3.4% and only just above population growth of 1.6%.</p>
<p>Over the medium term, low growth and high inequality could raise the risk of social tensions. They could also lead to pressure for policies that undermine fiscal sustainability. For example, the discussion about land reform, including expropriation without compensation, reflects frustration about a lack of progress on reducing inequality. The government has nevertheless made clear it recognises the risks of land reform and will ensure that associated policies will not negatively affect food security or economic growth. The general election expected for May 2019 is unlikely to lead to a significant change in the direction of economic policy-making.</p>
<p>The medium-term budget policy statement in October included an upward revision of deficit and debt projections, with consolidated national government debt (excluding local government debt of around 1.6% of GDP) now expected to stand at 57.4% of GDP in fiscal year ending March 2021 (FY20/21). The revisions mainly reflected lower value-added tax revenue forecasts and lower economic growth expectations, while the expenditure ceiling, a key anchor of fiscal policy, was maintained. No significant consolidation measures were taken to offset the deterioration, probably reflecting concerns about hurting the economic recovery and potentially political concerns in an election next year.</p>
<p>The authorities&#8217; consolidated national government deficit projections are now broadly in line with our forecasts for a deficit of 4% of GDP in FY18/19 and 4.2% in FY19/20 but we expect a slightly stronger consolidation to 3.9% of GDP (government: 4.2%) in FY20/21. We expect general government debt (including local government debt) to rise to 61.1% of GDP in FY20/21, from 54.6% in FY17/18. Debt rose from just 26.5% in FY08/09  largely due to under-performing economic growth. If growth stays below 2% over the medium term, as we currently expect, debt/GDP would remain on an upward trend and rise to 69% of GDP in FY27/28. While the current debt ratio is high relative to the historical &#8216;BB&#8217; category median of 49.1%, the low share of foreign currency debt in total debt (10.2%) and the long average maturity of debt securities of 15 years contain exchange-rate and roll-over risks.</p>
<p>The weak financial condition of state-owned enterprises (SOEs) constitutes a significant fiscal risk. The liabilities of non-financial and financial SOEs amount to 12.5% and 2% of GDP, respectively. Non-financial SOEs are in poor financial health, on aggregate running a loss of on average 1% of GDP per year over the last five years. A severe liquidity crisis at Eskom, the national electricity company responsible for the bulk of SOE debt, has eased in the face of key personnel changes and governance improvements. However, the long-term viability of the company remains in question and the utility may formally request direct sovereign support.</p>
<p>South Africa&#8217;s low domestic savings rate and high reliance on potentially volatile portfolio inflows and significant private-sector short-term borrowing (albeit mostly in local currency) is a source of external risk. This was illustrated by the large depreciation of the rand earlier in 2018 during the global emerging market sell-off. Our expectation for further pressure on emerging markets in 2019 from capital outflows and US dollar strength suggests conditions will remain challenging. The current account deficit is expected to rise to 3.5% of GDP in 2018 and to 3.6% in 2019 and 2020, reflecting the expected recovery of domestic demand, including higher imports of capital goods. However, the fully flexible exchange rate acts as an important buffer. Moreover, financing from deep local capital markets could help compensate if foreign appetite dries up.</p>
<p>Despite weak economic growth, banking sector asset quality has held up with non-performing loans at 3.4% of total loans in June 2018. This reflects solid supervision and prudent lending practices. The collapse of a small mutual bank, VBS, may accelerate progress on establishing deposit insurance and a resolution regime, which would further reduce the risks to the sovereign from the banking sector. However, legislation is unlikely to be approved before 2020.</p>
<p>&nbsp;</p>


Fitch Ratings keeps South Africa at junk status

<div style="display: block; position: relative; max-width: 730px;">
<div style="padding-top: 56.25%;"><iframe style="width: 100%; height: 100%; position: absolute; top: 0px; bottom: 0px; right: 0px; left: 0px;" src="//players.brightcove.net/1571595826001/default_default/index.html?videoId=5974765422001" allowfullscreen="" border=0 frameborder=0></iframe></div>
</div>
<p>Fitch ratings say operating conditions in Nigeria are recovering given improving oil prices. However, Fitch warns that the operating environment for banks is difficult with minimal sector loan growth and pressure on margins and capital. Olamipo Ogunsanya, Research Analyst at Renaissance Capital joins CNBC Africa as we focus on the Nigerian banking sector.</p>


Nigerian banks continue to face challenges

<p>JOHANNESBURG (Reuters) &#8211; South African President Cyril Ramaphosa’s multi-billion dollar plan to turnaround the economy will do little to lift the country’s sluggish economic growth rate, ratings agency Fitch said on Tuesday.</p>
<p>“South Africa’s latest economic plan is unlikely to deliver a significant boost to economic growth,” said Fitch, which rates Pretoria’s foreign and local currency debt at subinvestment, adding that rand’s recent plunge would also hinder the plan.</p>
<p>“The plan does include measures that could support growth, but many relate to long-standing policy ideas that have been slow to implement,” Fitch said of the plan announced by Ramaphosa on Friday to pull the economy out of recession.</p>
<p>Reporting by Mfuneko Toyana; Editing by Ed Stoddard</p>


Fitch_Flickr

Why Fitch thinks South Africa’s #StimulusPackage is unlikely to boost growth in the country’s economy

<p>South Africa’s budget reverses some of last year’s fiscal deterioration but poor finances of state-owned companies remain a major risk to fiscal targets, ratings agency Fitch said on Friday.</p>
<p><div id="attachment_126646" style="width: 1034px" class="wp-caption aligncenter"><img loading="lazy" decoding="async" aria-describedby="caption-attachment-126646" class="wp-image-126646 size-full" src="http://cnbc.africa/wp-content/uploads/2017/06/Fitch_Flickr.jpg" alt="" width="1024" height="768" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2017/06/Fitch_Flickr.jpg 1024w, https://cms.cnbcafrica.com/wp-content/uploads/2017/06/Fitch_Flickr-300x225.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2017/06/Fitch_Flickr-820x615.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2017/06/Fitch_Flickr-768x576.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2017/06/Fitch_Flickr-160x120.jpg 160w" sizes="(max-width: 1024px) 100vw, 1024px" /><p id="caption-attachment-126646" class="wp-caption-text">Photo: Flickr</p></div></p>
<p class="">In a budget announced on Wednesday, the Treasury said value-added tax would be raised for the first time in 25 years, part of efforts to cut the deficit and stabilise debt.</p>
<p class="">“This would represent a partial reversal of recent fiscal deterioration,” Fitch said in a statement.</p>
<p class="">“Nevertheless, fiscal targets are subject to substantial risks, the largest of which stems from state-owned enterprises, notably the electricity company Eskom, whose medium-term finances are under pressure.”</p>
<div class="Attribution_container_28wm1">
<div class="Attribution_attribution_o4ojT">
<p class="Attribution_content_27_rw">Reporting by Olivia Kumwenda-Mtambo; Editing by James Macharia</p>
</div>
</div>


Fitch says South Africa’s budget partly reverses fiscal deterioration

<p>Ratings agencies Fitch, Moody’s and S&amp;P Global all applauded South Africa’s budget where the Treasury raised value added tax for the first time in over two decades and announced plans to dramatically reduce its debt, a senior official said on Thursday.</p>
<p><img loading="lazy" decoding="async" class="aligncenter wp-image-40241 size-full" src="http://cnbc.africa/wp-content/uploads/2017/02/standardpoors_headquarters.jpg" alt="S&amp;P: South Africa &quot;is not business as usual&quot;" width="1361" height="1024" /></p>
<p class="">“We engaged with Fitch and Moody’s and S&amp;P. Their preliminary view was that we did well,” Director General Dondo Mogajane told a parliamentary committee, saying the department had spoken telephonically to the agencies after the budget speech was delivered on Wednesday.</p>
<p class="">Fitch and S&amp;P’s cut the country’s local debt rating to subinvestment in 2017, while Moody’s is due to announce a decision in March.</p>
<div class="Attribution_container_28wm1">
<div class="Attribution_attribution_o4ojT">
<p class="Attribution_content_27_rw">Reporting by Mfuneko Toyana; Editing by James Macharia</p>
</div>
</div>


Fitch

Fitch: Ghanaian economy to grow at 4.8% in next fiscal

Moody’s, Fitch cut Angola’s credit rating deeper into junk

Fitch downgrades Angola’s rating to CCC

South Africa unlikely to sort out its debt in four years – Fitch.

Fitch revises Kenya’s B+ rating to negative from stable

How the SA bond market is performing post WGBI exclusion

Rand hits record low, goes over 19 to dollar as Fitch downgrades SA further into junk status

Moody’s to cut South Africa’s sovereign credit rating to junk – economists

Fitch affirms SA’s outlook as negative

Fitch affirms South Africa credit rating but downgrades outlook from stable to negative

Mergence’s Mthombeni reveals which banking stocks she is banking on

Weak reform momentum weighs on SA’s sovereign rating

Fitch Ratings keeps South Africa at junk status

Nigerian banks continue to face challenges

Why Fitch thinks South Africa’s #StimulusPackage is unlikely to boost growth in the country’s economy

Fitch says South Africa’s budget partly reverses fiscal deterioration

Ratings agencies applaud South Africa’s budget: Treasury

News Tips

Advertise With Us

Fitch

Fitch: Ghanaian economy to grow at 4.8% in next fiscal

Moody’s, Fitch cut Angola’s credit rating deeper into junk

Fitch downgrades Angola’s rating to CCC

South Africa unlikely to sort out its debt in four years – Fitch.

Fitch revises Kenya’s B+ rating to negative from stable

How the SA bond market is performing post WGBI exclusion

Rand hits record low, goes over 19 to dollar as Fitch downgrades SA further into junk status

Moody’s to cut South Africa’s sovereign credit rating to junk – economists

Fitch affirms SA’s outlook as negative

Fitch affirms South Africa credit rating but downgrades outlook from stable to negative

Mergence’s Mthombeni reveals which banking stocks she is banking on

Weak reform momentum weighs on SA’s sovereign rating

Fitch Ratings keeps South Africa at junk status

Nigerian banks continue to face challenges

Why Fitch thinks South Africa’s #StimulusPackage is unlikely to boost growth in the country’s economy

Fitch says South Africa’s budget partly reverses fiscal deterioration

Ratings agencies applaud South Africa’s budget: Treasury

News Tips

Advertise With Us

Newsletters