S&P explains the reasons behind S.Africa's unchanged ratings

by Trust Matsilele 0

Konrad Reuss, managing director and South Africa office head at Standard & Poor’s told CNBC Africa that the ratings agency had kept the government rating unchanged after considering a number of variables.

(READ MOREStandard & Poor lowers South Africa’s credit rating)

“We have had two downgrades already over the last two years with the first one in October 2012 and the second one in June this year so for now we are fine where it is,” said Reuss.

“A lot of the bad news which is out is worked into the rating which doesn’t mean we are not concerned with some of the issues around growth in the economy.”

The ratings agency said the power utility will contribute to the government ratings going forward.

“Eskom is a story on its own and on the state utility we have a negative outlook compared to the stable outlook for the government rating,” he added.

“The situation will be a concern if we continue to see the load shedding we have seen for a while and this in the long term might affect government rating factoring the role Eskom plays in economic growth.”

(READ MORE: Moody’s downgrades Eskom’s senior unsecured ratings)

The new finance minister, Nhlanhla Nene recently said he was committed to trimming government spending.

“One of the challenges facing the new finance minister is trimming the government wage bill that his predecessor Pravin Gordhan struggled with,” said Reuss.

“We are in a ‘wait and see’ position but we have obviously taken note of the medium term budget policy statement that carried a lot of commitment expression especially on fiscal consolidation.”

Reuss added that his organisation has taken note of the fact that government to maintain the expenditure ceilings even to find savings with the expenditure savings ceilings.

He also expressed worry over the country’s moving economic targets.

“The rebound of economic growth in South Africa has become a moving target and a number of ratings agencies had to prune back significantly.”