Fitch says the downgrade is a result of the lack of a clear path towards government’s debt stabilisation, as well as the expected impact of Covid-19 shock on public finances and economic growth. 

The negative outlook reflects the prospect of further significant upside pressure on government debt and additional downside risks associated with the global shock. 

In the midst of the prevailing financial market stress emanating from Covid-19 and credit ratings downgrades by Moody’s and Fitch, the government reiterates its commitment to implement structural economic reforms to address the weak economic growth, constrained fiscus and ailing state-owned companies. 

Furthermore, government says it continues to prioritise and implement measures announced by President Cyril Ramaphosa to contain the spread of Covid-19, as well as limit its impact on the economy. 

Despite the downgrade and severe disruption in global financial markets, Fitch says it acknowledges South Africa’s resilience to external shocks. 

The agency says “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%)”. 

It is true that non-investment grade ratings have undesirable implications for the whole economy.

“To assure all South Africans, government is seized with addressing and minimising the impact of Covid-19, implementing measures to improve economic growth and setting government finances on a sustainable trajectory,” finance Minister Tito Mboweni said.

“This work requires close collaboration and coordination across various sectors of the economy,” he said.  

African News Agency