As South Africans are still sceptical about Standard & Poor’s (S&P) and Fitch’s ratings, Finance minister Pravin Gordhan still maintains he is not sure whether South Africa’s debt could be downgraded after holding discussions with the rating agencies last week.
The minister, who has been persistent in his approach with the firm to see that the SA economy is not downgraded, said it is hard to say what the team’s decision would be.
“Look, we were able to explain everything they wanted explained. In fiscal terms, we have a credible story, and when its comes to building confidence, we have a credible story. With enough work, we can also turn the corner as far as growth is concerned,” Gordhan said.
“They said to us, don’t tell us what you want to do, show us the evidence. And we’ve done that,” he told the Financial Mail.
Following the views of numerous analysts on the ratings, it is however most likely that south Africa will be pushed to “junk” status.
Last week, the central bank cut its 2016 growth forecast to 0.6% from 0.8%, reflecting the risk the economy will tip into recession and S&P said earlier in May that the country’s weak economy posed an immediate risk to the rating.
S&P rates the debt of the country at BBB-, one notch above speculative grade and with a negative outlook, while Fitch, also due to publish its review next month, assigns a similar rating after a downgrade in December.
SA’s officials met with the S&P team last week in a little chat before their review due to be published on June 3, which could see the country’s debt rating cut to junk.
Meanwhile, SA’s rand firmed to a one-week high against the dollar early on Wednesday on improved risk appetite, but analysts said the unit looked vulnerable to the possibility of a credit ratings downgrade and a US Federal Reserve interest rate hike.
The currency which was trading at its strongest levels since May 17, was traded at R15.5100/$ the dollar, 0.94% firmer from its New York close on Tuesday.
However, earlier this month, the other major rating agency, Moody’s, kept South Africa’s rating on hold at Baa2 with a negative outlook, two notches above junk.