S&P changes SA's outlook to negative, warns of growing debt burden

S&P Global Ratings changed its outlook on South Africa's sovereign credit rating to negative on Friday evening, citing low GDP growth, rising fiscal deficits and a growing debt burden. 

The rating agency did not downgrade SA further into junk, however.

It warned that it may lower the rating if it observed continued fiscal deterioration due to higher pressure on spending, rising interest costs, or the "crystallization of contingent liabilities related to state-owned enterprises, especially Eskom".

The assessment was broadly anticipated by analysts. In a Bloomberg survey, 16 out of 22 analysts said they expected the outlook to change from stable to negative. 

S&P in November 2017 already downgraded SA's credit rating to junk. Of the three major international credit rating agencies, only Moody's still has SA at investment grade. 

Following Friday's decision, S&P has SA's long-term foreign currency rating at BB (Negative) and the country's long-term local currency rating at BB+ (Negative). 

Moody's, meanwhile, changed its outlook on SA's credit rating to negative at the beginning of November. 

On Friday S&P said its SA rating was constrained by low GDP per capita growth, weak economic expansion, a large and rising government debt burden, and sizable contingent liabilities primarily tied to debt-laden power utility Eskom.

"The ratings are supported by the country's monetary flexibility, well-capitalized and regulated financial sector, and deep capital markets. South Africa also has moderate external debt, in particular low levels of external debt denominated in foreign currency," it said. 

S&P said it would be closely monitoring SA's economic performance to see if it weakens further. 

"We could also consider lowering the ratings if the rule of law, property rights, or enforcement of contracts were to weaken significantly, undermining the investment and economic outlook. We currently view this as unlikely."

ZAR/USD
17.00
(-0.09)
ZAR/GBP
21.24
(-0.12)
ZAR/EUR
19.14
(-0.13)
ZAR/AUD
11.81
(-0.13)
ZAR/JPY
0.16
(-0.20)
Gold
1774.74
(+0.03)
Silver
18.05
(+0.01)
Platinum
808.00
(+0.25)
Brent Crude
42.78
(-0.79)
Palladium
1914.01
(+0.62)
All Share
54521.90
(-0.17)
Top 40
50179.89
(-0.26)
Financial 15
10150.02
(-0.64)
Industrial 25
76554.73
(+0.52)
Resource 10
50138.02
(-1.24)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1598 votes
I am taking a hit, but should be able to recover in the next year
23% - 2091 votes
My finances have been devastated
35% - 3147 votes
It's still too early to know what the full effect will be
25% - 2269 votes
Vote