S&P chief says Ramaphosa euphoria must lead to action

Johannesburg - The head of S&P Global Ratings for sub-Saharan Africa on Thursday said South Africa needed to balance the current euphoria around new leadership with sound economic reforms in order to boost growth.

Konrad Reuss said the wave of optimism around the change of power, following the appointment of Cyril Ramaphosa as president, should be accompanied by action to implement policy changes. A change of leadership alone would not be enough to attract economic growth.

“It’s still early days … at the same time there are elections coming up next year,” said Reuss on the sidelines of a business meeting in Johannesburg.

He stated that the country needed to “strike a balance between winning elections next year and implementing reforms that would be important to invigorate economic growth”.

Ramaphosa’s elevation to the presidency last month after the resignation of Jacob Zuma was welcomed by markets, amid weak economic growth and high unemployment.

S&P currently rates South Africa's long-term local currency as 'BB+', or the first rung of junk grade.

The agency has raised concerns over the financial affairs of the country’s state-owned enterprises, including power utility Eskom.

Reuss said Eskom’s liquidity challenges remained an “ongoing concern” despite the recent change to its board.

Last month, S&P downgraded Eskom to 'CCC+', the seventh rung of non-investment grade, with a negative outlook.

 “We are concerned about the tight liquidity, but at this juncture, the  important issue for us over the last couple of months is that there has been a lack of evidence of government support,” he said.

Ruess said the state-owned power supplier was under “constant surveillance” adding that the ratings agency had noted that Eskom had “cobbled together a bridging loan” in order to improve its financial crisis.

In February, Eskom  announced it had signed a R20-billion short-term credit facility with a consortium of local and international banks.

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