14 March 2013
Ratings agency Standard and Poor’s, in its latest announcement on South Africa, had not taken adequate account of a number of positive developments in the six months since its previous announcement in October, the SA National Treasury said on Wednesday.
Affirming South Africa’s sovereign credit rating at BBB with a negative outlook on Wednesday, Standard and Poor’s (S&P) said it expected policy continuity and gradual fiscal consolidation from the South African authorities.
However, it said in a statement, the ratings were constrained “by South Africa’s many development needs and social challenges, which may create increasing political pressures and may increase fiscal spending pressure in the future”.
Pressures that might be brought to bear on fiscal consolidation included growth in public sector wages, lower than expected growth and increased development needs, the agency said.
In response, the National Treasury said S&P had not sufficiently acknowledged the adoption of the National Development Plan (NDP) by the ruling African National Congress (ANC) during a peaceful elective conference in Mangaung in December.
Also not taken into account were the government’s re-affirmation of its economic policies in President Jacob Zuma’s State of the Nation Address last month, or the wealth of information on the NDP and infrastructure spending provided by Finance Minister Pravin Gordhan’s 2013 Budget.
“The NDP, on which the 2013 Budget is premised, identifies the key constraints to faster growth and presents a roadmap to a more inclusive economy that will address South Africa’s socio-economic imbalances,” the Treasury said, adding that the government’s programmes were geared in the first place towards addressing poverty and unemployment.
The Budget had re-affirmed the government’s commitment to bringing down the budget deficit and stabilising net government debt to slightly above 40 percent of gross domestic product (GDP), the Treasury noted.
While risks to the country’s growth remained, the government’s fiscal framework remained “realistic and achievable”, and continued to be guided by the principles of counter-cyclicality, debt sustainability and intergenerational equity.
South Africa would continue to invest in infrastructure in order to grow “the productive capacity of our economy and the competitiveness of our industries” in a way that was consistent with fiscal sustainability, the Treasury said.