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Cape Town - The move by Standard & Poor’s (S&P) to keep South Africa’s credit rating on hold on Friday was largely the consensus market view, said Craig Sherman from Ashburton Investments.
“This was reinforced during the week by Finance Minister Pravin Gordhan’s comments stating that he believed the country had done enough to stave off a downgrade.
“Although Ashburton doesn’t foresee any material market movement as a result of S&P’s decision, it could give the market some impetus to extend the rally in the bond and currency markets sparked by this afternoon’s US jobs numbers,” he added.
In the longer term, however, this reprieve does not change the fundamental weaknesses in the South African economy and Sherman sees the decision to hold off on ratings downgrade as temporary with a downgrade still very likely to proceed in December.
Colen Garrow, economist at Lefika securities, told Fin24 that the ratings decision unfortunately doesn’t remove uncertainty. “S&P underlined our low growth situation and they’d like to see structures in place to elevate our GDP.”
South Africa would have to apply itself between now and October when Gordhan delivers his mini-budget, Garrow said.
He believes there is some maneuvering space to push up GDP growth, but the public and private sector will need to work together much closer.
“We have an ambitious infrastructure spending plan, but we still need to see it gain some traction.”
“This was reinforced during the week by Finance Minister Pravin Gordhan’s comments stating that he believed the country had done enough to stave off a downgrade.
“Although Ashburton doesn’t foresee any material market movement as a result of S&P’s decision, it could give the market some impetus to extend the rally in the bond and currency markets sparked by this afternoon’s US jobs numbers,” he added.
In the longer term, however, this reprieve does not change the fundamental weaknesses in the South African economy and Sherman sees the decision to hold off on ratings downgrade as temporary with a downgrade still very likely to proceed in December.
Colen Garrow, economist at Lefika securities, told Fin24 that the ratings decision unfortunately doesn’t remove uncertainty. “S&P underlined our low growth situation and they’d like to see structures in place to elevate our GDP.”
South Africa would have to apply itself between now and October when Gordhan delivers his mini-budget, Garrow said.
He believes there is some maneuvering space to push up GDP growth, but the public and private sector will need to work together much closer.
“We have an ambitious infrastructure spending plan, but we still need to see it gain some traction.”
