Share

Treasury notes Fitch concerns about protests, 'political noise'

Cape Town - Ratings agency Fitch is keeping an eye on the effect of continued student protests and "political noise", the Treasury said on Saturday after the release of the latest country ratings for South Africa.

"Fitch mentioned that additional spending on student bursaries as a result of student protests was absorbed by using the contingency reserve, some one-off financing and a re-prioritisation of other expenditures, but the protests showed that social pressures could lead to further spending needs," Treasury noted.

"According to Fitch, political noise may undermine government efforts to improve the governance of state-owned companies, which could affect the plan to streamline their portfolio."

Fitch also raised the African National Congress's 54th national congress as something to watch.

The Government Communication and Information Services said on Saturday Moody's investors Service left South Africa's long and short term ratings of Baa2/P-2 unchanged with a negative outlook, two notches above sub-investement grade.

''This is after the agency decided not to have a formal review process given their recent affirmation of the sovereign rating in May 2016,'' it said.

On Friday Fitch Ratings dropped South Africa's outlook to negative, while affirming the country's rating at BBB-, which is one notch above junk status.

The past year has been dominated by the #FeesMustFall student push for free education, and the National Prosecuting Authority's abortive attempt at trying Finance Minister Pravin Gordhan for fraud and theft.

Gordhan was under severe pressure while the NPA issue played out. There were also allegations that members of the wealthy Gupta family may have had a hand in some key Cabinet appointments.

But the Treasury was upbeat about feedback on its efforts to keep South Africa at investment grade after a nail-biting period of speculation over what they would do.

The Treasury responded to the ratings by saying that since the tabling of the Medium Term Budget it had continued to adhere to the expenditure ceiling set during the 2016 Budget.

It had reduced it further and proposed additional tax measures aimed at ensuring that government debt stabilises in the medium term, and is committed to further reducing waste through procurement reforms. 

"Over the next three years, the legal and regulatory framework will be strengthened to improve the relationship between expenditure and outcomes which is essential in an environment of slow growth and limited resources," the Treasury said.

Cabinet had also endorsed the private sector participation framework for state-owned companies and the guidelines for the remuneration and incentive standards for directors of these companies, as well as approving and publishing the revised Integrated Energy Plan for comment.

Its report on the proposed R3 500-per-month minimum wage also provided a chance to address inequality and unemployment. 

"All these developments have ensured an investment grade status for South Africa. If we continue at this pace and with such strong collaborations (government, business, labour, civil society and the general public) with a common goal, we will revise course and place South Africa on a sustainable path of faster and inclusive growth," it said. 

But it noted that Fitch's comments about political risks to standards of governance and policy making in the lead up to the ANC's big conference in 2017.

"The fact that the country's investment grade status has been maintained demonstrates the resilience of the country and its people, especially during difficult times, to achieve a common mission. 

"In this regard, government sincerely thanks all South Africans for their efforts in ensuring that the country does not lose its investment grade status and we urge all South Africans to continue this close working relationship with government over the period ahead."

But it found it "curious" that Fitch would worry about the party's conference next year, branding it an "unscientific" approach with "a negative narrative".

ANC spokesperson Zizi Kodwa said the government works not to appease ratings agencies, but to ensure public finances are managed in a way conducive to the raising of the level and inclusivity of economic growth.

Kodwa added that the comments about the conference were an unnecessary conflation of party and state.

But the party welcomed the "affirmation of gradual recovery" in the economy in the coming years.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.90
+0.2%
Rand - Pound
23.85
+0.2%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.31
+0.2%
Rand - Yen
0.12
+0.2%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders