It cautioned that the Cabinet reshuffle at the end of March‚ which triggered a downgrade‚ was likely to undermine governance of state-owned enterprises (SOEs)‚ weaken fiscal consolidation and reduce private-sector investment as a result of weaker business confidence.
“As the new finance minister has emphasised‚ the government’s commitment to existing fiscal targets still stands. As a result‚ it is unlikely that the government will raise its expenditure ceilings‚ which have served as a key anchor for fiscal policy. The government is also likely to implement some tightening if‚ as is expected‚ revenue underperforms‚ but the adjustment will be insufficient to keep deficit targets on track.”
The Treasury said in a statement: “Government notes the decision of Fitch and expresses gratitude to all the stakeholders who participated in the meetings with the ratings agency‚ and ensured that the country is not downgraded further.”
It added that fiscal consolidation remained firmly on track‚ that the government’s efforts remain focused on improving the growth trajectory and policy perceptions and that Finance Minister Malusi Gigaba was engaging with the private sector to make sure that the joint work of the government‚ business‚ labour and civil society continued.
“The leadership in government and the ruling party are firmly committed [to] improving business and investor confidence in SA. As Fitch has rightly mentioned‚ rhetoric of ‘radical socioeconomic transformation’ does not imply a fundamental policy shift.”
The Treasury said the National Development Plan would be the overarching policy of the government‚ and would be used as a template to achieve inclusive growth and to eradicate the challenges of unemployment‚ poverty and inequality.
In a scheduled review on Thursday‚ S&P Global Ratings‚ which cut SA’s sovereign credit rating for foreign currency-denominated debt to junk on April 3 — four days after President Jacob Zuma replaced Pravin Gordhan with Malusi Gigaba as finance minister — kept its rating unchanged:
It said it was also of the view that “while efforts to improve the SOC governance framework will continue‚ implementation decisions‚ for example on appointments of senior SOC management‚ will hamper these efforts and could lead to weaker financial positions of SOCs and higher contingent liabilities for the government”.