11 January 2013
South Africa is already busy tackling the issues cited by ratings agency Fitch in its downgrade of the country’s sovereign debt, the National Treasury said on Thursday.
The government was “aware of the challenges of poverty and unemployment the country is facing,” the Treasury said in a statement.
“At its recent conference, the ruling African National Congress (ANC) endorsed the National Development Plan (NDP), which identifies the constraints to faster growth and presents a roadmap to a more inclusive economy that will address South Africa’s socio-economic imbalances and challenges.”
From ‘BBB+’ to ‘BBB’
Fitch on Thursday downgraded South Africa’s long term foreign currency credit rating from “BBB+” to “BBB”, its long term local currency credit rating from “A” to “BBB+”, and its short term credit rating from “F2” to to “F3”.
Giving reasons for the downgrade, the agency said that South Africa’s economic growth performance had deteriorated, and that this was likely to affect public finances and exacerbate social and political tensions in the country, which had increased.
It added that South Africa had seen a decline in competitiveness, reflected in above-productivity wage settlements and infrastructure constraints which Fitch believes have contributed to the country’s widening current account deficit.
Mangaung ‘gave certainty on economic policy’
In its response, the Treasury noted that South Africa’s slower economic growth rate was in part due to external factors, particularly the protracted debt crisis in the Eurozone, an important trading partner for the country.
It said that the resolutions of the ANC’s conference in Mangaung in December had given certainty on economic policy, “which the Fitch report does not seem to fully appreciate”, adding that the government would be prioritising the implementation of the National Development Plan (NDP) in order to achieve higher levels of growth.
Finance Minister Pravin Gordhan’s latest Medium Term Budget Policy Statement, published in October, “sets out a disciplined fiscal framework that keeps the expenditure envelope that was published in February unchanged,” the Treasury said.
“It balances support for the economy in the immediate term with fiscal consolidation over the medium to long term. It provides for a sustained investment in growth inducing infrastructure.”
This budget framework demonstrated South Africa’s unambiguous commitment to maintaining debt and expenditure growth within sustainable levels, the Treasury said, adding that these principles would continue to underpin South Africa’s fiscal stance.