Johannesburg – Rating agency Fitch Ratings on Friday warned that the ANC’s infighting and the upcoming local government polls will slow down government’s decision-making.
The entity said in addition, exceptionally high inequality and joblessness could lead to long-term challenges to social stability. South Africa’s unemployment rate rose to 32.5% in the fourth quarter of 2020 from 30.8% in the previous period.
It was the highest jobless rate since quarterly data became available in 2008, with more people entering the labour market and actively looking for jobs.
“Infighting within the ANC, highlighted by the recent suspension of the party’s secretary- general, also continues to slow down government decision- making. Local elections in October could also slow the policy-making process,” Fitch said in its rating update.
This as Fitch affirmed SA’s long-term sovereign credit rating on Friday at BB-, which is three notches below investment grade and maintained a “negative” outlook.
The ANC suspended its controversial secretary-general Ace Magashule after he refused to willingly step aside as per party instructions. Magashule has since approached the courts to declare the decision invalid and not consistent with the constitution of the republic.
The ANC has said it will oppose Magashule’s application. Fitch also raised alarm bells about the financial position of Eskom and the acrimonious current wage negotiations. Eskom on Thursday said it could not afford to pay what unions demanded.
The National Union for Metalworkers of South Africa and National Union of Mineworkers are adamant the utility must meet their demands for a 15% salary increase.
They have rejected Eskom’s 1.5% offer.
“The electricity provider Eskom remains in a difficult financial situation, with wage negotiations also adding to risks. Discussions about easing Eskom’s debt burden have not made further progress in recent months,” Fitch said. The ratings agency also noted that government’s finances had “improved substantially”.
Fitch’s peers, S&P Global Ratings also left ilts long-term sovereign credit ratings for SA unchanged at BB-. In terms of outlook, S&P has maintained a “stable” view on South Africa.
S&P cautioned that a weak pace of economic reforms and slow vaccination rates will continue to constrain medium- term economic growth and limit the government’s ability to contain the debt-to- GDP ratio.
Moody’s decided this month against making any decisions on the country’s credit ratings. All three agencies have South Africa in junk status. Junk status is also referred to as sub-investment grade or non-investment grade. National Treasury said it noted S&P and Fitch’s decision.
“Government acknowledges the pressures the country’s credit ratings face and remains committed to addressing them.
“Additionally, government is aware that it needs to fasttrack growth-enhancing strategies,” the Treasury said.
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