Standard & Poor’s Ratings Services has assigned its ‘BBB’ foreign currency senior unsecured debt rating to the

  • Republic of South Africa ‘s proposed Eurobond.
    The assignment of the new rating follows the upgrade, on May 7, of Standard & Poor’s long-term foreign currency ratings on South Africa to ‘BBB’ from ‘BBB-‘, and of its local currency ratings to ‘A/A-1’ from ‘A-/A-2’. The outlook on South Africa is stable.


“The upgrade reflects the continued strength of South Africa ‘s fiscal performance, and ongoing improvements in the country’s external position,” says Standard & Poor’s credit analyst Mame-Fatou Diagne. “In addition, the government has continued to strengthen its track record of sound economic management and reform implementation in a challenging external environment, and it is not expected to deviate from its course of orthodox economic policies in the foreseeable future.”

Since 1994, structural reforms have achieved a diversification of the economy and increased its openness. As a result, South Africa’s economy has been reasonably successful in weathering the current global slowdown. The ongoing implementation of growth-enhancing structural reforms (particularly in the labour market), coupled with the prudent loosening of fiscal policy and well-designed development and social policies, will underpin a further increase in growth.

Growth, however, is unlikely to rise much above 4% over the medium term a level that would allow a more rapid amelioration of the country’s chronic unemployment and social problems. Factors still constraining growth include low levels of domestic savings and investment and labour market rigidities. The HIV/Aids pandemic will also place a severe burden on South Africa ‘s economy in the coming decade.

“Nevertheless, cautious fiscal and monetary policies, coupled with growth-enhancing structural reforms and continued policy delivery on the social front, will support stability and the government’s creditworthiness over the coming years,” says Diagne. “The continuation of privatisation should underpin foreign investment inflows and allow the reserve bank to build up its international reserves, which would also be critical to reduce external vulnerability. Longer-term rating prospects hinge on higher growth, sustained delivery on social issues, and structural reforms aimed at addressing unemployment and poverty, thereby entrenching political and social stability.”