Fitch keeps South Africa's sovereign rating unchanged

by Reuters
Thursday, 6 December 2018 16:05 GMT

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JOHANNESBURG, Dec 6 (Reuters) - Ratings firm Fitch on Thursday kept South Africa sub-investment grade credit rating steady at subinvestment and maintained its stable outlook, but warned that low growth and the rising debt of state-owned firms posed a risk.

Africa's most industrialised economy has barely grown in the past decade with fiscal missteps and government corruption contributing to weak business and consumer confidence.

Fitch rates both Pretoria's foreign and local currency debt at 'BB+', one notch below investment grade.

"South Africa's ratings are weighed down by low growth potential, sizeable government debt and contingent liabilities," Fitch said in a statement.

Large debt at state firms, particularly power supplier Eskom which said this week that it wanted the government to take on 100 billion rand ($7 billion) of its debts, have raised concerns about the country's ability to keep down spending.

Of the top three ratings firms only Moody's has the country's sovereign rating in investment grade.

A downgrade could trigger large capital outflows as some funds are forced to sell their holdings.

Investor sentiment has recovered slightly since President Cyril Ramaphosa replaced Jacob Zuma in February and promised to reignite investment into a stagnant economy. (Reporting by Mfuneko Toyana Editing by James Macharia)

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