S&P Global Ratings says South Africa’s sovereign rating risked being downgraded due to concerns about the postponement of fiscal consolidation and lack of clarity around land expropriation.

Ravi Bhatia, the Director, Sovereign Ratings at S&P, said on Tuesday in Johannesburg that it was because fiscal consolidation had been postponed in the Medium Term Budget Policy Statement (MTBPS).

Recession-hit South Africa last week unveiled a bleak budget that saw wider budget deficits and low growth.

South Africa is rated “junk” by S&P Global Ratings and Fitch.

“It is on those two aspects (referring to land reforms and fiscal consolidation) we would consider lowering the rating,” Bhatia said.

He said the next rating review by S&P would be on Nov. 23.

Bhatia said fiscal consolidation had been postponed in the Medium Term Budget Policy Statement (MTBPS) presented by new Finance Minister Tito Mboweni on Oct. 24.

“This has been a trend for many years. That the deficits in the MTBPS are being revised upwards that feeds into the debt stock where you see it rising toward 60 per cent with no clear stabilisation,” he said.

“And if you look at interest payments as a percentage of revenues, they are above 10 per cent, and whether they will go above our thresholds of 15 per cent is something to watch.”

Bhatia also said “sentiment has been dampened by the lack of clarity in the land expropriation.”

South Africa’s ruling African National Congress (ANC) has said it aims to change the constitution to allow for land expropriation without compensation.

The aim is to address racial disparities in land ownership that persist more than two decades after apartheid’s demise in 1994.

President Cyril Ramaphosa had said the policy would be undertaken in a way that does not threaten food security or economic growth.

The ANC said unused land would be the main target. However, the policy had continued to unnerve investors worried about the impact on property rights. (Reuters/NAN)

– Oct. 30, 2018 @ 16:35 GMT |