Following S&P Global Ratings’ decision to affirm South Africa’s long-term foreign and local currency debt ratings at ‘BB-’ and ‘BB’, respectively, and maintain the positive outlook, government’s growth strategy will continue to focus on maintaining macroeconomic stability to reduce living costs and grow investment, executing reforms to promote a more dynamic economy, building State capability in core functions and supporting growth-enhancing public infrastructure investment.

“The fiscal strategy continues to strike a balance between stabilising the public finances, reducing risks in the fiscal framework, encouraging economic growth and supporting low income and vulnerable households,” the National Treasury says in a May 16 statement.  

According to S&P, the ratings on South Africa benefit from the country’s sizable and sophisticated financial system that provides a deep funding base for the government.

The country also has relatively strong institutions, with good checks and balances, particularly its central bank. 

However, S&P says the ratings are constrained by relatively low GDP per capita and low GDP growth rates, as well as sizeable fiscal deficits and high government debt.

According to S&P, despite the re-tabling of the National Budget and the likely removal of mooted value-added tax increases, fiscal consolidation is planned to continue throughout the forecast period, and fiscal financing benefits from access to deep domestic markets and an actively traded currency.