S&P eyes possible post-election reforms
Mpho Hlakudi and Colleen Goko - S&P Global Ratings said it’s closely monitoring the outcome of South Africa’s elections this week and subsequent government policies to address issues from crime to energy supply that have deterred investment."We have seen investors being a little bit more cautious this year because of the election uncertainty," S&P’s Zahabia Gupta said in an interview. "Post-elections, more political and policy stability could lead to increased investment activity."
Foreign direct investment remains low, Gupta said, a troubling sign for a country with high development needs.
"Issues around energy supply, logistics, regulatory framework, red tape, and crime and corruption are major deterrents," she said. "Growth in private and foreign investment would be positive for growth prospects, because investment is still not back to pre-Covid levels."
Survey
A Bloomberg survey of fund managers conducted this month found that crime, fiscal risk and electricity supply were the biggest concerns they had with regard to South Africa in the long term.
Infrastructure bottlenecks in particular, especially in railway capacity and port congestion, remain significant constraints on growth, S&P’s Gupta said. S&P projects South Africa’s economy to grow 1.1% in 2024, with a slight increase to between 1.3% and 1.4% from 2025 to 2027.
The company’s base-case scenario sees the ANC entering coalition with a smaller party post 29 May vote, and a change in leadership following the elections would not necessarily lead to any immediate rating assessment change.
S&P recently affirmed South Africa’s rating at BB- — three levels below investment grade — with a stable outlook, saying that the rating’s strengths and weaknesses are broadly balanced.
Future ratings adjustments will hinge on the country’s growth outcomes and its ability to manage fiscal and debt trajectories effectively, it said. - News24/Bloomberg