Ratings agency Fitch on Thursday affirmed to keep South Africa's sovereign rating on hold at a sub-investment rating, at BB+ with a stable outlook.
Economist Strategist at Argon Asset Management, Thabi Leoka, says the rating agency is concerned that the earlier Cabinet reshuffle by President Zuma is likely to undermine government and weaken fiscal consolidation and reduce private sector investment.
They said that they also worried about growth because if you look at our 5 year average is about 1.6%. If you compare this number to similar rated countries their medium growth is 3.5%. So we are actually lagging in our category.— Thabi Leoka, Economist Strategist at Argon Asset Management
The rating agency Moody's is expected to make a decision soon.
They are the only agency to keep the country above investment grade. However, Leoka says she is expecting Moody's to downgrade us one notch when they finally make their announcement.
I think that if they don't move they will be out of sync with the others and it wouldn't make sense.— Thabi Leoka, Economist Strategist at Argon Asset Management
I think as South Africans we do understand the reason why we were downgraded if you look at our growth, GDP ratios and the danger that could happen if there are fiscal slippages.— Thabi Leoka, Economist Strategist at Argon Asset Management
Fitch seemed receptive to the new finance minister's commitment not to veer off the existing fiscal targets set by the previous team at Treasury.
To hear more of this interview, listen below: