Fitch downgrades S. African debt to ‘BBB’
Fitch downgraded Thursday South Africa's sovereign debt rating by one notch to 'BBB' citing poor growth prospects and rising social and political tensions.
“Economic growth performance and prospects have deteriorated, affecting the public finances and exacerbating social and political tensions,” the ratings agency said in a statement explaining the move.
The downgrade follows in the tracks of Standard’s and Poor’s and Moody’s, which both cut their South Africa ratings to similar levels late last year.
Fitch added that the outlook for the rating, which is near the lower end of the investment range, was stable.
Social and political unrest also affected Fitch’s decision.
“Protests over poor service delivery increased to record levels in 2012 and the economy has been beset by violent strikes that have affected growth and the current account,” it said.
Unprecedented mine strikes last year left over 50 people dead and cost the economy over a billion dollars in lost production.
Farm labourers have clashed with police in recent days over their demands for a doubling of their salaries.
Fitch warned that wage settlements above productivity gains were eroding South Africa’s competitiveness.
It said slow growth and rising corruption have crippled authorities’ ability to improve the living standards of Africa’s largest economy.
Unemployment is stuck at 25 percent and GDP grew by only 2.2 percent in 2012, according to the agency.
A “generally sound” banking system and the election of a respected businessman, Cyril Ramaphosa, as deputy president of the ruling African National Congress (ANC) offered glimmers of hope, Fitch said.