Rand Even Stronger After 3rd Agency Affirms South Africa’s Rating

Following the decisions by ratings agencies Standard & Poor’s and Moody’s over the past weeks to not downgrade South Africa to junk status, the third important ratings agency Fitch today followed suit.

The rand, which has rollercoastered over the last five months, reaching a low of almost R18 to the dollar in January, firmed even more from yesterday and, following the latest news, is trading at R14.72.

In December Fitch downgraded South Africa to ‘BBB-‘, outlook stable, only days before President Jacob Zuma took the disastrous decision to fire finance minister Nhlanhla Nene, which sent the financial market and rand into freefall.

In its statement today Fitch said it “affirmed South Africa’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘BBB-‘ and ‘BBB’, respectively”.

The department of finance – under minister Pravin Gordhan, whose tireless work after Nene’s sacking many have credited with helping save the country from a financial disaster – said the government welcomed the decision by Fitch.

“The decision affords South Africa a narrow window to demonstrate further concrete implementation of reforms that are already underway aimed at turning around the growth path and place public finances on a more sustainable path.

“Once again, this rating outcome demonstrates that during difficult times, South Africa – government, labour, business and civil society – can work together to achieve a common goal.”

South Africa is not out of the woods yet, however. As the finance ministry said, Fitch highlighted several “risks that could lead to the rating being lowered”.

“Government is mindful of these and fully aware that the next several months are critical. We are stepping up the implementation of the 9-point plan and other measures to boost the economy,” the finance ministry statement said.

“Efforts are redoubling our efforts aimed at: i) Restoring confidence and boosting investment amongst local and international investors; ii) Unblocking obstacles to faster employment growth in key sectors; and iii) Undertaking fiscal, State-Owned Company (SOC) and regulatory reforms.”