Fitch cuts S. Africa’s outlook to negative

By Hassan Isilow

JOHANNESBURG (AA) – The Fitch ratings agency on Friday revised South Africa’s outlook to negative from stable, citing infighting within the governing African National Congress party (ANC) as a concern for economic growth.

Fitch said in a statement it would maintain its triple B minus rating for South Africa’s long-term debt held in foreign and local currencies.

If a country’s rating falls into a sub investment level its cost of borrowing money increases. South Africa has not yet fallen into that category.

‘‘The South African economy may have started recovering from a series of shocks, but business confidence remains depressed and investment has continued to contract,’’ the agency said.

Fitch warned that infighting within the ANC and government would distract policy makers and send mixed messages that will undermine the investment climate constraining GDP growth.

Recent political uncertainties in South Africa include several corruption allegations brought against the president, factionalism with the ANC and disagreements between the president and Finance Minister Pravin Gordhan.

Last month, prosecutors charged Gordhan with fraud but later dropped the charges. Gordhan who has been opposed to President Jacob Zuma’s plans to spend on some state-owned companies said his charge was politically motivated.

The decision to charge Gordhan saw the South African currency, the rand, tumble against major currencies, while investor confidence also declined.

Fitch said it now expects South Africa will have only modest GDP growth of 1.3 percent in 2017 and 2.1 percent in 2018, although this is an improvement from 0.5 percent in 2016.

South Africa has been grappling with slow growth, a severe drought, low commodity prices, electricity cuts and political infighting among other factors.

The agency said despite weak macroeconomic conditions, the banking sector remains a rating strength.

‘‘The total capital adequacy ratio of the system increased to 15.5 percent in September from 14.2 percent at end- 2015.’’

Moody's ratings agency is expected to soon issue its updated grading on South Africa.