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S&P's South Africa Ratings Score Snapshot: Key rating factors Institutional assessment Neutral Economic assessment Weakness External assessment Neutral Fiscal assessment: flexibility and performance Weakness Fiscal assessment: debt burden Neutral Monetary assessment Strength

Although economists welcomed Standard & Poor’s decision to keep South Africa’s credit rating unchanged, they said it was only a matter of time before South Africa would be downgraded to junk status. Economists cheer S&P ratings decision

The rand has received an unexpected boost due to a dismal May jobs report out of the US and the decision by S&P to leave SA's credit rating one notch above junk status. Double dose of good news for SA rand

Government notes and welcomes S&P's decision to affirm SA's credit ratings #CreditRating — SA Gov News (@SAgovnews) June 3, 2016

The move by Standard & Poor’s to keep South Africa’s credit rating on hold was largely the consensus market view, says Craig Sherman from Ashburton Investments. S&P ratings reprieve won't boost SA markets - analyst

Economist Dr Azar Jammine from Econometrix reacts on SABC to ratings decision:

S&P Global Ratings has affirmed South Africa’s long and short term foreign and local currency bond ratings at ‘BBB-/A-3’ and ‘BBB+/A-2’ respectively. SA dodges S&P 'junk' bullet - for now

Montalto: Perplexed around political noise - there are structural and deeper issues about how ANC is run and issues about rent extraction.

Nomura's Peter Montalto on Radio 702: Setting us up for appointment in December.



A cut to below investment grade would have pushed up Pretoria's borrowing costs, making it harder to plug a budget deficit estimated at 3.2% of GDP in the 2016/17 financial year. - Reuters.



Adam Phillips of Umkhulu Consulting: It is a relief more than good news. We have had a reprieve and there is still a great deal of work to be undertaken on the economy in general. We will get a better indication with regards to the rand on Monday when all SA corporates get involved.



Viljoen: “They’ll probably want to see if we manage to improve our fiscal position and if the political situation stabilises after the local government elections in August.”

Christie Viljoen, economist at KPMG: “Standard & Poor’s decision was to be expected, but it’s probably only a matter of time before they would downgrade us to junk status.”

(Reports Liesl Peyper)

Chamber of Mines CEO Roger Baxter said: “We are pleased at this outcome as being in line with the reality of the situation. But we are aware that it gives the country no room for complacency. The Chamber will play its part in working with other elements of organised business, with government and with organised labour to do what is necessary to sustain an investment grade rating and hopefully, ultimately, to improve that rating.“

The rand has just dropped 2.6% to R15.15 against the dollar and 1.85% to R22 against the pound!



From Craig Sherman, Ashburton Investments: The move by S&P to keep South Africa’s rating on hold was largely the consensus market view, reinforced during the week by Finance Minister Pravin Gordhan’s comments stating that he believed the country had done enough to stave off a downgrade. Whilst we don’t see any material market action as a result, this could give the market some impetus to extend the rally in the bond and currency markets sparked by this afternoon’s US jobs numbers. In the longer term, this reprieve does not change the fundamental weaknesses in the South African economy and we see this as temporary with a downgrade still very likely to proceed in December.

S&P regarding the cohesion of the executive branch: Political tensions have increased in South Africa since the removal of former Finance Minister Nhlanhla Nene on December 9, 2015; the Constitutional Court ruling against President Jacob Zuma on March 31, 2016; and periodic disputes between key government institutions and within the ruling African National Congress (ANC). We believe that these political factors - if they continue to fester - could weigh more on investor confidence than inconclusive labour or mining sector reform.



S&P: We see risks that negotiations between the government, private sector, and unions could become protracted and, even if concluded, implementation could be nettlesome. Rules regarding labor relations and extractive industries are contentious in any country,but even more so in South Africa, given the historical legacy of apartheid. However,these challenges are not new and we believe a successful conclusion could help improve confidence and investment.



S&P: The third measure is the mining code, for which negotiations on Black Economic Empowerment are already sensitive.



S&P: Labour reform is key to ratings improvement. Prolonged strikes, mainly in mining and some manufacturing sectors, combined with less flexible labor laws and high youth unemployment, continue to pose structural weaknesses to South Africa's economy.



S&P: To place South Africa's economy on firmer footing and to maintain our investment-grade rating, we see several structural measures as key. The first is the provision of a reliable source of energy, where we have observed progress. Eskom,the state-owned power utility, has improved the energy supply through a better maintenance program, managing demand in peak periods, and by additions from its new power plants and from independent power producers. The combined measures have helped eliminate load shedding, which was prevalent in the last winter cycle and depressed overall 2015 economic growth.



S&P: On the domestic side, drought and subdued mining and manufacturing output, coupled with structural constraints, remain key negative factors. Largely due to some of these cyclical factors, we have revised down our real GDP growth assumptions for South Africa to 0.6% in 2016 from our 1.6% forecast published in December 2015. As weather patterns and terms of trade revert to mean levels,economic growth should improve.



Well done to SA Treasury! S&P affirming SA current credit rating. — Sherwin Bryce-Pease (@sherwiebp) June 3, 2016

Pravin Gordhan is the political winner in S&P’s decision to affirm #SouthAfrica’s credit rating. But there is no let-up on pressure. — Daniel Silke (@DanielSilke) June 3, 2016

Great news that S&P has retained SA's credit rating.A big Thank-U to Minister Gordhan&National Treasury Team! Now SA leadership should rise! — Iraj Abedian (@IrajAbedian) June 3, 2016

Francois Botha, Head of Multi-Management, Novare: The problem is that South Africa is already experiencing high inflation and the Monetary Policy Committee will likely impose further interest rate hikes this year to bring inflation back within the target band. The result of this is that it will put further pressure on economic growth. If we don’t find a catalyst for growth within the next few months then a downgrade would be inevitable.

Francois Botha, Head of Multi-Management, Novare: To avoid a downgrade later in the year the government will have to demonstrate a commitment to decrease spending. The government desperately need their income to increase. In order to do this the government will have to focus on measures which will grow the country, reduce the unemployment rate and increase the tax base.

S&P: South Africa's weak economic growth, relative to that of peers in similar wealth categories, continues to be hurt by a combination of factors, in our view.



S&P: The outlook remains negative, reflecting the potential adverse consequences of low GDP growth and signaling that we could lower our ratings on South Africa this year or next if policy measures do not turn the economy around.



S&P: Still, energy sector improvements will likely reduce some of the economic bottlenecks and pending finalisation of labour and mining reforms could engender a positive confidence shock. On the fiscal side, the government is showing greater resolve to reduce fiscal deficits at a faster pace than we expected.



S&P: Rising political tensions are accentuating vulnerabilities in the country's sovereign credit profile.



S&P: Low GDP growth is putting South Africa's economic metrics at risk and could eventually weaken the government's social contract with business and labour.



Treasury: S&P maintained the negative outlook on the rating, citing concerns about economic growth and warned it could lower the rating by year-end or next year if policy measures do not turn the economy around. Alternatively, S&P could revise the outlook to stable if they observe policy implementation that leads to an improved business confidence environment and increased private sector investment and ultimately result in higher levels of growth.



Treasury: The rating outcome demonstrates that South Africans can unite, especially during difficult times, to achieve a common mission. In this regard, government thanks all social partners for their efforts towards achieving this positive outcome and urges our partners to continue its close working relationship with government over the period ahead.



Treasury: Government notes and welcomes S&P’s decision to affirm South Africa’s credit ratings. The benefit of this decision is that South Africa is given more time to demonstrate further concrete implementation of reforms that are underway aimed at achieving higher levels of inclusive growth and place public finances on a sustainable path.



Treasury: S&P Global Ratings (S&P) has affirmed South Africa’s long and short term foreignand local currency bond ratings at ‘BBB-/A-3’ and ‘BBB+/A-2’ respectively. The foreign currency bond rating remains one notch above sub-investment grade whereas the domestic currency bond rating remains three notches above sub-investment grade.

Bloomberg anchor: You can hear a huge sigh of relief coming from South Africa.



JUST IN: South Africa's credit rating kept at investment grade by S&P. Watch more https://t.co/H89WE9USD2 https://t.co/42T2Fys4bO — Bloomberg TV (@BloombergTV) June 3, 2016

JUST IN: S&P Global Ratings affirms South Africa’s rating, keeps outlook negative



We need #JunkStatus to give junk Party voters a wake-up. We need to learn the hard way. — eCoaster (@daBuzzd) June 3, 2016

Renier de Bruyn of Sanlam Private Wealth: A downgrade by S&P will breach a psychologically important level for SA and it’s hard to find any positive outcomes for the economy.



A credit rating downgrade to #JunkStatus may cause Rand weakness, push SA into a recession & lead to loss of at least 200,000 jobs ?????? — South African Heroes (@SA_Heroes) May 24, 2016

Political analyst Daniel Silke: My own feeling now is that we might get a 6-month reprieve on the basis of Pravin Gordhan's promises being effective, the fact that local elections can still alter the political pendulum towards more positive change and that commodities look a little stronger and point to developing markets looking better in the next 12-18 months.



TreasuryOne: We are still of the opinion that we won't see a downgrade today and this could further help the ZAR. Currently we are trading around R15.30 and if we don't get downgraded we can possible see the ZAR test the R15.00 level again. If the downgrade does occur, the ZAR can push back to trade within the R15.50 to R15.75 range we have seen the past week or so.

TreasuryOne: After the poor US non-farm payroll print, the chance of a interest rate hike in June has come down from around 80% to 30%. This has really put the dollar on the back foot today. Currencies globally benefiting from this. Now we will all wait with bated breath to see what happens later with the Standard and Poor's decision on South Africa.



TreasuryOne: US non-farm payrolls with a very poor print, only 38 000 jobs added in May vs 164 000 expected. US unemployment rate down to 4.7%. USDZAR on the front foot breaking below R15.50.

