The MD of Standard and Poor’s (S&P) South Africa, Konrad Reuss, said on Wednesday that some of the recent pessimism in South Africa is completely overdone and that he does not feel the country is going to dip into a recession.
“Yes, growth will slow down and there will be challenges; 2008 and 2009 will be a bit of roller-coaster ride and South Africa has its vulnerabilities when it comes to the macro side. But I think the capacity issues are being addressed and some of the things that happened in January are a wake-up call and reminder that things have to be addressed,” he said.
South Africa currently has a “stable” foreign-currency rating by S&P, with the recent Eskom power failures and political transition raising some speculation that the sovereign ratings (BBB+) of S&P and other agencies may be downgraded.
However, the MD of S&P’s Sovereign Ratings, Moritz Kraemer, confirmed during the conference on Wednesday that South Africa’s sovereign ratings are “one of the better protected considering the current disturbances”.
S&P, Fitch and Moody’s last upgraded their sovereign ratings for South Africa in 2005, but while Moody’s and Fitch revised their outlooks to “positive” last year — putting the country in line for another upgrade — S&P left its at “stable”.
Reuss said that on the policy front, on balance, he would think policies would continue strengthening South Africa. “You will be on a roller-coaster ride, but I think and hope South Africa will come out on top,” he added.
“One reason I think pessimism is overdone is you have one advantage here. You are not insulated from international markets, but when it comes to contaminated assets — the asset class that is troubled — it is not something your investors are overly exposed to. So you don’t have to worry that much about issues like the credit crunch, and that puts me in a more confident or hopeful mood,” noted Reuss.
“I think you will come out on top, but it will be a difficult two years,” said Reuss, adding that he would be keenly watching the outcome of the national budget next week Wednesday. — I-Net Bridge