Ramaphosa’s speech underscores weak South Africa credit outlook – Fitch

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JOHANNESBURG (Reuters) – South African President Cyril Ramaphosa’s state of the nation address offered only partial detail on key policy areas like the electricity sector and underscored a weak outlook for the country’s creditworthiness, Fitch Ratings said on Friday.

Ramaphosa said in the annual address on Thursday that South Africa had to fix its strained public finances and procure more renewable energy to ease crippling power shortages.

But he was short on specifics that may have reassured investors his government had a clear plan to solve the deep-seated structural problems in Africa’s most industrialised economy.

Fitch is one of two major ratings firms to have South Africa’s sovereign debt in “junk” status, with a long-term foreign-currency rating of ‘BB+’. It put that rating on a “negative outlook” in July due to concerns over rising government debt and slow growth.

Fitch said Ramaphosa’s speech left important questions unanswered.

“The president repeated promises made by the minister of mines to more readily allow big power-consuming companies, particularly mines, to build their own electricity generation capacity, … but it is still unclear whether licences will be easily obtainable,” it said in a statement.

Fitch said it did not expect Finance Minister Tito Mboweni to make clear commitments on reducing the public sector wage bill in a budget speech later this month, despite Ramaphosa saying talks with trade unions on the subject were ongoing.

“The government’s continued difficulties in implementing its agenda are illustrated by the fact that the president now aims to issue licences for new mobile phone spectrum by end-2020, after already announcing the relatively uncontroversial measure in the 2018 state of the nation address,” it added.

Moody’s is the last major ratings agency to have South Africa on an investment grade rating. It is scheduled to review that next month.

Reporting by Alexander Winning; Editing by Hugh Lawson

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Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

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