27/10/2017 06:18 BST | Updated 27/10/2017 06:18 BST

Ratings Agency 'Concerned' About SA's Nuclear Plans And ANC Divisions

The ratings agency says Mahlobo's appointment signals that SA still wants to pursue a large nuclear energy programme.

Reinhard Krause / Reuters

Ratings agency Fitch has raised concerns about South Africa's nuclear build programme, saying it is not clear whether the programme is going ahead or not, raising concerns about a possible downgrade. Eyewitness News (EWN) reported that Fitch said the appointment of David Mahlobo as energy minister sent mixed signals.

Finance Minister Malusi Gigaba, in his medium-term budget speech this week, said South Africa could not afford the programme right now. But Fitch said that Mahlobo's appointment sends signals that South Africa still intends forging ahead with it.

Ahead of his speech on Wednesday, Gigaba reportedly said that while nuclear remained in the energy mix, a large-scale programme was not affordable right now.

According to Business Day, Fitch, in a statement, said it was concerned that the widening growth deficit and growing debt burden indicated "a change in the direction of policymaking away from a focus on fiscal consolidation". Fitch also said there was "no agreement on consolidation measures or even targets for revenue increases".

The ratings agency also expressed concern about the ANC's elective conference, saying it foresees that divisions within the party will continue after the December conference, "and it is not clear the political environment will become more conducive to consolidation".

According to Fin24, Fitch also raised concerns about the state of SOEs and seemed unimpressed about President Jacob Zuma's team of ministers who are tasked with fixing the economy.

"The SOEs most likely to require injections, such as Denel, South African Express and the South African Broadcasting Corporation, are relatively small and the fiscal impact would be limited. But the document also points to a risk that Eskom, which holds much larger debt of 9.3% of GDP, may require renewed injections if stabilisation measures do not materialise. Gigaba emphasised that a nuclear power programme is not affordable, but the appointment of a new energy minister last week may signal a desire on the part of the government to accelerate a programme.

"Proposals to shore up the public finances are being considered by a team of cabinet ministers, with measures to be announced in next year's budget. But the fact that no agreement on consolidation measures or even headline targets for revenue increases were included in the MTBPS highlights how disagreements in the ANC have made it difficult to agree on savings measures," the ratings agency reportedly said.