South Africa has made progress, but it will need to show results as well as higher per-capita growth rate and fiscal reforms if it wants to be upgraded. Ratings agency S&P kept South Africa's investment-grade rating unchanged on Friday, which it lowered to two notches below investment grade in November.
S&P director Ravi Bhatia told Business Day that there would have to be "significant and sustained" improvement in both economic growth and fiscal outcomes before the ratings could be raised.
He reportedly said: "One would need to see higher growth on a per capita basis and that, in turn, will help the fiscal framework."
S&P did not give policy advice, he reportedly said, but the ratings agency raised concerns over the debate on land reform.
It reportedly said: "if the rule of law, property rights or enforcement of contracts were to weaken, undermining the investment and economic outlook".
Treasury deputy director-general Anthony Julies reportedly told Business Day that this reflected S&P's "wait-and-see" attitude, and that it will be only be able to see results in the October budget.
By then there would be more certainty on economic growth as well as whether more state-owned enterprises will need bail-outs, he reportedly said.
According to Fin24, Treasury said on Friday that it was determined to improve the country's ratings.
Treasury reportedly said that business and consumer confidence have improved since the ANC's December elective conference, and said nine recent changes showed improvement. These include replacing the boards at Eskom and Denel and the appointment of a new head of the Hawks.
"Going forward, government will engage S&P on their areas of concern. Taking steps to improve business confidence even further, achieving higher economic growth, fast-tracking the SOC (state-owned companies) reform agenda, and ultimately restoring the country's investment grade credit rating, remains a top priority," Treasury reportedly said.
NWU School of Business economist Raymond Parsons told IOL that it was now critical that per capita income increases.
"What matters now is the next periodic evaluation of South Africa by Moody's, which usually tends to be more optimistic. It is, therefore, Moody's which holds the key to South Africa's continued avoidance of universal junk status," Parsons said.