South Africa’s ruling African National Congress (ANC) Monday reacted to the decision by Fitch Ratings to revise the country’s outlook to negative from stable, saying it is doing everything possible to address the issues that prompted the low ratings.
Fitch noted that the country’s growth outlook had deteriorated, which will make it challenging to reduce the budget deficit.
In addition, the Standard and Poor’s (S&P) Ratings Agency has revised South Africa’s outlook to negative from stable.
Both agencies are concerned about the platinum strike, weak domestic and external demand which led to GDP contraction in the 1st Quarter 2014, and it is feared could depress 2nd quarter growth.
In addition to labour activity, Fitch also highlighted high wage demands and electricity constraints as representing negative supply side shocks, and suggested that these would constraint the fiscal space in the context of high budget deficit and rising debt levels.
The ANC said its National Executive Committee recently held its biannual meeting which focused on arresting the downward growth trajectory and building on strengths of the economy.
“We appreciate the challenges ahead and have made the resolution of the current platinum strike as urgent and prerequisite for building confidence in the economy. Coupled with the proposed metal strike, the impact can be devastating on the economy,” said ANC spokesman Zidwe Kodwa.
He said the necessary reforms to unlock the potential of the South African economy to grow at rates that would accelerate the reduction of unemployment, poverty and inequality are set to be implemented with higher vigour and determination.
“In our view, it is premature for any pronouncement at this stage on the likely performance of the government that has just taken office. The ANC calls on all South Africa to work with us and the ANC government to grow this economy for the benefit of all South Africans,” he added.