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S&P Global is optimistic about SA’s economy, warns more work lies ahead

The agency downgraded the country to junk status last year as state capture, among other things, ravaged investor confidence and some state-owned companies.

Home Affair Minister Malusi Gigaba ahead of the ANC national policy conference at Nasrec on 30 June 2017. Picture: Thomas Holder/EWN

CAPE TOWN - Ratings agency Standard & Poor’s Global says it has confidence in South Africa.

But it adds a lot of work lies ahead before the country's credit rating returns to investment grade.

The agency downgraded the country to junk status last year as state capture, among other things, ravaged investor confidence and some state-owned companies.

The agency's Konrad Reuss believes the country's economy is on the mend.

“There’s a lot of goodwill out there now to get it right and to bring the economy back onto a more sustainable growth path. However, it’s not going to be easy.”

Reuss adds it's critical the country improves on its growth.

“Growth, as mentioned earlier from a credit perspective as a ratings agency, is very important. In a growing economy problems can be dealt with more easily. For the fiscus, a growing economy means more tax intake and more money to deal with problems in the public sector.”

The comments by the ratings agency comes after Finance Minister Malusi Gigaba’s Budget speech, which he defended on Thursday following criticism over a value-added tax (VAT) increase.

The minister announced VAT will increase from 14% to 15%.

Gigaba has sharply criticised accusations that the budget tabled had no regard for the plight of poor people.

But he says the tough decisions taken were aimed at helping, rather than hurting, poor people.

“It’s wrong to say it’s fine for us to be downgraded because the poor already lives in junk.”

Gigaba says any downgrade by Moody's - now hopefully averted - would have triggered the flight of capital, increased the cost of government borrowing, caused job losses and would have stifled any chance of growing the economy.

He says poor people would have suffered the most.

“The only other place where we can borrow money from when the financial markets or the bond markets say that we're such a huge risk or have debt we can't pay is the International Monetary Fund. Believe you me, that is not pro poor.”

Moody's is scheduled to review the country's credit rating next month.

Read the full Budget speech below:

Budget Speech 2018 by Primedia Broadcasting on Scribd

Additional reporting by Gaye Davis.

(Edited by Shimoney Regter)

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