South Africa

ANC majority at risk – Fitch

Fitch Ratings believes the ANC could lose its majority in the 2024 election but said this likely would not lead to major changes in the country’s economic policy. 

Fitch recently affirmed South Africa’s long-term foreign-currency issuer default rating (IDR) at BB- with a stable outlook.

The rating agency said South Africa’s rating is constrained by low real GDP growth, a high level of inequality, a high and rising government debt-to-GDP ratio, and a modest path of fiscal consolidation. 

In particular, the agency highlighted South Africa’s high unemployment rate and low growth as significant risks to the country’s credit rating.

The agency said a further weakening of trend growth or a sustained shock that further undermines fiscal consolidation efforts and raises socio-economic pressure in the face of exceptional inequality could lead to a negative rating action or downgrade for South Africa.

Under elevated socio-political risks, Fitch highlighted the ANC’s bid for power in the 2024 general election.

It said the ANC’s dominance over the country’s political landscape has been challenged since the party’s poor performance in the November 2021 municipal elections. 

“We believe the party could lose its majority in the May 2024 general election, but this would be unlikely to result in major changes in economic policy,” the agency said.

Justice Minister Ronald Lamola recently said South Africa’s energy insecurity presents the biggest risk to the ruling ANC’s prospects of winning this year’s election.

Lamola, a member of the ANC’s decision-making National Executive Committee, said the party is keenly aware of the risk of unreliable power to its prospects in the election.

“Electricity affects everything, economic growth, our ability to create jobs — all of that is dependent on electricity,” Lamola said in an interview in Johannesburg on Friday. Stabilising supply before the vote is the top concern of the ANC.

Fitch estimates that load-shedding will reduce in intensity in 2024 and 2025 compared with 2023 but will not disappear. 

The peak of load shedding declined from 6.7 GW in May 2023 to 3.5 GW in December 2023. 

It said the return to the grid of three units of Kusile power station since September 2023 and the synchronisation of unit 5 in December 2023 add a total of 3.2 GW to generation capacity. 

“Further capacity is expected to come from private-sector investments, with a pipeline of confirmed projects representing 12 GW of new capacity,” the agency said.

“The legal separation of Eskom into three divisions, intended to further catalyse investment in generation and transmission, is moving slowly, and we do not expect full separation before 2025.”


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