Chief Reporter

RATINGS agency Standard & Poors (S&P) yesterday highlighted SA's sluggish economic growth and its high unemployment rate as two of the hurdles to SA's hopes of getting a rating upgrade in the near future.

Although SA was upgraded by both S&P and Fitch to a notch above investment grade last year, any further upgrade would make its sovereign bonds more attractive to investors and lure more foreign money into SA.

This year, government has prioritised the need to boost growth and cut the unemployment rate, and the S&P report illustrated that SA's plight in this regard is worse than in other countries with similar ratings.

Yesterday S&P released its first report into Sovereign Ratings in 12 African countries, in which SA was ranked second behind Botswana.
Although SA is now rated BBB putting it alongside China, Mexico and Thailand S&P said that SA's "long-term ratings prospects hinged on higher growth, sustained delivery on the social front and structural reforms aimed at addressing unemployment and poverty, thereby addressing political stability".

The ratings agency noted that SA's economic growth rate, which was 1,9% last year, "continued to disappoint".

SA's HIV/AIDS pandemic, which has seen up to 15% of the country infected, was also noted as a factor which made the country stand out unfavourably amongst its peers.

But despite these socioeconomic problems, S&P lauded SA's economic policymakers.

"SA's commitment to transparency, accountability and best practice in budgeting and planning is outstanding by emerging market standards and compares favourably with that of peers and certain higher-rated governments," it said.

This country's "prudent economic management" and "welldesigned development policies" had helped to mitigate the problems of the unemployment rate and a forecasted gross domestic product per capita level of $3850 below its peers in the same BBB ratings category.
While S&P also said that SA's external liquidity was still relatively weak, the ratings agency noted the progress made as this country bolstered its international reserves and relaxed exchange controls.