Fitch affirms S. Africa's investment-grade credit status

Ratings agency Fitch on Wednesday affirmed South Africa's investment-grade credit status, pushing the rand to rise to its firmest in just over a month.

Fitch said in a statement that it has affirmed South Africa's Long-Term Foreign and Local-Currency Issuer Default Ratings at 'BBB-' and 'BBB', respectively.

"The 'BBB-' rating reflects low GDP growth, significant fiscal and external deficits, and high debt levels, which are balanced by strong policy institutions, deep local capital markets and a favourable government debt structure," Fitch said.

Political risk has increased since the previous ratings review in December 2015, although it is not out of line with 'BBB' peers, the agency said.

The dismissal of two finance ministers in a week in December, and subsequent tensions between the new finance minister Pravin Gordhan and other parts of the government have raised questions about the government's commitment to sustained fiscal consolidation and prudent governance of state-owned enterprises, Fitch said.

It said President Jacob Zuma has become increasingly embattled following the Constitutional Court ruling that he should repay some public funds used to refurbish his Nkandla residence and the Gauteng high court's ruling that the previous suspension of a 2009 corruption case against Zuma was irrational.

By noon on Wednesday, the rand had gained 1.16 percent to 14.7295 per dollar, its firmest since May 4.

On Friday, Standard & Poor Global rating also maintained South Africa's investment grade BBB-rating, strengthening the rand and helping boost investor's confidence.

The latest developments are contrary to wide expectations that South Africa's rating would be downgraded to junk status. Endit