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S&P Global Ratings said it was closely monitoring the outcome of South Africa's election next week and the subsequent government policies to address issues from crime to energy supply that have hindered investment.
“Election uncertainty has made investors a little more cautious this year,” S&P's Zahabir Gupta said in an interview. “After the elections, we could see more political and policy stability, which could lead to more investment activity.”
Gupta said foreign direct investment remains at a low level, a worrying sign for a country with huge development needs.
“Issues such as energy supply, logistics, regulatory frameworks, bureaucracy, crime and corruption remain major deterrents,” she said. “Increased private and foreign investment would be positive for growth prospects as investment has yet to return to pre-COVID levels.”
A Bloomberg survey of fund managers in May found that the top concerns about South Africa's long-term condition were crime, fiscal risks and power supplies.
S&P's Gupta said infrastructure bottlenecks, particularly rail capacity and port congestion, are major constraints on growth. S&P forecasts South Africa's economy to grow 1.1% in 2024, then rise slightly to 1.3% to 1.4% from 2025 to 2027.
In the company's base case, the ANC is expected to form a coalition government with smaller parties after the May 29 election, and a change in leadership after the election would not necessarily lead to an immediate change in the rating assessment.
Last week, S&P affirmed South Africa's rating at BB-, three notches below investment grade, with a stable outlook and saying the strengths and weaknesses of the rating were broadly balanced. Any future rating adjustments would depend on the country's growth results and its ability to effectively manage its fiscal and debt trajectory, S&P said.
