US credit agency Fitch Ratings says while the uncertainty over the future of President Cyril Ramaphosa is a risk for South Africa, the most likely scenario is that of a broad policy continuity.
Findings against Ramaphosa by a panel established by Parliament have raised questions over his future, spooking markets last week, as investors and citizens contemplated the implications of his exit on anti-graft efforts, and the budget deficit. The panel found the president may have a case of impeachment to answer following a theft of at least $580 000 that was stashed in a sofa at a game farm he owns.
Ramaphosa, however has opted to fight for his political position, winning political support during a meeting of his party's chief political organ on Monday, while also securing the delay of an impeachment process in the legislature by a week, News24 reported.
Fitch, which at BB- has SA's long-term sovereign debt grade at three notches into junk status - its 13th highest ranking overall - said on Monday that political barriers to completing impeachment are high, as reaching the necessary two-thirds majority would require significant numbers of ANC legislators to vote against the president.
The ANC currently holds 58% of seats in parliament. The opposition also has the option to push for a vote of no confidence in the government, which requires a simple majority, the risk assessor said in a statement.
"Even if the president were to resign, we believe that it is more likely that a potential successor would emerge from the president’s moderate wing of the ANC rather than the [Jacob] Zuma-linked Radical Economic Transformation faction, which advocates more populist approaches," the agency said.
Fitch had affirmed SA's BB- rating with a stable outlook in November, saying at the time while the ANC could lose its majority in 2024, it didn't expect this to lead to immediate changes in economic policy, as the ANC would most likely remain in government in alliance with smaller parties.
The risk assesor said on Monday that the Phala Phala scandal may damage the reputation of the ANC, raising the possibility that the ruling party will respond by spending more than expected.
"The outlook for public finances, and for the government debt trajectory specifically, remains an important rating sensitivity for South Africa. Socioeconomic pressures, against a backdrop of high unemployment and extreme income inequality, are already a constraint on the pace of fiscal consolidation," the agency said.
"In addition, ANC governments do not have a record of substantially loosening policy ahead of elections to boost their electoral prospects - though in the past their support was firmer," it said.
Political instability and increased uncertainty about the policy outlook could further weigh on near-term investment prospects if they weaken business sentiment, it added.
"South Africa’s deteriorating power and transport infrastructure are a major constraint on the economic growth outlook. The country’s low growth potential, which we estimate at 1.2%, remains a key credit weakness."