Rating agency Fitch has warned that intensified power cuts could put South Africa at risk of credit rating downgrades.
The warning follows the decision by President Cyril Ramaphosa to declare a national state of disaster to deal with the country’s unprecedented power cuts.
While South Africa’s BB rating with a stable outlook has not been revised yet, the rating agency said that failure to address the electricity crisis over the medium term could add downward pressure on the rating.
Fitch said that the move to declare a national state of disaster and plans to appoint an electricity minister could help strengthen government’s capacity to address power shortages.
However, the rating agency was worried about the country’s poor track record on execution and Eskom’s governance issues.
Fitch believes that the resignation of Eskom CEO, Andre de Ruyter, could further delay the power utility’s turnaround strategy.
Eskom is not the only state-owned company on the rating agency’s radar, with concerns that the growing problems at Transnet are also affecting the mining industry’s ability to export bulk commodities.
The implications for the South African economy could prove to be dire.
Meanwhile, the reserve bank has revised the country’s economic growth for 2023 down to 0.3% from 1.1%.
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