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Comments RE Fitch Report on SA Riots: Some Assertions Accurate, Others Miss the Mark

SOUTH AFRICA
  • While Fitch said the unrest would have no bearing on the country's sovereign credit rating (BB-), it warned about possible fiscal risks emanating from wage negotiations posing risks to debt:GDP metrics and the fiscal consolidation.
  • However, the current tone amid unions is not reflective of Fitch's concern RE renewed strike risks to kick Govt while it is down, and will need to be assessed more closely in the coming weeks before jumping to such conclusions.
  • As for fiscal risks to govt from the cleanup and insurance effort, to me, this represents a more substantial risk of protest and pressure to break the fiscal consolidation as many innocent parties go unsupported after having uninsured businesses destroyed.
  • On the socio-political front, I tend to agree with Fitch that the unrest has weakened Ramaphosa on a number of fronts, given his slow response to the matter that forced a number of complicating elements like vigilantism to defend private property.
  • However, how Ramphosa deals with supposed instigators will be a key factor in gauging the possibility of an RET breakaway – should key members such as Carl Niehaus and Magahsule be implicated and reprimanded.
  • Whether this crisis has been enough for to form a breakaway support base for the RET outside the ANC remains to be seen – and will largely be determined by how Ramaphosa deals with the crisis.
  • Social divisions sewn by this crisis have set SA back decades, and may see more left-wing elements creep into society as years of elevated poverty and unemployment (that were the root cause of the crisis) continue to create burgeoning discontent within a struggling population.
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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