SOUTH AFRICA

RISK RATING
Elevated
Default High Risk Score 5.80
Normal Average 4.13
Weighted Average 3.51
RISK RATING HISTORY
RISK RATING SCALE

Risk Rating Scale

Severe: 8.0 to 10
High: 6.0 to 7.9
Elevated: 4.0 to 5.9
Moderate: 2.0 to 3.9
Low: 0.0 to 1.9
EXCHANGE RATE
Country Outlook

Africa’s most industrialised economy is suffering one of the worst shocks from the coronavirus among its peers. Beyond financing constraints, there are also political obstacles to implementation of the economic recovery plan. The plan is indicative of the ruling ANC party’s indecisiveness on policy formulation and deep-seated ideological divisions. Labour unions allied to the ANC may have consented to state power utility Eskom restructuring but remain at odds with the government on many other policy initiatives, while Ramaphosa’s rivals in the party are seeking to thwart his government’s economic recovery efforts. In order to overcome such challenges, Ramaphosa is bypassing the ANC and the ANC-dominated public administration. Implementation of the economic recovery plan will be overseen by the Presidency, rather than the respective ministries and parliamentary portfolios. Meanwhile, the political fallout over state corruption has had a serious impact on South Africa’s investment risk outlook. South Africa lost its last investment-grade credit rating in March 2020.

  • President Cyril Ramaphosa has waited two and a half years since ousting his predecessor Jacob Zuma to consolidate his authority and eliminate his rivals. A ‘state of emergency’ situation since the onset of the pandemic in March 2020, in which both the ANC and public administration can be bypassed by a loyalist parallel government, has given Ramaphosa the opportunity to move ahead with his promised reforms, while law enforcement institutions have now been successfully strengthened to remove his primary rivals opposed to those reforms. However, the political deadlock and seemingly endless flow of corruption allegations has weakened the government’s approach to battle the coronavirus and stimulate an economic recovery.
  • The arrival of the pandemic and the implementation of stricter security measures initially contributed to a decrease in serious crimes across many parts of the country. However, civil unrest risks and other forms of crime have emerged as primary threats to stability. Food insecurity is triggering increased attacks on shops, trucks, schools, and commercial assets. Instances of extrajudicial police actions related to their work to curb the virus spread, including police brutality, sexual assault, and theft, are becoming more frequent. South African businesses also suffer higher losses due to phishing attacks and internet fraud. With such attacks already surging, the economic cost is likely to hit local businesses hard particularly.
  • The economic recovery is mostly hamstrung by funding shortages. South Africa’s economy is in dire straits and the government is effectively bankrupt. Debt already stands at 81 percent of GDP and could rise to 95 percent by 2025. Already 21 percent of tax revenue is being spent on meeting interest costs on historic debt. The fiscal deficit is set to balloon due to a USD 17 billion tax revenue gap. In 2020, the IMF approved USD 4.3 billion in emergency financing. However, the IMF’s issuance of special drawing rights will be insufficient to meet the country’s massive spending commitments in coming years and the government will potentially need to consider further funding from the Fund, including a programme with politically unpalatable conditionalities attached.
CUMULATIVE AND DAILY COVID-19 INFECTIONS AND DEATH RATE
INTERNATIONAL MONETARY FUND | DATAMAPPER
Risk Perils
Political Instability
2.2
Expropriation, Nationalisation, Confiscation & Deprivation
3.8
Contract Frustration & Breach
4.2
Taxation
4.8
Bribery & Corruption
3.0
Regulatory Burden
4.0
Strikes, Riots & Civil Commotion
5.8
Security
5.2
Sovereign Default
2.8
Economic Volatiliy
5.5

Risk Rating Scale (small)

Severe
High
Elevated
Moderate
Low

Risk Score BTN

SECURITY MONITOR

ACLED DASHBOARD

MEDIA MONITOR

View Media Monitor BTN

RELATED ARTICLES