Standard & Poor’s (S&P) remained concerned about the "social dynamics" in SA, which could further slow economic growth and ultimately let the country’s budget performance flounder, the rating agency said on Thursday.
It was worried about the direction the government’s debt burden had taken over the last few years.
The bulk of SA’s budget is generally geared towards social spending. Social assistance expenditure grew at an average annual rate of 11 percent between 2008 and last year.
S&P late last year unexpectedly downgraded SA’s sovereign credit rating from BBB+ to BBB.
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A credit downgrade tends to inflate the cost of borrowing, making it more expensive to repay a loan.
The agency last year warned that strikes in the mining sector were likely to threaten the country’s economic policy framework.
It kept a negative outlook on its BBB rating for SA, saying "the political, economic and fiscal ramifications of SA’s social tensions could deteriorate" beyond expectations.
This year, SA has continued to face the challenge of strikes and to some extent social unrest. The Marikana massacre last year as well as the recent violent farm strikes in the Western Cape have damaged investor sentiment.
"We are at this point more concerned about the social dynamics," S&P head of Sub-Saharan Africa Konrad Reuss said on Thursday during an Africa Frontier Advisory seminar on Africa’s outlook for 2013.
The labour unrest was particularly worrying. "If that were to continue it would continue to impact negatively on the economy," Mr Reuss said.
" At some point it would impact on the budget performance. We are certainly worried about the direction the government’s debt burden has taken over the last few years.
"That would be the combination (of factors) that would make us sit and think hard about what the right rating is for SA. We downgraded SA for the first time since 1994.
"We are saying, from our perspective, the risks are still stacked on the downside. Certainly the budget (that) is coming in a month’s time is an important date on our calendars — we would not expect the budget to be so off track to make us think about another rating action ."
Mr Reuss painted a bleak picture of the general average credit ratings of Sub-Saharan African countries. "Over the last year, the average rating has deteriorated notwithstanding all the enthusiasm (for African markets)."
Speaking at the same event, Association for Chartered Certified Accountants head of policy in sub-Saharan Africa Alvin Chikamba said there were opportunities in sub-Saharan Africa, but with a lot of risk.
"I think what Africa needs to do in 2013 is to get its act together before Europe recovers ," he said.