Fitch keeps South Africa at BBB, changes outlook to negative

President Zuma

Fitch ratings agency affirmed South Africa's BBB credit rating on Friday but changed its outlook to negative from stable, citing poor prospects for economic growth and rising public debt.
The rand fell to session low of 10.755 against the dollar, down 0.8 percent on the day.
"Following its election victory ... government faces a challenging task to raise the country's growth rate and improve social conditions," Fitch said in a statement.
"This has been made more difficult by the weaker growth performance and deteriorating trends in governance and corruption."
Hit by a crippling strike in the platinum mines since January, South Africa's economy contracted 0.6 percent in the first three months of the year, the first quarterly output decline since a recession in 2009.
Reserve Bank Governor Gill Marcus said this week the economy was unlikely to slip into recession but made clear that unions and mining companies urgently needed to resolve the five-month platinum strike to get the entire sector back on track.
The leader of the striking AMCU platinum union said on Friday that a wage deal was imminent, leading to hopes that the longest mining strike in South African history is nearing its conclusion.
Mining output surprised in April, expanding slightly against market expectations for a 7 percent contraction.
Fitch cut its GDP forecast to 1.7 percent for this year, compared with the Reserve Bank's expectation for 2.1 percent.
The ratings agency raised concerns about persistent budget shortfalls that are forcing the government to borrow more and push out its plans for more sustainable spending.
It expected further slippage in the consolidated government deficit for 2014/15 "owing to the growth shock and platinum strike". The wide current account deficit was also a risk.
South Africa's treasury responded by reiterating its commitment to keeping to its stated fiscal path.
"Government is resolute in its commitment to maintain fiscal sustainability and keep its debt within manageable levels," the treasury said in a statement.
"While short term cyclical factors might cause marginal deviations from targets, we will not deviate from the long term trajectory."
Fitch said South Africa's floating exchange rate acted as a shock absorber and most of the country's debt was denominated in the local currency, while the strong banking system continued to be a supportive factor.
S&P, Fitch and Moody's all last downgraded Pretoria in the aftermath of another wave of violent labour protests in 2012 which culminated in police shooting dead more than 30 striking miners. S&P is due to give its rating review later on Friday.