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16 March 2021 – South Africa’s Country Risk Report 2021
Rating: C3 – Sensitive risk for enterprise
Strengths
- Rich natural resource base (gold, platinum, chrome, manganese, vanadium, coal and diamonds)
- Key strategic economic and political player in the region
- Judicial and business environments aligned with advanced standards
- Exchange rate flexibility helps to cushion external shocks and the central bank has an established track record of proactive and credible policy stance
- Deep financial markets and a sound banking sector (overall ample liquidity, good asset quality, satisfactory capitalisation)
Weaknesses
- Dramatic deterioration of public debt ratios because of the activation of state guarantees to SOEs
- Large budget deficit because of growing wage bill, public debt interest payments and transfers to loss-making SOEs
- Structural issues weigh on potential growth (low productivity, public sector inefficiencies, skilled human capital shortages, weak competitiveness) while product and labour markets remain highly rigid
- High dependence on volatile portfolio investment flows to finance the current account deficit
- Underinvestment and aging infrastructure (energy and transport) limit the development of a diversified industrial base
- High poverty, income inequality and unemployment (above 30%) are sources of social tensions
Source (Euler Hermes)