On June 3, 2016, S&P Global Ratings affirmed its long- and short-term 'BBB-/A-3' foreign currency and 'BBB+/A-2' local currency sovereign credit ratings on the Republic of South Africa. The outlook remains negative.

At the same time, we affirmed the 'zaAAA/zaA-1' South Africa national scale ratings.

OVERVIEW

• Low GDP growth is putting South Africa's economic metrics at risk and could eventually weaken the government's social contract with business and labor.

• Rising political tensions are accentuating vulnerabilities in the country's sovereign credit profile.

• Still, energy sector improvements will likely reduce some of the economic bottlenecks and pending finalization of labor and mining reforms could engender a positive confidence shock. On the fiscal side, the government is showing greater resolve to reduce fiscal deficits at a faster pace than we expected.

• We are therefore affirming our 'BBB-/A-3' foreign currency and 'BBB+/A-2' local currency ratings on South Africa.

• The outlook remains negative, reflecting the potential adverse consequences of low GDP growth and signaling that we could lower our ratings on South Africa this year or next if policy measures do not turn the economy around.