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The decision by S&P to leave South Africa’s sovereign credit rating unchanged was expected by some local economists (including STANLIB) although most analysts and financial market participants were very nervous ahead of the decision. According to S&P, the decision to downgrade South Africa’s domestic credit risk reflect the fact that the government’s financing needs are increasing beyond previous base-case expectations, while the proportion of rand turnover in the global foreign exchange market has fallen over the last three years. In addition S&P are concerned that political events have distracted from growth-enhancing reforms and persistently low GDP growth continues to dampen per capital wealth levels and South Africa’s fiscal performance. While the government has identified important reforms and supply bottlenecks delivery has been piecemeal. Real exports growth is likely to be slow over 2016-2019 on persistent supply side constraints to production. South Africa still funds part of its current account deficits with portfolio and other investment flows, which can be volatile. The South African government faces risks from non-financial public enterprises due to their weak balance sheets. Although less than one-tenth of the South African government’s debt stock is denominated in foreign currency, nonresidents hold about 35% of the government's rand-denominated debt, which could make financing costs vulnerable to foreign investor sentiment, exchange rate fluctuations, andrises in developed market interest rates. South Africa’s electricity sector has improved, with no load shedding since winter 2015 reflecting new capacity and lower demand. The government has set up a commission into minimum wages, which has provided a starting point for negotiations with business and labour unions. Prolonged and damaging strikes are likely to be curtailed over the next two to three years because the gold and platinum sectors signed multiyear wage agreements. South Africa has a strong democracy with independent media and reporting. S&P also argues that South African will maintain its institutional strength in the judiciary, which provides checks and balances and accountability where the executive and legislature has appeared less willing to do so. The government has delayed for two decades plans to finance and build nuclear power plants, which could have negatively impacted the fiscal metrics. South Africa continues to pursue a floating exchange rate regime. The SARB is viewed as being operationally independent and its policies as credible. Net general government debt and contingent liabilities related to financially weak government-related entities exceeded current expectations. Overall, S&P’s assessment of South Africa was fairly well balanced and fair. Most of the negatives flagged by S&P are well known and extensively debated, while the long-list of positives factors is a welcome stand-out feature of S&P’s review compared with recent statements by Fitch and Moody’s. It is clear that S&P’s main concerns remain SA’s sustained low GDP growth rate, the risk that political tensions lead to a further deterioration in economic activity as well as a weakening of various fiscal parameters and that the State Owned Enterprises continue to place and excessive burden on government’s contingent liabilities. It appears that S&P is impressed by national treasury’s intention and commitment to improving the country’s fiscal position. Ultimately, the country remains precariously close to another ratings downgrade from all three of the credit rating agencies.