GCR believes that the Government of South Africa (GoSA) continues to show a strong willingness to support State Owned Entities (SOEs) in most instances. However, because of constrained resources, actual support is becoming less consistent and less reliable. We do not expect many issuer credit rating changes in the short-term for GCR rated SOEs because the ratings only benefit from implicit support up to a restrained rating level, even if a majority of the debt is guaranteed.
GCR believes the three cases highlighted above demonstrate some inconsistency and weakening of the capacity to support. There has currently been relatively restrained government support for the Land Bank, despite its importance to the SA economy and in particular the thorny land reform debate. Support for SANRAL has ensured it can timeously meet its obligations, but has not included a sustainable solution. In contrast, SAA has received financial support well in excess of what was guaranteed, even though there are many private players that can fulfil its role.