Johannesburg — US RATING agency Standard & Poor's (S&P) has kept SA's sovereign credit rating unchanged at BBB+ with a stable outlook, saying that the economy is doing well but still faces severe challenges.

These included continued high reliance on portfolio inflows along with income disparities, poverty, high unemployment and the impact of HIV/AIDS, it said.

S&P's decision to affirm SA's medium investment-grade rating may disappoint the government after rival agency Moody's revised the outlook on its Baa1 rating for SA's foreign currency debt to "positive" from "stable".

That signals SA is likely to be considered for an upgrade in the next 12-18 months, a step which would encourage direct investment inflows and further reduce the price which the country pays to service its debt.

A third rating agency, Fitch, is close to the end of an annual review of its ratings for SA, which stand on a similar scale to Moody's and S&P .

"The ratings on the Republic of S A are supported by its prudent macroeconomic policies, a moderate debt burden, and strong and stable political institutions," S&P said.

However, the agency highlighted what it described as SA's "relatively vulnerable external finances" -- a reference to the growing deficit on the country's current account.

This widened to 6,5% of gross domestic product last year -- the highest in more than three decades, and well above the 3% seen as a comfortable yardstick.

So far the shortfall has been comfortably financed by capital inflows, but as they mainly go to equities, they could quickly disappear if global sentiment swings against emerging markets.

"The stable outlook reflects our expectations that prudent macroeconomic policies, coupled with continued economic reforms and delivery on the social front, will support higher economic growth and the government's creditworthiness over the next few years," S&P said.

"This resilience is balanced by the challenges of addressing income disparities in S A and the negative impact of the HIV/AIDS pandemic on the country in the coming decade."

Brait economist Colen Garrow said S&P's decision to affirm SA's ratings should be seen as a favourable endorsement.