Credit rating agency Fitch on Friday affirmed South Africa's long-term foreign and local currency debt ratings at BB- and maintained a stable outlook.

According to Fitch, the affirmation took into account the recent overperformance of revenue and government's strong efforts to control expenditure, which, if continued successfully, could bring about debt stabilisation. However, the agency assumes a substantial part of recent higher revenues to be temporary and sees current public sector wage demands pointing to increased upward pressure on spending.

As South Africa, like many other countries, continues to face a cost-of-living crisis, public sector unions are demanding a 10% wage increase, while government is holding firm on its offer of 3%, plus benefits. At the Medium-Term Budget Policy Statement (MTBPS) just last month, Finance Minister Enoch Godongwana flagged this as a short- to medium-term risk, saying that higher-than-budgeted public service wage costs would strain fiscal resources.

"Additional fiscal measures or reductions in headcounts would be required to contain overall compensation spending," he said.

The spending estimates tabled at the MTBPS included the offer that the government made to unions at the end of August including:

The continuation of a non-pensionable cash allowance for the current financial year. This translates...