Prudent macroeconomic policies and a moderate debt burden An independent central bank committed to low inflation, well-developed capital markets, and a strong financial sector Political stability and transparent institutions Structural economic weaknesses and deep social inequalities Vulnerability to volatile capital inflows The ratings on the Republic of South Africa are supported by its prudent macroeconomic policies, a moderate debt burden, and strong and stable political institutions. These are balanced by relatively vulnerable external finances and severe structural socioeconomic weaknesses, including income disparities, poverty, high unemployment, and the unfolding HIV/AIDS pandemic. South Africa did not escape the global turbulence in the second quarter of 2006 that adversely affected emerging markets in particular. The rand depreciated by 20% in May 2006, exacerbating
