S&P downgrade South Africa to junk Status - Alldamoney

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S&P downgrade South Africa to junk Status

Following the axing of former finance minister, Pravin Gordhan, ratings firm S&P Global has downgraded South Africa’s sovereign credit rating to junk status.

According to the rating firm, changes made to the executive leadership, including the removal of finance minister by the ANC-led governments have put policy continuity at risk.

The country’s credit status has been on edge for some time, following years of decline during Zuma’s presidency.
In response the Rand dropped, moving from levels around R13.51 in late afternoon trade, to R13.66 on the announcement.

Euro/Rand – down 2.11% to R14.59
Dollar/Rand – down 1.91% to R13.68
Pound/Rand – down 1.58% to R17.05
South Africa’s foreign currency rating was also downgraded to BB+ by S&P which is officially a sub-investment grade also the local currency debt was downgraded to BBB- (one notch above junk).
More downgrades may lie ahead as both ratings carry a negative outlook.
S&P in their report said the negative outlook reflects the view on political risks which could undermine fiscal and growth results more than currently projected.

“If fiscal and macroeconomic performance deteriorates substantially from our baseline forecasts, we could consider lowering the ratings,” the rating firm said.
“We could revise the outlook to stable if we see political risks, reduce and economic growth and/or fiscal outcomes strengthen compared to our baseline projections.”
Junk status has been an inevitability for South Africa for some time, according to analysts, as the country has struggled with debt, incredibly slow economic growth and political uncertainty and high levels of unemployment.
Countries with Sub-investment grades suffer from high borrowing costs, while some governments block their citizens from investing in such countries.
Meanwhile the scandal-hit ZUMA, who is popular in rural South Africa and benefits from a stalwart base of support within his own party, has done little to allay widespread perceptions of corruption and illegitimacy, to calm the uproar in his country.

Warranting Corruption Watch, one of South African NGOs calling for another motion of no-confidence against him “The events have clearly established that renewal will not come from within the ranks of the ruling party, which has been captured by a narrow clique around the president and his corrupt business cronies.” it said.

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