South Africa’s credit rating would be downgraded if further policy
mistakes were made and if growth continued to disappoint, the Regional Head of Standard & Poor’s said on Thursday.
Konrad Reuss said in Johannesburg that the wave of changes, referring to a surprise cabinet reshuffle last month, were capable of affecting a country’s exchange rate.
“Certainly, events before Christmas were a good sign of how policy mistakes can be made and how they can have a tremendous impact on something like the exchange rate very quickly.
“We certainly felt we had to flag downside risks in this current
environment for South Africa which would result in a downgrade in particular if growth continues to disappoint significantly,” Reuss
said.
President Jacob Zuma changed finance ministers twice in a week,
alarming investors and triggering financial turmoil that sent the
rand, bonds and stocks plummeting. In its November review of South Africa’s credit status S&P kept its rating at BBB-, one notch above sub-investment grade, but changed the outlook to negative from stable.
Fellow ratings firm Fitch also cut South Africa’s rating to a notch
above junk in December.
Ratings firm Moody’s rating is two notches above junk with a negative outlook.
The International Monetary Fund on Tuesday cut its 2016 growth
forecast for South Africa to 0.7 percent from 1.3 percent.
Focus is now likely to shift to reappointed Finance Minister Pravin
Gordhan’s budget speech in February.
The agencies and the wider investor community are keen to see if
Gordhan can rein in government spending while boosting growth in an economy that is also facing rising inflation and unemployment running at 25 percent. (Reuters)
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