https://docs.google.com/document/d/1jW4dbHVjtGE6R8AXofjI5zbattHhEoaDxxR53Jz9S4w/edit?usp=sharing Ratings agency Standard & Poor’s on Monday placed South Africa's credit outlook at junk status after an emergency meeting at the weekend.
This is "to reflect its view that the divisions in the ANC-led government have led to changes in the executive leadership".
The rand fell by as much 2 percent to the dollar in response to the news of the downgrade, while government bonds also weakened sharply.
This follows a cabinet reshuffle around midnight on Thursday, which resulted in Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas losing their jobs.
The ratings downgrade will not affect the average citizen in the short term, but could restrict access to credit in the long term and possibly lead to an interest rate increase. However, the rand could decrease in value even more, sparking a rise in the price of imported goods.
Senior ANC leaders said they had no idea how president was making decisions. How should investors hope to understand SA then? #JunkStatus
— xhanti (@XhantiPayi) April 3, 2017 The executive changes initiated by President Jacob Zuma, S&P said, have put at risk fiscal and growth outcomes.
“We assess that contingent liabilities to the state are rising. The negative outlook reflects our view that political risks will remain elevated this year, and that policy shifts are likely, which could undermine fiscal and economic growth outcomes more than we currently project."
S&P lowered the long-term foreign currency sovereign credit rating on the Republic of South Africa to 'BB+' from 'BBB-'and the long-term local currency rating to 'BBB-' from 'BBB'.
It also lowered the short-term foreign currency rating to 'B' from 'A-3' and the short-term local currency rating to 'A-3' from 'A-2'. The outlook on all the long-term ratings is negative.
So where is Gigaba going to borrow money to finance that nuclear deal of his and the Guptas? #JunkStatus
— IG: ConceptSixty5 (@Sentletse) April 3, 2017 In addition, S&P lowered the long-term South Africa national scale rating to 'zaAA-' from 'zaAAA'.
In December, S&P kept the country’s sovereign credit rating at one notch above junk status, with a negative outlook, while Fitch adjusted its outlook to negative from a stable a notch above junk.
Read the full statement
https://docs.google.com/document/d/1jW4dbHVjtGE6R8AXofjI5zbattHhEoaDxxR53Jz9S4w/edit?usp=sharing