Treasury responds to junk rating
Treasury has responded to Standard & Poor’s (S&P) decision to downgrade South Africa to junk status.
On Monday evening (3 April), S&P downgraded South Africa’s foreign currency rating to BB+ – officially sub-investment grade – while local currency debt has been downgraded to BBB- (one notch above junk).
Both ratings carry a negative outlook, meaning further downgrades may lie ahead.
S&P’s revised position comes days after president Jacob Zuma announced a cabinet reshuffle, which included the sacking of finance minister Pravin Gordhan and his deputy, Mcebisi Jonas.
Gordhan was replaced by Malusi Gigaba, who previously served as minister of home affairs and minister of public enterprises, and who has very little background in finance and economics, holding a BA degree in education and a Master’s in social policy.
Read: South Africa downgraded to junk
Treasury said in a statement on Monday evening (3 April) that while the leadership of the finance portfolio has changed, government’s overall policy orientation remains the same.
“As indicated by minister Gigaba on 1 April 2017, ‘government has been, and will remain, committed to a measured fiscal consolidation that stabilises the rise in public debt’.”
“South Africa is committed to a predictable and consistent policy framework, which responds to changing circumstances in a measured and transparent fashion,” the government department said.
“Open debate in a democratic society should not be a cause for concern, but reflects an important means to accommodate differing views.
“South Africa’s constitutional arrangements remain robust. These key institutional strengths are acknowledged by rating agencies.
“This rating announcement calls for South Africans to reflect on the need to sustain and act with urgency to accelerate inclusive growth and development so that we can reverse the triple challenge of poverty, unemployment and inequality.
“Reducing reliance on foreign savings to fund investment and relying less on debt to finance public expenditure will secure South Africa’s fiscal sovereignty and economic independence,” the Treasury said.
Mmusi Maimane, leader of the Democratic Alliance called on president Zuma to resign immediately to allow a new administration to stabilise the economy.
This evening’s decision by Standard and Poors Global Ratings Services to downgrade South Africa’s sovereign credit rating to ‘junk status’ is a clear vote of no confidence in President Zuma, and a direct result of his decision to fire Pravin Gordhan and Mcebisi Jonas last week.
“Instead of acting in the best interests of the country and its people, Zuma chose to act in his own best interests by firing Gordhan and Jonas. The negative effects of this downgrade – which is likely not to be the last – will be felt by all South Africans. This downgrade will result in higher government borrowing costs, less money for basic services, and less job creating investment,” Maimane said.
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