Standard & Poors warns of further downgrades if reforms don’t happen soon
South Africa’s credit rating could get downgraded deeper into junk status if political uncertainty triggered by the recent firing of the finance minister stalls reforms needed to grow the economy, the Global Ratings said speaking to Reuters.
Gardner Rusike, the associate director and lead analyst for South Africa at S&P said that continued politicking ahead of the ruling African National Congress’s conference at the end of the year was likely to distract government from implementing economic reforms.
“There are risks that potential growth outcomes could be weakened, especially with uncertainty that’s been brought along in a year where you may not get strong decisions for strong reform programs,” said Rusike.
“We’ve had three downgrades over the last four or five years which means that the credit story for South Africa has been deteriorating.”
S&P downgraded South Africa’s sovereign credit rating to BB+ with a negative outlook from BBB- grade on April 3, saying the firing of its internationally respected finance minister, Pravin Gordhan, posed a major risk to fiscal policy.
The warning by the credit agency arrives a day after newly appointed finance minister, Malusi Gigaba, set out on an international roadshow to draw further investment buy time with ratings agency Moody’s, which has the country on watch for a downgrade.
However Gigaba will shoulder much of South Africa’s financial burden alone according to Dr Azar Jammine, lead economist at Econometrix who noted that Gigaba would not have the support of big business.
Read: Business leaders opt out of international roadshow with Gigaba
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