More downgrades for SA companies expected

More South African companies were likely to face downgrades this year, the Business Day reported on Tuesday.

According to the paper, rating agency Standard and Poor’s (S&P) warned that the “uncertain” global and domestic environment and the effects of the recent widespread strikes would be the cause for the declines.

Rating agencies have already downgraded several large companies, including parastatals Eskom and Transnet.

“It’s the uncertainty of the political environment which is weighing heavily on companies… they are somewhat paralysed by the inertia in government policies and are sitting on cash reserves waiting for more clarity on political developments,” Meganomics economist Colen Garrow was quoted as saying.

He said further reductions would make it more expensive for businesses to borrow money to help to finance government’s expansion programmes.

S&P told the Business Day that investors were anticipating the outcomes of the African National Congress’ December elective conference to get direction on hotly debated issues such as nationalisation in the mining sector.

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More downgrades for SA companies expected