A sovereign credit rating downgrade to junk status in December 2016, or even earlier, is highly probable if finance minister Pravin Gordhan suffers a similar or worse fate than his predecessor, Nhlanhla Nene.<\/p>\n
This is according to Dr. Conrad Beyers from the Department of Actuarial Science at the University of Pretoria.<\/p>\n
Yesterday reports emerged that Gordhan and other former SARS officials have been ordered to \u2018present\u2019 themselves at the Hawks\u2019 offices to receive warning statements.<\/p>\n
This news sent the rand plummeting<\/strong><\/a> against hard currencies, weakening to its lowest levels in weeks.<\/p>\n Many commentators see the Hawks\u2019 investigation into Gordhan as a political move, masterminded by President Jacob Zuma.<\/p>\n This political instability, especially in the finance department, is not welcome in South Africa\u2019s struggling economy.<\/p>\n \u201cIt is clear that credit rating agencies regard politically-related risks as the single major factor that may influence their ratings decisions for South Africa,\u201d said Beyers.<\/p>\n \u201cIf you scrutinise rating agency reports on South Africa, as well as public statements and assessments by rating agencies, political risk currently vastly overshadows all other risks,\u201d he said.<\/p>\n It is, however, not all doom and gloom. \u201cOn the positive side, the importance of political risks in South Africa implies that positive Government action can contribute significantly to create confidence,\u201d Beyers said.<\/p>\n He said that such positive action by Deputy President Cyril Ramaphosa, Gordhan, and prominent business figures – the so-called Team South Africa – helped avert a seemingly inevitable ratings downgrade earlier this year<\/p>\n However, the opposite is also true. According to Beyers, a second major shock to the Treasury will likely confirm rating agency fears that there is a willingness in key government circles to sacrifice the country\u2019s economic well-being for ulterior motives.<\/p>\n \u201cTeam South Africa convinced credit ratings agencies that the chaotic exit of Nene in December 2015 was a once-off event that will not be repeated,\u201d said Beyers.<\/p>\n \u201cThe rating agencies apparently gave South Africa the benefit of the doubt. However, a similar chaotic exit of Gordhan will illustrate that the \u2018Nenegate\u2019 event was not once-off, and that more such shocks are likely in store for the future.\u201d<\/p>\n Gordhan\u2019s arrest would be a disaster for South Africa<\/a><\/strong><\/p>\n Rand in trouble as Hawks move in on Gordhan<\/a><\/strong><\/p>\n Let\u2019s be clear \u2013 there are no charges against Pravin Gordhan: NPA<\/a><\/strong><\/p>\nMore on South Africa<\/h3>\n