The rand came under renewed pressure in evening trade on Monday (3 April) after ratings firm S&P Global downgraded South Africa\u2019s sovereign credit rating to junk status.<\/p>\n
According to analysts, junk status has been an inevitability for South Africa for some time, as the country has struggled with debt, high levels of unemployment, incredibly slow economic growth and political uncertainty under president Jacob Zuma\u2019s tenure.<\/p>\n
By 18h30 on Monday the rand lost nearly 2.2% of its value against the greenback, trading at R13.70, having closed last week at R13.42.<\/p>\n
S&P downgraded South Africa\u2019s foreign currency rating to BB+ \u2013 officially sub-investment grade \u2013 while local currency debt has been downgraded to BBB- (one notch above junk).<\/p>\n
Both ratings carry a negative outlook, meaning further downgrades may lie ahead.<\/p>\n
S&P said that its negative outlook reflects\u00a0the view that political risks will remain \u00a0elevated this year, and that policy shifts are likely \u2013 which could undermine fiscal and growth outcomes more than we currently project.<\/p>\n
\u201cIf fiscal and macroeconomic performance deteriorates substantially from our \u00a0baseline forecasts, we could consider lowering the ratings,\u201d it said.<\/p>\n
\u201cWe could revise the outlook to stable if we see political risks reduce and \u00a0economic growth and\/or fiscal outcomes strengthen compared to our baseline projections.\u201d<\/p>\n
Two other agencies are expected to deliver their reviews on South Africa in the coming weeks, starting with Moody\u2019s on Friday (7 April).<\/p>\n
Moody\u2019s currently has South Africa at two notches above junk status, with expectations that the group will cut the country to one notch above junk.<\/p>\n
Fitch meanwhile, has South Africa at one notch above junk.<\/p>\n