{"id":347242,"date":"2019-10-17T14:33:45","date_gmt":"2019-10-17T12:33:45","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=347242"},"modified":"2019-10-17T15:05:24","modified_gmt":"2019-10-17T13:05:24","slug":"what-junk-status-could-mean-for-south-africa-according-to-the-reserve-bank","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/347242\/what-junk-status-could-mean-for-south-africa-according-to-the-reserve-bank\/","title":{"rendered":"What junk status could mean for South Africa, according to the Reserve Bank"},"content":{"rendered":"<p>A possible downgrade of South Africa\u2019s credit rating may already be priced into markets, but structural reforms are still needed, says Reserve Bank governor Lesetya Kganyago.<\/p>\n<p>In an interview with <strong><a href=\"https:\/\/www.cnbc.com\/2019\/10\/17\/south-african-reserve-bank-chief-says-debt-rating-downgrade-may-be-priced-in.html\" target=\"_blank\" rel=\"noopener noreferrer\">CNBC <\/a><\/strong>on Thursday (17 October), Kganyago said that government was\u00a0\u201calive\u201d to the issues raised by ratings agencies.<\/p>\n<p>\u201cFrom where we\u2019re sitting as a central bank, what we look at is we ask ourselves the question \u2018is a downgrade reflected in the current financial market prices?\u2019\u201d Kganyago said.<\/p>\n<p>\u201cIf it is reflected in the current financial market prices, then a downgrade should not have such an adverse effect on the South African financial assets because it is already priced in, but if it is not priced in, we are going to see an outflow of funds from the South African bond markets.\u201d<\/p>\n<p>He added that if\u00a0the downgrade goes ahead and South Africa falls out of investment-grade-only indices, the country\u2019s debt will still attract investors but market stability may become a problem.<\/p>\n<p>&#8220;The problem with those sub-investment grade investors is that they are speculative in nature and they will just introduce volatility of capital flows for South Africa,\u201d he said.<\/p>\n<p>Moody\u2019s is currently the only major ratings agency that has South Africa in investment grade, one notch above junk, with a stable outlook.<\/p>\n<p>The country has been rated below investment grade since 2017 by ratings agencies Standard &amp; Poor and Fitch.<\/p>\n<p>Should the agency also downgrade South Africa to junk status, the country would no longer be eligible for inclusion in debt gauges such as Citigroup Inc\u2019s World Government Bond Index (WGBI).<\/p>\n<p>This would trigger a major outflow of money from the country estimated to be in the region of R100 billion.<\/p>\n<hr \/>\n<p><strong>Read: <a href=\"https:\/\/businesstech.co.za\/news\/finance\/347178\/rand-jumps-on-news-of-south-africas-new-energy-plan\/\" target=\"_blank\" rel=\"noopener noreferrer\">Rand jumps on news of South Africa\u2019s new energy plan<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A possible downgrade of South Africa\u2019s credit rating may already be priced into markets but structural reforms are still needed, says Reserve Bank governor Lesetya Kganyago.<\/p>\n","protected":false},"author":10,"featured_media":24779,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[26],"class_list":["post-347242","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/347242","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=347242"}],"version-history":[{"count":5,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/347242\/revisions"}],"predecessor-version":[{"id":347254,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/347242\/revisions\/347254"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/24779"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=347242"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=347242"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=347242"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}