Ratings agency Standard & Poor’s drops South Africa to junk

Economists had predicted that the firing of Gordhan would hurt South Africa’s economy, which saw growth of just 0.5 per cent last year and has an unemployment rate of around 27 per cent. Zuma’s actions would cause South Africa to be downgraded to junk status by credit ratings agencies, economists warned.

South Africa is rated one notch above junk at Fitch and two notches above junk at Moody.

S&P kept a “negative” outlook on South Africa, meaning it is more likely to downgrade it again than upgrade it.

The South African currency, the rand, was down on Monday as investors expected a downgrade. The dollar was up 1.9 per cent at 13.68 rand by late Monday after the report. The rand has dropped almost 10 per cent in the last month.

South Africa is part of the so-called BRICS economies — also including Brazil, Russia, India and China — that had enjoyed strong growth in the past decade. But all of them have run into economic trouble. Brazil and Russia have fared worst, falling into deep recessions, but even China has seen economic growth slow down.

The downgrading by S&P indicates that Zuma’s firing of Gordhan will have negative economic consequences for South Africa. Zuma’s Cabinet reshuffle, in which he also sacked some critics, has brought an official request by the opposition Democratic Alliance for a vote of no confidence in parliament and plans for protest marches. Calls have been growing for Zuma to step down since August last year when the ANC lost control of key metropolitan areas in local elections, partly because of dissatisfaction with the president’s performance.

Top members of the government and the ANC are openly criticizing Zuma. At the weekend Deputy President Cyril Ramaphosa called for his countrymen to get rid of “greedy” and “corrupt” people.

Stuart Graham, The Associated Press

by Canadian Press

Ratings agency Standard & Poor’s drops South Africa to junk

Our Community