On Monday, South Africans were devastated when S&P Global Ratings downgraded the country’s sovereign credit rating to ‘Junk’.
This is as a direct result of President Jacob Zuma’s Cabinet reshuffle last week.
The ratings agency said the executive changes “have put at risk fiscal and growth outcomes”, Engineering News reported.
Downgraded to ‘Junk’ status
Media reported that S&P also reassessed South Africa’s contingent liabilities, reflecting an increased risk that nonfinancial public enterprises, such as Eskom, would need further “extraordinary government support”. Read more…
S&P Global Ratings lowered the long-term South Africa national scale rating to ‘zaAA-‘ from ‘zaAAA’.
“The downgrade reflects our view that the divisions in the ANC-led government that have led to changes in the executive leadership, including the Finance Minister, have put policy continuity at risk,” S&P said in a statement.
According to Engineering News: “The negative outlook, meanwhile, reflected a view that political risks would remain elevated in 2017 and that policy shifts were likely.
“The agency saw higher risks of Budgetary slippage, and upward pressure on South Africa’s cost of capital, which would further dampen already-modest growth.”
As part of the reshuffle, energy minister Tina Joemat-Pettersson was replaced with MP Mmamoloko Kubayi. Read more…
Having officially dropped former finance minister, Pravin Gordhan, and his deputy Mcebesi Jonas, a move that has been under much scrutiny of late, the country’s investor confidence could see a turn for the worse.
President Jacob Zuma replaced Gordhan with Malusi Gigaba – who has served as Home Affairs Minister since May 2014, previously holding the post of Public Enterprises Minister in 2010 – and his deputy with Sifiso Buthelezi.