South Africa’s sovereign credit rating was downgraded to junk status on Monday following an emergency S&P Global Ratings meeting at the weekend, Business Day reported.
The decision follows President Jacob Zuma’s Cabinet reshuffle on Thursday where several ministers, including Finance Minister Pravin Gordhan and his deputy, Mcebisi Jonas, were axed. Experts say other ratings agencies are likely to follow suit.
South Africa’s ability to borrow on the market took a hit within hours of Gordhan’s removal.
“We were hoping, today, for example, to raise R600-million in the bond market on a short-term basis — and bids for just over R200-million were actually offered, because there’s this concern about the economy rising from the announcements made yesterday,” Gordhan said on Friday.
S&P on Monday placed South Africa’s credit rating to speculative grade (commonly referred to as “junk”), a one-notch reduction to BB, and the ratings agency said “the economic crises President Jacob Zuma plunged the country into with his midnight cabinet reshuffle” prompted it to hold an emergency review at the weekend instead of June 2, as was scheduled, according to Business Day.
Moody’s scheduled review of South Africa is on Friday (April 7) and it remains unclear when Fitch, which has a near-junk status rating for the country at BBB-, will release its review.