Finance Minister Malusi Gigaba knew that Standard & Poor’s (S&P) rating agency would downgrade South Africa to junk status on Friday March 31, just hours after he was made minister of finance.
At a press briefing on Tuesday April 4, Gigaba said he did not know when S&P had decided on the economic downgrade. On Friday morning, just after President Jacob Zuma’s midnight announcement that finance minister Pravin Gordhan had been axed, Gigaga was informed that S&P had downgraded South Africa’s credit rating to junk status.
“When I walked into office on Friday the decision had been made,” Gigaba said.
S&P may have made its decision on South Africa’s credit rating late on Thursday or early on Friday morning. Gigaba met Moody’s and Fitch rating agencies on Friday, but decided not to meet S&P after it became clear that they would not change their decision.
“It was not necessary to talk to them, [because] it would not change the decision,” he said.
Gigaba said that he did not tell South Africans of the downgrade at a press briefing he held on Saturday, because he did not want to lose the trust of S&P, who he said had made known the credit downgrade in confidence.
In the coming days, the minister and his team will finalise plans to begin talking with S&P about the downgrade. The press briefing was delayed by more than two hours because Gigaba held a handover meeting with Gordhan. He said the former finance minister had also assisted in discussing the downgrade.
The two will continue to meet in the coming days. “Our discussions covered a whole range of issues but were not concluded,” Gigaba said.
“We did not abandon radical economic transformation”
Moody’s has said that it will not issue a credit rating this week as it had planned. The rating agency had put South Africa on review for a downgrade after the Cabinet reshuffle last week.
Gigaba said the meetings with Moody’s and Fitch would address issues of political stability and policy to “reassure” them that “there’s not been a change in government”.
The minister emphasised that even though the position of finance minister and deputy minister had changed, government policies still remain the same. “We did not abandon radical economic transformation,” Gigaba said. And inclusive growth remained a priority in boosting the economy.
“We acknowledge that yesterday’s announcement [of the S&P downgrade] was a setback. Despite our challenges, now is not the time for despondency,” he said.
Moody’s has indicated that South Africa is at risk of a credit downgrade to junk status because of the change in leaders in key institutions such as the treasury.
Three officials in the ANC top six – ANC secretary general Gwede Mantashe, Deputy President Cyril Ramaphosa and ANC treasury general Zweli Mkhize – have spoken out against the Cabinet reshuffle. Ramaphosa called it “unacceptable”.
Gigaba says he has written to the ANC, to be sent once he has signed it, because he is “concerned that discordant views are creating confusion” and a divided ANC will “continue to harm us”. He plans to meet the ANC to “discuss the importance of political management”.