As Jacob Zuma faces backlash over the sacking of ex-finance minister Pravin Gordhan, agency cuts country’s rating grade.
Credit rating agency Standard and Poor’s (S&P) has downgraded South Africa’s rating to junk status, as the country’s currency continued to slide following a major cabinet reshuffle.
In an unscheduled review that prompted a sell-off in South African assets, S&P on Monday cited the impact of divisions in the government of President Jacob Zuma that led to leadership changes, including the departure of former Finance Minister Pravin Gordhan.
“This has increased the likelihood that economic growth and fiscal outcomes could suffer,” said S&P, which cut its rating by one notch to BB+ – its highest non-investment grade mark – and also assigned Africa’s most industrialised economy a negative outlook.
The rand, which has fallen three percent against the US dollar since the Friday night shake-up, tumbled further after the downgrade.
S&P also said that “political risks will remain elevated this year, and that policy shifts are likely, which could undermine fiscal and economic growth”.
Following S&P’s announcement, South Africa’s Treasury expressed its commitment to a responsible fiscal path.
“South Africa is committed to a predictable and consistent policy framework, which responds to changing circumstances in a measured and transparent fashion,” it said in statement.
Moody’s, another ratings agency which has South Africa two notches above “junk” status, is expected to deliver a review on Friday.