Last week’s shock cabinet reshuffle has tipped SA over the edge of the investment-grade cliff, with ratings agency S&P Global Ratings downgrading SA’s foreign currency rating to subinvestment grade, or “junk” status, on Monday evening, sending markets into a tailspin.
What does junk mean to the average South African?
Further downgrade imminent
Moody’s also put SA on review for a downgrade late on Monday, which suggests that a downgrade from the agency is imminent.
The ratings agency, whose next ratings review had been due only in June, departed from its schedule to do the downgrade, saying the executive changes initiated by President Jacob Zuma had put at risk the country’s fiscal and growth outcomes, increasing the risk of policy shifts that could be negative for economic growth and fiscal discipline.
S&P also put a negative outlook on the new BB+ rating, suggesting a further downgrade could be on the cards if it sees deterioration in SA’s economic or fiscal performance.
The rand lost almost 3% within half an hour of S&P’s announcement.