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Fitch keeps South Africa's credit rating at junk

26 November, 2017, 01:07 | Author: Paula Vaughn
  • S&P downgrades South Africa as rand slides

S&P said its outlook on South Africa is "stable", meaning credit metrics are not expected to change significantly over the next year.

Moody's opted to keep both the country's foreign- and local-currency ratings on Baa3, its lowest investment grade ranking, but put them on review for possible downgrade.

"The bottom line is that the ratings decisions of the two most important ratings agencies amount to a vote of no confidence in the new and mysterious "Presidential Fiscal Committee's" capacity to stabilise public finances over the medium term in South Africa", Maynier added.

Fitch already rates South African debt as "junk", and affirmed the rating on Thursday.

The agency said in its report that weak economic growth had led to deterioration in public finances beyond previous expectations.

That's the view of Ian Matthews‚ head of business development at Bravura‚ who was commenting on the downgrade to "junk" status of South Africa's sovereign rating on Friday by S&P Global Ratings.

S&P lowered the country's local-currency rating one step to BB+, one level below investment grade, and placed it on a stable outlook.

"A momentous political agenda has overshadowed policy making, despite the deteriorating economy and weakening public finances", it said.

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Moody's said it would reassess SA's debt after the ANC elective conference in December, and the main budget in February next year.

National Treasury said in a statement on Thursday that it had "noted Fitch's decision not to further downgrade South Africa deeper into "junk status".

South African debt has already been dropped from one of the widely used global bond indexes, the JPMorgan Emerging Market Bond Index Global according to Matthews.

"However, despite this resilience, the downgrade is a blow for South Africa and it could and should have been avoided".

Local currency borrowing makes up about 90 percent of the South Africa's total 2.2 trillion rand ($159 billion) of debt.

Infighting within the ruling African National Congress ahead of a conference in December to elect a successor to President Jacob Zuma as party chief has also sapped investor confidence in Africa's most industrialised economy where growth has slowed to a near standstill in recent years.

S&P Global Ratings cut South Africa's local-currency debt score to junk on Friday, while Moody's Investors Service also threatened to slash its ranking, raising the risk of a selloff from global indexes.

Policy uncertainty, such as the introduction of the controversial new Mining Charter; the deterioration at major state owned entities; the fiscal slippage revealed in the October adjustments budget, and ongoing allegations of corruption all contributed to this environment he said.

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