South Africa cut to junk for the first time since 2000
This is in response to a cabinet purge by President Jacob Zuma that’s sparked increasing calls for him to resign.
S&P cut the foreign-currency rating to BB+, the highest junk score, and warned that a deterioration of the nation’s fiscal and macroeconomic performance could lead to further reductions.
The local-currency rating was reduced to BBB-, still investment grade, from BBB. The outlook on both ratings was kept at negative, signaling that the next move could be downward.
Zuma sacked Finance Minister Pravin Gordhan, who pushed for budget restraint, in a stunning cabinet reshuffle last week that’s ignited South Africa’s worst political crisis in almost a decade.
“The downgrade reflects our view that the divisions in the ANC-led government that have led to changes in the executive leadership, including the finance minister, have put policy continuity at risk,” S&P said.
“This has increased the likelihood that economic growth and fiscal outcomes could suffer.”
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