International News

JOHANNESBURG, (MILLAT+APP/AFP) – South Africa’s economy
could be dealt a damaging blow later Friday when the Standard & Poor’s rating agency is due to release an assessment that may downgrade its foreign currency debt to junk status.
S&P currently has South Africa — the continent’s most developed
economy –rated at the lowest investment grade, one notch above junk.
The Fitch ratings firm last week kept South Africa one notch above
junk, but dropped its outlook from stable to negative, citing the country’s recent political turmoil under President Jacob Zuma.
Also last week, Moody’s kept South Africa unchanged two notches above
junk status.
“The South African economy is showing resilience, supported by strong
and independent institutions,” the treasury said, welcoming the assessments.
But this week has seen further political drama when Zuma’s loyalists
beat back an attempt by at least four ministers to oust him from power.
The rebellion was the most serious threat to the president since he
took office in 2009.
Zuma has been engulfed by graft scandals, while South Africa’s
economic growth has fallen to 0.5 percent and unemployment hit a 13-year high.
Efforts to avoid junk status have been at the centre of political
wrangling for months, with Zuma at loggerheads with Finance Minister Pravin Gordhan, a reformist widely respected among international investors.
Gordhan had been due to appear in court last month on graft charges
that many experts saw as an attempt by Zuma associates to oust him.
The charges were dropped at the last minute, exposing deep tensions
in the ANC as several ministers came out in his support.
Analysts say a foreign currency downgrade to junk by S&P on Friday
would be cushioned by the Moody’s and Fitch assessments.
“If it materialises, it would not impact South Africa’s inclusion in
the major global bond indices. This would require two agencies cutting local
currency ratings to junk status,” Dave Mohr, investment strategist at Old
Mutual, said in a note.
S&P’s local currency rating for South Africa is three notches above
junk.