International News

JOHANNESBURG, (MILLAT+APP/AFP) – South
Africa’s political turmoil and weakening economy will come under the harsh spotlight of international credit ratings from this week amid predictions the country could lose its investment-level status.
Moody’s will release its updated grading on Friday, before Standard &
Poor issues its key announcement a week later on December 2.
S&P currently has South Africa — the continent’s most developed
economy — rated at the lowest investment grade, and a downgrade would put the country’s bonds into so-called “junk” status.
Moody’s currently rates it one level higher than S&P.
Any downgrade would trigger a further crisis of confidence among
investors who have become increasingly wary of South Africa’s economic prospects under President Jacob Zuma.
The country has endured a year of political scandals and falling
economic growth, set against record unemployment and huge social inequality more than two decades after the end of apartheid.
The outcome of the ratings reviews is uncertain, but more than half
of 12 economists surveyed by Bloomberg said the S&P would downgrade South Africa to junk.
Peter Montalto, Nomura bank analyst, however said S&P could freeze
its rating until next year, while Moody’s might cut it by one notch.
“The agencies may want to see the outcome of the budget in February
for specifics on revenue changes and also where growth is at the time,” he said.
“Many policy makers have been talking up the chances of ratings
staying on hold in recent days.”
A rating downgrade could trigger a bout of bond selling by foreign
investors. Some investment funds have rules that allow them to only hold bonds that have investment-grade ratings.
A downgrade would also likely fuel fierce criticism of Zuma’s
leadership.