South Africa’s credit rating cut amid cabinet shuffle

CREDIT ratings agency Standard and Poor’s downgraded South Africa’s rating to junk status on Monday, as pressure on President Jacob Zuma grows following a controversial cabinet shuffle.

S&P said the cut to below investment grade reflects “heightened political and institutional uncertainties” following Zuma’s shock purge of critical ministers on Friday, including respected finance minister Pravin Gordhan.

The shake-up has “put at risk fiscal and growth outcomes”, the ratings agency added as it downgraded South Africa to BB+ from BBB-.

The rand fell a further 2 percent against the US dollar on Monday night, after already suffering a 5 percent drop since Friday.

Moody’s ratings agency said it was placing its own South Africa rating – two notches above “junk” status – on review for a downgrade, a decision it said was “prompted by the abrupt change in leadership of key government institutions”.

Mmusi Maimane, leader of the main opposition Democratic Alliance, branded the S&P downgrade “a clear vote of no confidence in President Zuma”.

The president has faced widespread criticism for replacing Gordhan with a loyalist, former home affairs minister Malusi Gigaba.

All of South Africa’s main opposition parties have condemned the move, as has Deputy President Cyril Ramaphosa, an African National Congress party member, and the communist partners in the ANC’s coalition government.

Opposition parties on Monday vowed to press ahead with a no-confidence vote against Zuma, as the ANC’s own integrity commission delivered a stinging rebuke over the cabinet shuffle, saying it was “deeply perturbed” by the lack of consultation, according to media reports.

Shortly after his appointment, Gigaba had stressed the need to maintain South Africa’s investment grade status.

The treasury issued a statement in response to the S&P downgrade saying it showed the need to “accelerate inclusive growth and development”.

“Reducing reliance on foreign savings to fund investment and relying less on debt to finance public expenditure will secure South Africa’s fiscal sovereignty and economic independence,” it added.

The country was granted a reprieve at the end of last year when rating agencies did not drop it to the “junk” category following a series of downgrades.

Zuma has survived several no-confidence votes in recent years.

GIANLUIGI GUERCIA/AFP A man dressed up as a clown holds a placard during a rally outside the South African National Treasury on Monday in Pretoria called by ‘Save SA’, a coalition of civil organisations, opposition parties, Unions members and supporters protesting against...