S Africa braces for credit review as growth falls
JOHANNESBURG:
South Africa braced for a potentially damaging credit rating review yesterday as Moody’s releases its latest assessment amid political tension, reform blockages and weak economic data. President Jacob Zuma has been engulfed by graft scandals and a power struggle with Finance Minister Pravin Gordhan, while growth has fallen to 0.5 percent and unemployment hit a 13year high.
Moody’s was expected to issue its updated grading later, before Standard & Poor’s makes 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 socalled “junk” status. Moody’s currently rates South Africa two levels above junk. Any downward review would further drain investor confidence in the country’s prospects under Zuma and the ANC party, which has ruled since the end of apartheid.
“We are politicizing downgrading. That is our problem,” the president told parliament this week. “We have been working hard... and we are talking to them (rating agencies).” Efforts to avoid junk status have been at the centre of political drama for months, with Zuma loyalists at loggerheads with Gordhan, who is widely respected among international investors.
“Zuma has focused on removing Gordhan and maintaining his grip on power, while Gordhan (has) been working very hard to avert a ratings downgrade,” the Eurasia consultancy group said in briefing note. —AFP