Downgrade to junk status a possibility for SA according to poll
Slow growth and an unsteady political climate could very well see South Africa downgraded to junk.
South Africa’s credit rating could be cut to junk later this year according to a new poll by Reuters. The poll was taken a few days after police summoned Finance Minister Pravin Gordhan over an investigation into the so-called “rogue unit” of SARS.
Out of the 23 economists surveyed, 19 believed that the investigation held “significant risk” of leading to a downgrade of South Africa’s sovereign rating. The other four respondents said the investigation would only “marginally” affect the rating.
According to IOL, respondents overwhelming expected at least one agency to cut the rating to junk this year.
“The probe raises doubt about whether Mr Gordhan has the political space to implement much needed fiscal reforms,” said Rafiq Raji, managing director at Macroafricaintel Investment in Lagos.
Colen Garrow, economist of Lefika Securities, said elements which impact a credit rating are not only economic.
“In particular, the interference by the head of state on the operations of a vital organ of government has the potential to not only downgrade the sovereign credit, but to also prompt a (disinvestment) of capital from the country,” said Garrow.
“Any discourse within National Treasury will therefore have an impact on South Africa’s credit rating,” he added.
