Covid-19: South Africa’s downgraded to junk again, this time by Fitch

While South Africa’s economy is still trying to recover from Moody’s announcement of downgrading the country’s credit rating to junk status last week, ratings agency Fitch has done the same on Friday (3 April).

Fitch has downgraded South Africa’s long-term foreign and local currency debt ratings further into non-investment grade to ‘BB’ from ‘BB+’ and maintaining a negative outlook.

Fitch’s decision, similar to Moody’s, was based on the country not having a clear plan or strategy to stabilise its debt as well as the expected impact of the Covid-19 on public finances and economic growth.

National Treasury responded in a statement to the downgraded, “In the midst of the prevailing financial market stress emanating from Covid-19 and credit rating downgrades by Moody’s and Fitch, government reiterates its commitment to implement structural economic reforms to address the weak economic growth, constrained fiscus and ailing state-owned companies.”

They added that the government will continue to prioritise and implement measures announced by President Cyril Ramaphosa aimed at containing the spread of Covid-19, that will have a limited impact on the economy.

Minister of Finance Tito Mboweni said a non-investment grade will have undesirable implications to the economy but reassured South Africans, “Government continues to prioritise and implement measures to improve economic growth and setting government finances on a sustainable trajectory. This work requires close collaboration and coordination across various sectors of the economy.”

The reaction on Twitter of the downgrade was negative:

SA has been downgraded by rating agencies to junk status, the Rand’s value is collapsing, jobs are lost, the economy, i.e. revenue base is shrinking. The self proclaimed “Heart Surgeons” of SA’s macroeconomic framework have hitherto said nothing. Where’s the stimulus package?

— Floyd Shivambu (@FloydShivambu) April 3, 2020

Now Fitch joins the party and downgrades SA further into junk. That explains the collapse in the rand. Enough already!

— Magnus Heystek (@MagnusHeystek) April 3, 2020

In summary:
– Moody's has us 1 notch below investment grade, negative outlook
– S&P has us 2 notches below investment grade, negative outlook
– Fitch has us 2 notches below investment grade, negative outlook

Slippery slope…

— Johann Biermann 🇿🇦 (@JohannBiermann1) April 3, 2020

R19 to the 💵

Fitch has downgraded Mzansi into ‘junk’ pic.twitter.com/H2MCI1i13j

— Tumi Sole (@tumisole) April 3, 2020

Yesterday the Fitch Rating Agency downgraded South Africa again. The two issues identified are debt stabilization and economic impact of Convi-19. The culture of talking rather than doing must come to an end. Now it is the time for the experts and the learned to come to the fore!

— Tshilidzi Marwala チリツィ・マルワラ (@tmarwala) April 4, 2020

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