S&P Global, the ratings agency which downgraded South Africa to sub-investment grade – commonly known as junk status – in November 2017, has now warned that yet another downgrade may be on the cards.
At the Consumer Goods Council Summit in Johannesburg on Wednesday, Konrad Reuss, S&P’s MD for sub-Saharan Africa, said South Africa may be downgraded again later in November.
He cited his reason being the doom and gloom laid out by Finance Minister Tito Mboweni during his mid-term budget speech, in which he did not mince words about the economic trajectory South Africa was on, or about the consequences if we did not reverse this path.
“The next big announcement will be on November 22. There will certainly be a very controversial committee discussion because at this point we have a new medium-term budget policy statement (MTBPS) with a lot of bad news but with very little action or action plan,” Reuss said, according to Business Day.
S&P’s last downgrade was as a result of then president Jacob Zuma firing Pravin Gordhan as finance minister in a reshuffle that had a severe effect on the value of the rand.
The ratings agency’s warning comes after Moody’s – the only ratings agency that still has SA at investment grade – downgrading the outlook for its credit rating of the SA government from stable to negative.
This means that while we are still at investment grade according to the ratings agency, them downgrading us next year is “nearly inevitable“, according to an expert, Peter Attard Montalto, the head of Capital Markets Research at Intellidex.
In its announcement of its decision to change our outlook, Moody’s acknowledged the grim state of the country’s economy, and expressed concern about the immediate future.
Moody’s mentioned high unemployment, Eskom, inequality, and severe sociopolitical challenges.
The negative outlook means the country has about 12 to 18 months in which a downgrade could be delivered, though it could come even sooner.
(Compiled by Daniel Friedman. Background reporting, Simnikiwe Hlatshaneni)