Downgrades can’t be shrugged off

Perhaps taking their cue from Pravin Gordhan when he was finance minister, some South Africans tend to downplay the significance of negative news from international ratings agencies.

The theme is foreigners don’t understand. Using this defence mechanism, it is easy to shrug off Moody’s downgrade of South Africa’s big four banks: Standard, FirstRand, Nedbank and Absa. The agency, which downgraded Capitec last week, was reacting to the limited bailout of African Bank by the SA Reserve Bank (SARB).

The SARB disagreed with Moody’s initial downgrade of Capitec, saying Capitec’s business model was different from African Bank’s.

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