Exactly a week after the Cabinet reshuffle, rating agency Fitch announced on Friday, 7 April, that it had downgraded South Africa’s long-term foreign and local credit rating from BBB- to BB+, which is classified as sub/non-investment grade – effectively taking the country’s investment status to ‘junk’. This followed Standard & Poor’s (S&P) decision earlier that week to downgrade South Africa’s sovereign credit rating to a similar rating status.
Both S&P and Fitch cited current political events, which resulted from the reshuffle, as the major reason for their respective decisions to downgrade South Africa’s credit rating. In their view, they believe current political events taking place in the country will weaken the standard of governance and public finances and ultimately lead to a change in the direction of economic policy which will undermine the progress that has been made in the last 12 months. During this period, there was a moment of economic stability in the country where the markets were responding positively to the fiscal order and discipline maintained by National Treasury, especially curbing spending by the state-owned enterprises (SOEs).
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