South Africa’s credit rating downgraded to junk

AP

CAPE TOWN: South Africa’s credit rating has been downgraded to junk status by Standard & Poor’s (S&P) following the political crisis in the country.

The announcement from S&P came after South Africa’s markets closed for business on Monday saying it cut its rating for the country.

S&P cited risks to the economy from the political crisis in the country and the recent reshuffle of top government roles by President Jacob Zuma.

There have been objections against Zuma’s decision to replace Finance Minister Pravin Gordhan by Malusi Gigaba.

Credit ratings are important as they are seen as a confidence barometer in a country’s economy.

Scoring national governments on how credit-worthy they are helps determine the interest rates countries pay to borrow money.

The news has also put more pressure on the South African rand and led to a 4% fall in the value of the currency on Friday.

Fitch and Moody’s, are also expected to make an announcement on their assessment in the near future.

“Continued political instability that adversely affects standards of governance, the economy or public finances, was one of the ratings sensitivities we highlighted in November when we revised the outlook on South Africa’s ‘BBB-‘ rating to ‘negative’ from ‘stable’,” said Jan Friederich, senior director at Fitch in a note to clients on Friday.