Averting the downgrade | South Africa | Quick Consolidation Loans

Averting the downgrade

South Africa received a credit downgrade during the first quarter of 2017. The first impact of the downgrade could be seen in government bonds and the Johannesburg Stock Exchange, where tens of billions of Rands were removed from South Africa by foreign investors. The downgrade also affects our country’s ability to borrow money from other companies or countries. For many years, South Africa has been borrowing money from reputable institutions offering low-interest rates. However, because of the negative credit rating, the South African government will no longer be able to borrow money from their normal sources. On June the 2nd, 2017, there will be another rating announcement. So how is the South African government averting the downgrade?

On Monday the 22nd of May 2017, South African ministers met with S&P Global Ratings – after discussions with Moody’s Investors Service last week – in hopes of avoiding another downgrade. S&P Global Ratings, as well as Fitch Ratings, reduced Africa’s most industrialised economy to junk, due to political instability and concerns over policy continuity. This took place after President Jacob Zuma removed Pravin Gordhan as the finance minister, and replaced him with a minister who has very little financial experience.

According to Fitch Ratings, the changes in the cabinet would weaken standards of governance and public finances.

At the meeting with S&P, the finance minister, Malusi Gigaba, and his deputy, Sfiso Buthelezi, were joined by Rob Davies, Lynne Brown and Mmamoloko Kubayi, who lead the ministries for trade, public enterprises and energy respectively. While S&P is due to announce another rating on the nation on the 2nd of June, Moody’s has placed our country under review for a downgrade.

Our country has held an investment grade at all three of the rating agencies since 2000. However, S&P Global Ratings and Fitch Ratings have both given South Africa a credit rating of BB+, which is the highest non-investment grade. While our nation is two levels above junk at Moody’s.