S&P has cut South Africa’s credit rating to junk status, saying the dismissal of its respected finance minister heralded a damaging policy shift, while President Jacob Zuma readied for a showdown with other ANC leaders over the sacking.
In an unscheduled review that prompted a selloff in South African assets, the credit agency handed South Africa its first downgrade since 2000, citing the impact of divisions in the ANC-led government that led to leadership changes including Pravin Gordhan’s removal on Zuma’s orders late on Thursday.
“This has increased the likelihood that economic growth and fiscal outcomes could suffer,” said S&P, which cut its rating by one notch to BB+, its highest non-investment grade mark, and also assigned Africa’s most industrialised economy a negative outlook.
Moody’s later said later that it was placing South Africa on review for downgrade, and that it would assess the likelihood of changes in key areas of financial and macro-economic policymaking following Zuma’s cabinet changes.
Zuma’s dismissal of Gordhan, widely respected in financial circles, threatens to split the upper echelons of the ruling African National Congress down the middle.
Some pundits say Gordhan was the target of political pressure from a faction allied to Zuma, which has criticised his plans to rein in government spending, wrangled over the spending on a planned nuclear expansion as well as the running of loss-making state owned enterprises and the tax agency.
His sacking drew public criticism from Deputy President Cyril Ramaphosa, ANC Secretary General Gwede Mantashe and Treasurer-General Zweli Mkhize before Monday’s regular meetings of the party leadership.
Zuma still had the support of Chairwoman Baleka Mbete and Deputy Secretary-General Jessie Duarte, marking a straight split among the party’s “Top Six” leaders, sources said.
Late on Tuesday the president also won the backing of the party’s influential women’s league, which accused S&P of holding the country to ransom.