S&P Cuts South Africa’s Credit Rating To ‘junk’

Credit rating agency Standard and Poor’s downgraded South Africa’s rating to junk status on Monday, as the country’s currency continued to slide following a controversial cabinet shuffle.

“The executive changes initiated by President Zuma have put at risk fiscal and growth outcomes,” S&P said in a statement.

It said the rating cut to below investment grade reflected “heightened political and institutional uncertainties” after President Jacob Zuma’s shock purge of critical ministers on Friday, including Pravin Gordhan, a respected former finance minister.

The rand has fallen three percent against the US dollar since the Friday night shake-up, and fell further after the S&P downgrade.

The ratings agency added that “political risks will remain elevated this year, and that policy shifts are likely, which could undermine fiscal and economic growth”.

Moody’s, another ratings agency which has South Africa two notches above “junk” status, is expected to deliver a review on Friday.

Zuma has faced widespread criticism for replacing Gordhan with a loyalist, former home affairs minister Malusi Gigaba.

All of South Africa’s main opposition parties have condemned the move, as has deputy president Cyril Ramaphosa, an ANC member, and the communist partners in the ANC’s coalition government.

Shortly after his appointment Gigaba stressed the need to maintain South Africa’s investment grade status.

The country was granted a reprieve at the end of last year when rating agencies did not drop it to the “junk” investment category following a series of downgrades.

South Africa’s opposition parties on Monday vowed to press ahead with a no-confidence vote against Zuma.

The opposition call came as the ruling ANC’s own integrity commission delivered a stinging rebuke over Zuma’s cabinet shuffle, saying it was “deeply perturbed” by the lack of consultation, according to media reports.

“Opposition parties are fully behind the motion of no confidence in Jacob Zuma,” said Mmusi Maimane, leader of the main opposition Democratic Alliance (DA), ahead of the downgrade.

The DA and the third-largest opposition party, the leftist Economic Freedom Fighters Party (EFF), wrote to the national assembly speaker requesting an urgent sitting to debate the no-confidence motion, since Parliament is currently in recess.

Speaker Baleka Mbete, who is also the chairwoman of the ANC, cut short an official trip to Bangladesh and returned home on Sunday to consider the opposition request.

“I am alive to the extreme challenges and sense of anxiety our young democracy is going through at this moment,” Mbete said on Sunday.

Zuma has survived several no-confidence votes in recent years.

However, “When other motions of no confidence failed, we were not facing the crisis that we are facing currently,” said the president of the African Christian Democratic Party, Kenneth Meshoe.

“Now it is not only members of the opposition that acknowledge that we have a crisis, but members of the ruling party,” he said.

“This is not an academic exercise, we are serious about this,” said Maimane. “We are working to remove Jacob Zuma.”

With 249 seats, the ANC commands a strong majority in the 400-member parliament. For a no-confidence vote to pass, the opposition would have to secure a simple majority — meaning it would need to secure at least 50 votes in favour by ANC lawmakers.

Analysts say they believe the no-confidence vote is unlikely to pass.

“I don’t see the ANC caucus splitting ranks — that will be quite a momentous day. It would also give far too much prominence to the opposition, which I don’t think even those who dislike Zuma would want to do,” said Daniel Silke, an independent analyst.

But Zuma’s cabinet overhaul exposed deep divisions within the ANC, and DA officials are confident they can recruit enough support from ruling-party MPs to unseat the president.

“There are quite a number of other colleagues and comrades who are unhappy about this situation, particularly the removal of the minister of finance who was serving the country with absolute distinction,” Ramaphosa, the ANC deputy president, said after the cabinet shuffle.

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