South Africa's Zuma Calls for Stop to Public Spats Within ANC

Standard & Poor's Global has the country's foreign debt at junk, with a negative outlook and Fitch has both the rand and foreign denominated debt at junk, with a stable outlook.

Economist Kamilla Kaplan says, "The negative outlook typically signals that the next ratings move would be another downgrade and typically ratings agencies would keep us on negative for about 12 months".

The contents of the leaked confidential government documents will likely embolden Zuma's opponents in the ANC who want to oust him or prevent his chosen successor from becoming party president in December, analysts say.

But Moody's lowering by a notch from Baa2 to Baa3, the bottom of the investment grade table, will be a cause for concern in Pretoria as the Treasury strives to convince investors it is serious about governance and fiscal discipline. "Fedusa is outraged that our economy and our membership at large have now been faced [with] a double whammy in one week - first the negative contraction of the GDP statistics and now the second nail in the coffin due to the downgrade", Ajam said. Approximately R500 billion was wiped from the South African economy after former finance minister Pravin Gordhan and his deputy Mcebisi Jonas were fired in a midnight [cabinet reshuffle] by President Zuma that shook the economy.

South Africa's long-term local-currency bond and deposit ceilings were lowered to A2 from A1, and the long-term and short-term foreign-currency bond ceilings lowered to A3/P-2 from A2/P-1, respectively.

As a outcome, Moody's views the underlying political dynamics which led to the March cabinet reshuffle as posing a threat to near- and medium-term real GDP growth.

The negative outlook reflects Moody's view that the risks to growth and fiscal strength arising from the political outlook are tilted to the downside.

Growth in South Africa's key mining sector slowed sharply in April while manufacturing contracted much more than expected, data showed on Thursday.

Moody's had delayed its decision but finally announced the downgrade Friday citing "the weakening of South Africa's institutional framework" as well as worsening growth prospects and rising public debt, according to the agency's vice president Zuzana Brixiova.

  • Zachary Reyes