Now Fitch downgrades SA to junk - TechCentral

Now Fitch downgrades SA to junk

Jacob Zuma

South African debt got dealt a second blow in a week as Fitch Ratings joined S&P Global Ratings and cut the nation’s credit assessment to junk following President Jacob Zuma’s move to fire his well-respected finance minister.

Fitch reduced the foreign-currency rating to BB+, the highest non-investment grade, the company said in a statement on Friday, four days after S&P reduced its assessment. The local-currency rating was also lowered one level to junk. The outlook is stable.

Zuma fired finance minister Pravin Gordhan, who pushed for budget restraint, in a cabinet reshuffle on 31 March, igniting South Africa’s worst political crisis in almost a decade and sparking calls from top officials for him to resign.

Investors regard the firing as a blow to an economy growing at the slowest pace since a 2009 recession and grappling with 27% unemployment. The rand and bonds plunged.

The downgrade “reflects Fitch’s view that recent political events, including a major cabinet reshuffle, will weaken standards of governance and public finances”, the company said.

“The reshuffle is likely to undermine, if not reverse, progress in state-owned enterprises’ governance, raising the risk that state-owned enterprise debt could migrate onto the government’s balance sheet.”

Zuma doesn’t understand how his actions can influence decisions by rating companies, and his actions showed a “recklessness” that ruined South Africa’s credibility, former President Kgalema Motlanthe said in a 3 April interview.

Pressure within the ruling ANC has been growing for Zuma to step down after he recalled Gordhan from a trade trip in London on 27 March. The former minister was holding meetings with investors and ratings companies.

The president replaced Gordhan with former home affairs minister Malusi Gigaba, who has no financial or business experience, making him the nation’s fourth finance minister in 15 months.

Both the South African Communist Party and the Congress of South African Trade Unions, the country’s biggest labour federation, have called on Zuma to resign, as has a group of the ANC’s veteran members.

Malusi Gigaba, left, with President Jacob Zuma

The rand, which had been the world’s best-performing currency in 2017 until the 27 March recall, has now erased all its gains this year for the biggest decline among more than 140 currencies monitored by Bloomberg. The rand decreased 0,6% to R13,84/US$ at 1.38pm in Johannesburg.

The Fitch cut came as thousands of people gathered across the country to demand that Zuma resign. The protests were called by Save South Africa, which has been campaigning for better government, and are backed by the main opposition party, the Democratic Alliance, and civil-rights groups.

Zuma, 74, will face a no-confidence motion in parliament on 18 April sponsored by opposition parties. The ruling ANC said its members won’t vote against the president, whose decision to change the cabinet was criticised by three senior members of the party, including deputy President Cyril Ramaphosa.

Zuma, who’s due to step down as ANC leader in December and as the nation’s president in 2019, has survived a series of corruption scandals and presided over the party’s worst electoral performance since the end of apartheid in 1994 in municipal elections in August.

Moody’s Investors Service put its Baa2 assessment, which is two levels above junk, on review for a downgrade on 3 April.  — (c) 2017 Bloomberg LP

55 Comments

  1. Vusumuzi Sibiya on

    The ANC leadership has demonstrated that the world is indeed not ruined by corrupt person(s); state capturers; or a President who lacks integrity and leadership; but it is ruined by good people who keep quiet and are too cowardly to stand up for the truth.

    Come 2019 it is clear that the Gauteng province will be lost to the opposition because of leadership that stands in silence and hands over power; they will be scrambling once again attempting to form a coalition with the very same parties that they should be working with on the 18th of April 2017.

    The kind of leadership that is required now is the sort that can predict and shape it’s own future which should be to advance a better future for the people of the country and the future of the ANC.

    Today however has been a great day for South Africa and it has been proven that arrogance will never over power the will of the people in a democracy.

  2. This downgrade has nothing to do with micro and macro policies but more political or favoritism . It’s business dictatorship .

  3. I’d far rather have the Diktat of business than that of a gang of smugly arrogant ANC cronies stealing the South African treasury’s funds in broad daylight and dishing out those funds to fellow cronies, Guptanites and Russian nuclear oligarchs that’s for sure.

  4. Vusumuzi Sibiya on

    Whether or not it has to do with micro and macro policies is irrelevant; we are not in an economy 200 years ago trading with cattle and the impact of downgrades does us no favors in 2017 given the Westernized global economy we find ourselves in.

  5. Talking about tradition , who’s against progress or contentment of old established ways of businesses in this country ? preventing any movements that’d eventually take our economy away from stagnation (junk status to be precise ).

  6. @vusumuzisibiya:disqus I think so too. The 2019 elections are going to be a big wake up call for the ANC. I don’t mind them being in charge, which I think will be the case. I just want parliament to function. If the ANC loses its majority vote, then at least parliament would function properly for once.

  7. Vusumuzi Sibiya on

    I think you’re missing the point…

    It really doesn’t matter if you perceive it to be true that whites are against progress; the global economic game is played by certain rules and downgrades don’t put you in a winning position and ought to be avoided and not self inflicted as has occurred to us in the past week given the reshuffle by the President.

    You can look next door at Zimbabwe to see what happens when you try and play someone else’s game by your own rules; the ratings agencies have the power and crying foul isn’t going to change things; just like turning the clock back 200years is not going to happen.

  8. you’re off the mark , who talked about whites being against progress ? And for SA to be downgraded happened in 1998 , again 2001 …what was different then comparing the outcry in 2017 ? fact : all the time SA government try to shift gears driving the economy these ” questionable agents ” poke nose by downgrading SA , why is that ? they claim might change policy meaning they’re content with current state of our economy … assuming that we’re blind , as practically , interests rates etal has been years in junk status … that’s the junk they’re afraid to lose as they’re the ones benefitting .

  9. Vusumuzi Sibiya on

    The loss of Gauteng to the opposition is a given if the ANC persists with the arrogance of the notion that they will close rank on a matter of truth just because it is a chorus also being sung by the opposition.

    The truth remains the truth regardless of who is doing the singing and this is the same arrogance being displayed that lead to the loss of key metros in GP. Yes it is possible to bounce back from junk status but just how likely is the ANC able to bounce back from loss of the economic hub of GP; we’ve being attempting a bounce back in WC and that should the indicator.

    Rather loose the liability that is Zuma now and put up a good fight on a new slate to prevent the loss of Gauteng. The leadership race was begun by Zuma with the reshuffle and not consulting; why should MPs be towing the line when there’s so much at stake come 2019.

    And comrades in GP suffered immensely because of Zuma in the past municipal elections which the reason why the alliance partners have also deemed him to be a liability. The cowardly leadership that is currently in the ANC is just being silent and handing the Gauteng province to the opposition.

  10. Vusumuzi Sibiya on

    Do you know what perceive means or am I again off the mark when telling you to dust up on your understanding of the English language.

    Finger pointing in a global game that is not your own and where you are just another developing world economy is not going to influence the decision of rating agencies…

    However good governance and playing by what makes the agencies comfortable is more likely to work favorably even towards economic growth that would be able to advance radical economic transformation.

  11. You’re off the mark even by attempting to lecture me about english language , your statement ” against the whites ” were your attempt to insinuate another topic .
    Global game doesn’t play somewhere in universe . in fact , these ratings are irrelevant to a certain extent because they themselves are not role players but manipulators . Investors no longer rely on their candle lighting to see business opportunities . they’re therefore outdated .

  12. Vusumuzi Sibiya on

    And now you are a spokesperson for investors…

    So exactly how much new FDI are we going to be seeing now that the irrelevant ratings agencies have boldly displayed their bias and downgraded SA to junk status???

    I hope your answer will be more impressive than your understanding of English.

  13. I can bet … you know nothing about foreign direct investment other than the abbreviation . For your info . SA’s FDI is the one driving our economy compare with Local investors became politicians than investors .

  14. Vusumuzi Sibiya on

    Well Leko how much money do you have to put on the table???

    I had this same challenge by a banker; and I also put it to him that there is no way for anyone to make such a bold claim that given their profession they have more knowledge than another.

    Just for the mere fact that we live in a connected online world, one can research and get access to info on any subject matter; and that same banker after doing some research on me, conceded that he needed to withdraw the bet….

    Hey but I’m more than happy to take your money, so just how much are you willing to bet that my knowledge ends at just the abbreviation???

  15. Research alone is not enough , experience will tell ALL _if any !!

    Go ahead , heed my call for bet . than being creative .

  16. Vusumuzi Sibiya on

    So what you are is also a psychic that’s able to know the amount of info one can research or Google and get informed opinion from people with etensive experience in the subject of FDI???

    It’s nowonder you’ve made yourself a spokesman for investors –

    BTW (By the way – in case you once again find yourself off the mark) I’m the one who asked about the amount you are going to put on the table; so please answer or do you still need to dust up on your English???

  17. Now you tell me that I’m a psychic … and a spokesperson for investors … is it your level of intelligence so low ? or my analysis ( based on understanding what is business , and what is not ) somehow overwhelming your text book knowledge . as for english subject , I’m glad you are competent enough to notice differs with yours … it is mine alone … and I’m quick to get what you didn’t say , nothing to dust up .

  18. Vusumuzi Sibiya on

    You can’t be very smart now if you can’t answer a simple question like – How much you’re going to put on the table for the bet???

    So I guess getting an amount from you is out of the question; let me give you a clue – you don’t have to use letters, the English is just going to confuse you…

    Just use the numbers

  19. Vusumuzi Sibiya on

    No go back and read carefully now… You’re the one who set out to bet and I asked you for an amount –

    I bet your English teacher must have said the same to you on many occasions –

    Go back and read carefully Leko

  20. I guess , English subject does excite you . Let me put a figure on the table for what’s get me interested … R1000.00 …now get to the point .

  21. Vusumuzi Sibiya on

    Well done!

    Now what do you suppose I’ll find when I Google FDI… Will it just have the abbreviation???

  22. I want you to tell me about SA’s current foreign direct investment , who owns what-when and how much ? who does attract those investors and how they go about acquiring such businesses … and how the junk status would affect them … further tell me how these rating agencies get involved in FDI
    IMPORTANTLY , how our government fared in managing such investments under Zuma administration compare with Mbeki’s …

  23. Vusumuzi Sibiya on

    How about you first answer the question that was asked of you…

    Now that you are going back and reading carefully with your copy of “English for Dummies” handy –

    Oh what the heck, I’ll just copy and paste to save us all the time;

    >>So exactly how much new FDI are we going to be seeing now that the irrelevant ratings agencies have boldly displayed their bias and downgraded SA to junk status???

    I hope your answer will be more impressive than your understanding of English.

  24. At least you can spell dummy with precision … your kind of question made it easier for me to understand how clueless you’re beyond abbreviations . what’s that ” New FDI ” ?

    # we will address English subject later .

  25. Vusumuzi Sibiya on

    So as I thought… A bright spark like you on FDI would be found with no answer; and to think that we’ve patiently been anticipating your FDI wisdom on this very first question that was asked.

  26. Forecast – Analysis or Opinion , surely I can express myself clearer , after we done with betting …

  27. Vusumuzi Sibiya on

    It would be a forcast and let’s have it being more accurate than one that would be from a weather report.

    There’s plenty of places to find opinion and analysis; so that’s not the question asked…

    My bad, I don’t have a copy of “English for Dummies” so apologies for any confusion caused in the question.

  28. Greg Mahlknecht on

    While it sucks it happened, I do agree with the downgrade and can understand why it happened. When the president of the country fires someone who has a track record of being a good finance minister, and installs someone with someone who has proven himself to be inept, and who right away says he’ll double down on “radical economic transformation” – policies that have both failed in their intention of empowering the black poor, and strangled growth – if I was working at these rating agencies, I’d also downgrade us!

    This wasn’t dictatorship or favouritism – Zuma earned us that Junk status fair and square.

    It’s obvious what Zuma is doing – appointing people loyal to him in every important position, with no thought to their skills to carry out their job – and this isn’t a local secret, everyone in the world that watches South Africa knows this.

    I also find it hilarious that the ANC people justify the appointments with “XYZ has experience in a ministerial role” – where all they’ve done in ministerial roles is fail miserably in their duties. That’s not experience. That’s reason for dismissal!

  29. Geewizz, you really still believe in that write off ANC of yours. Not only JZ, but clearly practically the whole organisation has become a write off, BER, beyond economical repair. It is only because the voters base is so easily and totally misled, historical reasons and just doesn’t know better, that they still have a sizeable support. Any well informed person has been very critical of the ruling party and is leaving them.
    JZ hates the well informed and educated blacks, because he knows they are his biggest opponents.

  30. Vusumuzi Sibiya on

    >>you really still believe in that write off “holy” ANC of yours.

    The ANC is not mine, it belongs to the people and when a person like Zuma makes the ANC his and hands over our struggle to his Gupta friends; it is our duty to take back our ANC –

    >>the whole organisation has become a write off, BER, beyond economical repair.

    I don’t believe that you’re sincerely concerned about our ANC being a write-off; but what you’re probably concerned about is the economy of the country and rightfully so;

    …the graph which Greg posted shows where we come from and it is under the same ANC that we have been able to ascend above the junk status that was inherited;

    …and it is thus more than possible that with visionary leadership we can ascend to even higher and achieve greater accomplishments together when we focus our efforts on building a Better SA for ALL our People.

  31. Predictions are in nature falsehood . I’m tired tonight cannot further elaborate .

  32. Greg Mahlknecht on

    What’s per-year outlook got to do with anything? You were specifically talking about the actual ratings. We were not downgraded until Zuma came along with his gravy train. There’s no need to speculate, when there’s actual data to examine.

  33. Hey , nothing actual about ratings , simply indicate doubts / certainty only . Check current negative status of England and Australia ratings and explain its true meanings .
    SA has been downgraded in the past , that’s a matter of fact !!

  34. Greg Mahlknecht on

    Actually, Fitch specifically said this latest downgrade was about policy uncertainty. And it’s blindingly obvious to anyone that that’s 100% true.

    SA was not downgraded in the years you mentioned. That’s a fact. I even posted the relevant graph! I’m not sure where you’re getting these 1998 and 2001 downgrades.

    USA ran out of money in 2011. That’s worth a downgrade.

  35. No , Man you simply quoting Mybroadband media source released 3 days ago comparing South Africa’s credit ratings per president ( topic ). It’s lazy research .
    I challenge you to double check Fitch SA 2001 standard and poor’s ratings . differs with Moodys . Source : Ieconomics .

    As for 1998 , I let facts speaks on its own . Attached . https://uploads.disquscdn.com/images/47d9720b7f3b860b0399f0b0dc9e7a3fe5f4a59b441b45c94151e50007cea68e.png https://uploads.disquscdn.com/images/91d3d9a3ac74ff1aa1461b6e36b67a29a4447d2bae36911975c66faac9963f03.png https://uploads.disquscdn.com/images/f0e81dbd7e912f42bd143dca8363d0b0e3c215495283e17985e78d8a0042de7b.png https://uploads.disquscdn.com/images/3959d9272aa3d6752629a3079270baabab1498f55b70c0ff63d81c82d942fb61.png

  36. Vusumuzi Sibiya on

    It would be really great if you answer the question because one shouldn’t embark on a course of radical economic transformation going into the future without a workable plan;

    …and that is something that definitely will entail having an ability to accurately predict/forecast rather than doing as Zimbabwe did because that’s certainly not the transformation we’re looking for.

    For people in Zimbabwe there was the option of going south across the border and that is not an option for us; unless you are having a Gupta luxury yacht awaiting for you in the oceans going south.

  37. Greg Mahlknecht on

    Um… I’m not sure what you’re getting at – your images support my point of view, not yours. Nothing there shows that we were downgraded in 1998 or 2001?

    The image I posted was the entire history of our ratings, since we got one after Apartheid fell, there’s not a mention of a president on the graph at all.

    It’s easy to put in division lines per-president and see:
    Mandela good
    Mbkei meh
    Zuma bad

  38. Do you even understand what downgrade / negative means ? what junk status is , is not ? what’s support you there ? or you’re illiterate in matters of economics .

  39. why even thinking about Zim-routine or Guptas in this case if SA’s policies are clear to you ? Problem that stalls SA’s economy is fear of taking actions , that .. my friend garantees to shrink the economy more than radical policies ( which in my view if are in harmony with current trends and not discriminating against the former garantees to bring thriving economy ).

  40. Greg Mahlknecht on

    I do. I’m not sure you do. Negative outlook is not the same as a downgrade, I think that’s where your misunderstanding is coming in.

  41. Vusumuzi Sibiya on

    I can’t see how the action of shooting oneself in the foot when embarking on the marathon task towards radical economic transformation is in anyway helpful;

    Surely, the best climate to advance the action to be taken is where SA is viewed as a favorable destination for investment and how does junk status serve to advance the action to be taken???

    We really need to stop finding excuses for defending the corruption that’s staring us in the face;

    The way to be triumphant is to beat those who oppose you at their game with the rules that apply.

    To do anything else has more potential for harm regardless of what little good interests may exist;

    …but the reshuffle was in the interest of the Guptas and there’s no denying that fact.

  42. Lowering status from moderate risk into high rusk is downgrading … all the time lowered status it’s a downgrade … so far SA is not into default status which is junk .

    Negative outlook means Downgrade .

  43. Greg Mahlknecht on

    OK, you do seem to be talking about the outlook. That’s not what everyone else is talking about. The outlook isn’t relevant when looking back and the ratings upgrades/downgrades have actually happened.

  44. Yes , downgrade happened on media ONLY , double check Fitch standard and poors last update 7/4/2017 . SA ratings as stable yet on the media and opposition’s interpretation is as if we’re on D status . Whilst in actual fact SA score is 56 though we should be up-there closer to 100 . Source : global economic indicator .
    The Noise and Misinterpretation speaks volumes of ignorance from the opposition .

  45. Greg Mahlknecht on

    Why are you still going on about the outlook? Forget about that… We’re on junk status (I double-checked fitchratings . com, we’re BB+) with a stable outlook. That means we’re stable on BB+ and Fitch doesn’t expect us to go to BB in the near future.

    “… as if we’re on default” – not sure what you mean by this, it’d be interesting to know what you think you’re saying.

    Desperation from opposition? What? Just because you don’t understand what’s going on, don’t get all uptight. Do you think anyone LIKES the fact that the cost of living will go up? Wow. Is that what you really think?

  46. I think we will never be on the same page … because I don’t take these rating agency’s analysis as gospel truth hence I say the rest of the world put SA score on 56 ( lower medium grade ) , backup by valid facts . Fitch jump into conclusion that because of uncertainty caused by change of finance minister therefore SA is a Non investment grade … speculative … what other facts to suggest his alarmism conclusion ?
    Moodys might differ as they delay updates for a 2months period … what would you read in their conflicting predictions ?

    Stable doesn’t mean stationed . reflect political atmosphere . Other than that nothing talks of SA of highly / extremely speculative or substantial risk . By default status , I mean in default with no prospects of recovery … the cost of living going likely to go up because of lack of domestic production and high inflation … in the main , it talks to overpricing which is what businesses takes advantage of over incompetent government ministries like finance , Pravin in particular . Fear of the new minister by business sector has to do with changing business’s complacency . nothing else besides losing . If majority , blacks in particular could be assisted by government policies to be productive means threat to traditional businesses in South Africa .
    Opposition’s focus is to divide People of South Africa than unite towards one goal , by dividing ANC and targeting Zuma is key for their selfish interest at the expense of the nation … if it wasn’t the case , Zuma is outgoing president in two-years time , why commit political suicide so late ? they’re taking advantage of business maneuvers to retain a clueless former minister . Pressing hard on panic buttons .

  47. Greg Mahlknecht on

    > I mean in default with no prospects of recovery

    Nobody but you has suggested that. Although with Zuma’s latest batch of failed apointees, prospects are indeed bleak.

    >Fitch jump into conclusion because of uncertainty caused by change of finance minister

    No they didn’t. Read their full reasoning for the downgrade. It makes a lot of sense.

    >what would you read in their conflicting predictions

    I wouldn’t. You’re the only one speculating here. These agencies give reasons for their actions. Speculating and guessing isn’t necessary.

    >retain a clueless former minister

    Gordhan clueless? Hah. You make me laugh. Gigiba’s the clueless one. He leaves a trail of failure in his wake. Name one position he’s been effective in.

    At this point in time, Zuma’s pretty much working full-time for the DA/EFF (I’ve been saying this for a while, but SACP echoed these sentiments today). He’s a vote winning machine for the opposition. By trying to get him out of power, the opposition is making their life harder, and putting the citizens of the country above their political prospects. With Zuma taking his wrecking ball to the ANC, one just has to sit back and let him lose the votes.

    >why commit political suicide so late

    For the good of the country. Your comment perfectly captures and confirms what everyone suspects of the ANC faithful – that this is the party of Zuma, he is their lord and master and can do no wrong in their eyes. Even Malema woke up – a few years ago he was willing to die for Zuma.

  48. What is junk status in your understanding ? , because to me it means default / no prospect of recovering in the near future . I cannot say Gigaba will fail or succeed , time will tell . But for Pravin , your dude dismally failed . Under his watch SA dropped standards . Pity … you don’t know me , nothing smells ANC in me but I cannot turn a blind eye or blindly go with the flow … Zuma must go for valid reasons as both him and Pravin are failures . I’m glad you trust Malema , I used to see him as becon of hope … not anymore !!

  49. Greg Mahlknecht on

    Wikipedia “Credit Ratings” and educate yourself. We’re BB+ right now. It’s funny up to now you’ve been arguing over something you admit you didn’t even know the meaning of!

    “Under his watch SA dropped standards” – how exactly? Google Gigiba, and you’ll find a trail of failure that he’s left. Gordhan has a fine track record of success, and is respected the world over by his peers.

    I certainly don’t trust Malema, he’s a vile racist. He wants to steal my land, and occasionally kill me. I was just illustrating that even the most staunch ANC defender has their limits with their corrupt leadership.

  50. I can tell you’re clueless about what these credit ratings serves , nothing actual but predictions over observed economic trends , policies , and politics in general . but the outlook of governments economic policies and conduct are . ratings are not only limited on the major three or two . Prove me wrong by facts .
    Pravin was tolerated but not highly respected , and the world conduct its businesses professionally … SA’s inability to grow or recover from stagnation shock happen under Pravin’s tenure . Up-to-date stacked up .

  51. Greg Mahlknecht on

    >I can tell you’re clueless about what these credit ratings serves

    Dude.. you don’t even know what they MEAN!

    > Prove me wrong by facts

    I did.

  52. I don’t often laugh out loud ALONE , I can tell you’re … dumbfounded … but then you’re enlightened !!

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