Close Menu
TechCentralTechCentral

    Subscribe to the newsletter

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    Facebook X (Twitter) YouTube LinkedIn
    WhatsApp Facebook X (Twitter) LinkedIn YouTube
    TechCentralTechCentral
    • News

      Britehouse breaks free from NTT Data

      10 July 2025

      Samsung’s bet on folding phones faces major test

      10 July 2025

      OpenAI to launch web browser in direct challenge to Google Chrome

      10 July 2025

      The satellite broadband operators taking on Starlink

      9 July 2025

      Yaccarino out: Musk’s handpicked CEO quits X suddenly

      9 July 2025
    • World

      Grok 4 arrives with bold claims and fresh controversy

      10 July 2025

      Cupertino vs Brussels: Apple challenges Big Tech crackdown

      7 July 2025

      Grammarly acquires e-mail start-up Superhuman

      1 July 2025

      Apple considers ditching its own AI in Siri overhaul

      1 July 2025

      Jony Ive’s first AI gadget could be … a pen

      30 June 2025
    • In-depth

      Siemens is battling Big Tech for AI supremacy in factories

      24 June 2025

      The algorithm will sing now: why musicians should be worried about AI

      20 June 2025

      Meta bets $72-billion on AI – and investors love it

      17 June 2025

      MultiChoice may unbundle SuperSport from DStv

      12 June 2025

      Grok promised bias-free chat. Then came the edits

      2 June 2025
    • TCS

      TCS | Connecting Saffas – Renier Lombard on The Lekker Network

      7 July 2025

      TechCentral Nexus S0E4: Takealot’s big Post Office jobs plan

      4 July 2025

      TCS | Tech, townships and tenacity: Spar’s plan to win with Spar2U

      3 July 2025

      TCS+ | First Distribution on the latest and greatest cloud technologies

      27 June 2025

      TCS+ | First Distribution on data governance in hybrid cloud environments

      27 June 2025
    • Opinion

      In defence of equity alternatives for BEE

      30 June 2025

      E-commerce in ICT distribution: enabler or disruptor?

      30 June 2025

      South Africa pioneered drone laws a decade ago – now it must catch up

      17 June 2025

      AI and the future of ICT distribution

      16 June 2025

      Singapore soared – why can’t we? Lessons South Africa refuses to learn

      13 June 2025
    • Company Hubs
      • Africa Data Centres
      • AfriGIS
      • Altron Digital Business
      • Altron Document Solutions
      • Altron Group
      • Arctic Wolf
      • AvertITD
      • Braintree
      • CallMiner
      • CambriLearn
      • CYBER1 Solutions
      • Digicloud Africa
      • Digimune
      • Domains.co.za
      • ESET
      • Euphoria Telecom
      • Incredible Business
      • iONLINE
      • Iris Network Systems
      • LSD Open
      • NEC XON
      • Network Platforms
      • Next DLP
      • Ovations
      • Paracon
      • Paratus
      • Q-KON
      • SevenC
      • SkyWire
      • Solid8 Technologies
      • Telit Cinterion
      • Tenable
      • Vertiv
      • Videri Digital
      • Wipro
      • Workday
    • Sections
      • AI and machine learning
      • Banking
      • Broadcasting and Media
      • Cloud services
      • Contact centres and CX
      • Cryptocurrencies
      • Education and skills
      • Electronics and hardware
      • Energy and sustainability
      • Enterprise software
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Lifestyle
      • Motoring
      • Public sector
      • Retail and e-commerce
      • Science
      • SMEs and start-ups
      • Social media
      • Talent and leadership
      • Telecoms
    • Events
    • Advertise
    TechCentralTechCentral
    Home » Current affairs » SA junk rating seen as inevitable

    SA junk rating seen as inevitable

    By Agency Staff18 November 2016
    Twitter LinkedIn Facebook WhatsApp Email Telegram Copy Link
    News Alerts
    WhatsApp

    south-africa-640

    Should South Africa avoid having its credit rating cut to junk in the next two weeks, it could just be staving off the inevitable.

    More than half of 12 economists surveyed by Bloomberg said S&P Global Ratings will strip the nation of its investment-level rating. The median probability of South Africa retaining its current assessment in December is 45%, falling to only 20% in 2017, the survey shows.

    Africa’s most industrialised economy faces a cut to junk on its foreign currency credit rating as output is forecast to expand at the slowest pace this year since a 2009 recession, delaying the government’s plans to narrow the shortfall on the budget and rein in debt.

    While the economic growth outlook has improved marginally and a similar Bloomberg poll six months ago showed 12 of 13 economists said the nation’s credit rating will be cut to junk by the end of the year, political turmoil, including now-dropped fraud charges against finance minister Pravin Gordhan, has overshadowed some the government’s efforts to boost investor and business confidence.

    “I don’t think it’s high enough on the priority list — that we are seeing enough being done,” Christie Viljoen, an economist at KPMG in Cape Town, said on Thursday by phone. “It might be enough at the moment to avoid an immediate downgrade in December, but if it is avoided in December, it’s going to happen next year.”

    S&P is scheduled to announce its assessment, which is at the lowest investment grade and has a negative outlook, on 2 December and Moody’s Investors Service will publish the review of its rating, currently one level higher than S&P’s, on 25 November.

    Officials from Fitch Ratings, which has a stable outlook on its BBB- rating, visited South Africa this week and are concerned about the nation’s ability to stick to its fiscal targets and about the lack of economic growth, according to deputy finance minister Mcebisi Jonas. Fitch hasn’t set a date for its assessment.

    “We will be able to maintain the current expenditure ceiling, we think we will, and I dare say, we convinced them we can,” Jonas told reporters in Johannesburg on Thursday. “My sense is that there was general acceptance of our constraints and the good work we are doing.”

    Gordhan has been leading efforts to avoid a downgrade to junk with meetings between the government, business and labour and by talking to foreign investors. However, the standoff between him and President Jacob Zuma over control of the treasury and delays in passing new mining and anti-money laundering laws and overhauling employment legislation have fueled perceptions of political turmoil and policy uncertainty that S&P and Fitch warned against in June when they left their ratings unchanged.

    “We aren’t deteriorating, we are just moving sideways at the bottom,” Thabi Leoka, an economist at Argon Asset Management in Johannesburg, said by phone. “The political noise is a problem and it’s the biggest risk, I even think that it’s a bigger risk than growth.”

    A cut by S&P would move the company’s assessment of the nation’s creditworthiness to below investment grade for the first time in 16 years and put South Africa in line with Russia and Indonesia. Investors already consider South Africa more risky than Russia. The cost of insuring against non-payment of debt for five years using credit default swaps is 26 basis points higher than for Russia.

    Still, a cut to junk on the foreign currency rating may not lead to significant forced bond selling by foreign investors.

    South Africa’s local currency ratings, which are usually referenced for inclusion in global benchmark indexes such as Citigroup’s World Government Bond Index, are several notches above junk. However, a foreign currency downgrade may hurt sentiment and add to woes for the rand in a year of domestic political turmoil and emerging market uncertainty fueled by Brexit and the election of Donald Trump as US president.

    The currency weakened 0,3% to R14,47/US$ as of 6.51am in Johannesburg on Friday. Yields on rand-denominated government bonds due in December 2026 rose two basis points to 9,02%.

    “While S&P is likely to remain quite bearish and quite negative on South Africa, there is sufficient scope for them to keep our rating at a BBB- level,” Mohammed Nalla, head of strategic research at Nedbank in Johannesburg, said by phone. “Potentially this buys us another six months worth of time. It doesn’t mean we are out of the woods.”  — (c) 2016 Bloomberg LP



    Subscribe to TechCentral Subscribe to TechCentral
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email Copy Link
    Previous ArticleAirbnb moves into full-service travel
    Next Article China’s tech sector looks to profit from Trump

    Related Posts

    AI in project management: a new era of efficiency and transformation

    10 July 2025

    Britehouse breaks free from NTT Data

    10 July 2025

    Grok 4 arrives with bold claims and fresh controversy

    10 July 2025
    Company News

    AI in project management: a new era of efficiency and transformation

    10 July 2025

    Samsung unfolds the future with thinnest, lightest Galaxy Z Fold yet

    9 July 2025

    Huawei supercharges South African SMEs with over 20 new eKit products

    9 July 2025
    Opinion

    In defence of equity alternatives for BEE

    30 June 2025

    E-commerce in ICT distribution: enabler or disruptor?

    30 June 2025

    South Africa pioneered drone laws a decade ago – now it must catch up

    17 June 2025

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2025 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.