Not to be outdone, Fitch Ratings announced on Friday that it had downgraded SA’s credit rating to “junk” status. Last week S&P announced that they had downgraded SA’s sovereign credit rating.
Despite repeated messages from President Jacob Zuma and Finance Minister Malusi Gigaba that there would be no fiscal and monetary policy change, it was not good enough for Fitch, who said that former Finance Minister Pravin Gordhan’s sacking would be bad for the country.
Commentators have been analysing SA’s downgrade by S&P since it happened with many arguing that the ratings agencies are irrelevant and represent the interests of capital and not the poor. Others have argued that this would be the beginning of very difficult times for SA. Those who support the President believe that it is a price the country needs to pay in order to reach the goal of radical economic transformation. More still have called for a Brics ratings agency to be formed as a matter of urgency.
S&P and Moody’s – who are yet to announce their decision after saying they need 30 to 90 days, but are still two notches above junk – have come under fire in SA for fines they have had to pay, in essence admitting to fraud related to ratings they delivered leading up to the global credit crunch in 2008.
Fitch said in a statement that the recent cabinet reshuffle “will weaken standards of governance and public finances”. The agency named the firing as Gordhan and his deputy Mcebisi Jonas as key to its decision, saying it is likely to result in “a change in the direction of economic policy”.
“The reshuffle is likely to undermine, if not reverse, progress in SOE governance, raising the risk that SOE debt could migrate onto the government’s balance sheet,” Fitch added.
The much-spoken about nuclear deal was also in the agency’s spotlight. “The Treasury under its previous leadership had said that Eskom could not absorb the nuclear programme with its current approved guarantees, so the Treasury will likely have to substantially increase guarantees to Eskom.