SA heading for junk status

SA heading for junk status

South Africa seems to be heading firmly towards junk status, this comes after a second of the worlds largest rating agencies, Moody's, has reacted badly to Malusi Gigaba's medium-term policy statement.

Moody's has scheduled its next review on November 24.

Rating agency Fitch has already downgraded South Africa to Junk status issued a bleak statement last week while Standard & Poor's has not yet commented.

SA heading for junk status

READ ALSO: Cape Town’s first desalination plant scheduled to come online in February 2018 learned from that last week Fitch said that along with policy uncertainty and whether or not South Africa will pursue a nuclear programme had contributed to the negative outlook. Gigaba has already said no to nuclear but the appointment of David Mahlobo hints at nuclear being on the cards.

The dire economic picture "suggests that the change in direction of policymaking away from a focus on fiscal consolidation that we anticipated as a consequence of March's Cabinet reshuffle is underway and occurring faster than we had expected," Fitch reportedly said.

SA heading for junk status

Rating agencies may wait until the outcome of the December conference before deciding on South Africa's credit rating, but this is increasingly unlikely.

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Moody's said that the medium-term policy statement was the first in years to deviate away from fiscal consolidation.

"In our view, unless the government issues a credible fiscal consolidation plan in the February 2018 budget, debt sustainability is at risk," Moody's reportedly said.

SA heading for junk status

It seems more likely a case of when and not if South Africa will be downgraded completely to junk status.

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