As expected S&P cut SA’s local currency rating to subinvestment grade on Friday, but raised its outlook to stable from negative.

Many economists anticipated that SA was at risk of losing these remaining investment grade ratings after a lacklustre medium-term budget policy statement.

Standard and Poor

In June, S&P affirmed SA’s long-term foreign currency sovereign credit rating at a sub-investment grade rating of BB+, and retained its negative outlook on all the long term ratings and affirmed SA’s long-term local currency sovereign credit rating at an investment-grade rating of “BBB-”, and also retained its negative outlook.

In line with expectations the ratings agency lowered SA’s long-term local currency rating to BB+ from BBB-Both Moody’s and S&P had SA’s debt on the last rung of investment grade for its local currency long-term sovereign debt (and also foreign currency from Moody’s).


S&P placed SA’s foreign government bonds at subinvestment grade in April following President Jacob Zuma’s surprise cabinet reshuffle.

Within minutes of the announcement the rand had plunged from R13.88 to the dollar to R14.15.

“Weak GDP growth has led to further deterioration of SA’s public finances beyond our previous expectations,” S&P said in its ratings action, citing the weakening economic and fiscal trajectory.

“We think the government will attempt to introduce offsetting measures in an effort to improve budgetary outcomes, but these may not be strong enough to stabilise public finances, and may weaken economic growth further in the near term.”

S&P also lowered its long-term foreign currency rating to BB with a stable outlook.

S&P added, however, that a key credit strength was the country’s monetary flexibility as well as an improving external position.

The ratings agency also noted that politics had overshadowed policy making, despite the weakening economic conditions.

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