More SA companies to downgrade – report

2012-11-27 06:29

More South African companies were likely to face downgrades this year, according to a report.

Rating agency Standard and Poor (S&P) warned that the “uncertain” global and domestic environment and the effects of the recent widespread strikes would be the cause for the declines, Business Day reported today.

Rating agencies have already downgraded several large companies, including parastatals Eskom and Transnet.

“It’s the uncertainty of the political environment which is weighing heavily on companies ... they are somewhat paralysed by the inertia in government policies and are sitting on cash reserves waiting for more clarity on political developments,” Meganomics economist Colen Garrow was quoted as saying.

He said further reductions would make it more expensive for businesses to borrow money to help to finance government’s expansion programmes.

S&P told Business Day that investors were anticipating the outcomes of the ANC’s December elective conference to get direction on hotly debated issues such as nationalisation in the mining sector.

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