The ‘die is cast’ for junk status downgrade - Manuel

Cape Town - Former Finance Minister Trevor Manuel on Thursday warned that a downgrade to junk was likely.

Political turmoil in South Africa, including a decision by prosecutors to charge Finance Minister Pravin Gordhan, has raised the risk of a downgrade.

MUST READ: S&P warns what's happening in SA more than just political noise

After months of investigations, prosecutors on Tuesday summoned Gordhan to appear in court on November 2 on charges of fraud over his approval of the early retirement and subsequent reappointment on a contract basis of a former colleague.

That resulted in “fruitless” expenditure of R1.1m, they said. They’re also probing allegations that Gordhan oversaw the establishment of an illicit investigation unit when he was commissioner of the South African Revenue Service. Gordhan says the charges are baseless and politically motivated.

S&P and Fitch Ratings both have South Africa’s credit rating at BBB- with a negative outlook, which is one notch above junk status. Moody's rating is slightly better at Baa2 with negative outlook. S&P is set to deliver its next ratings review on December 2.

Manuel, whose term as finance minister ended in 2009, said the decision to prosecute was reckless and a ratings downgrade had already been priced into South African assets.

“In many respects my sense is that the die is cast,” Manuel said in a speech in Johannesburg.

“When the country gets downgraded to below investment grade, the people who pay the price are the poor because there’s less money available to deliver public service.

“It’s people who are more dependent on the state for their very existence who actually pay the price of the carelessness of some.”

SA must stick to fiscal targets set in February budget - S&P

South Africa needs to stick to its fiscal targets set in the budget if February if it is to retain its investment grade credit rating, Standard & Poor’s (S&P) Global Ratings said on Thursday.

“What has changed in South Africa is that political tension, political turmoil has come to the fore,” Konrad Reuss, S&P’s managing director for Sub-Saharan Africa, said at the Thomson Reuters Africa conference in Cape Town on Thursday.

“I’m tempted to say that is a game changer compared to 10 years ago. We would be concerned if the current fiscal position is undermined. We want to see the minister and his team stick to the fiscal targets.”

Reuss said S&P would also take into account risks arising from South Africa’s lacklustre growth when making its assessment. The country faced significant spending pressures, the trend line of its debt was going in the wrong direction and state-owned companies posed a risk to the fiscus, he said.

Deputy Finance Minister Mcebisi Jonas will accompany President Jacob Zuma to the Brics summit in India this weekend along with six other cabinet ministers, the president’s office said in a statement on Thursday.

Read Fin24's top stories trending on Twitter:

ZAR/USD
16.84
(-0.10)
ZAR/GBP
21.28
(-0.36)
ZAR/EUR
19.04
(-0.27)
ZAR/AUD
11.71
(-0.06)
ZAR/JPY
0.16
(-0.58)
Gold
1804.82
(+0.07)
Silver
18.66
(+0.02)
Platinum
840.00
(+0.78)
Brent Crude
42.31
(-2.17)
Palladium
1961.00
(+0.36)
All Share
55440.30
(-0.62)
Top 40
51181.69
(-0.69)
Financial 15
10422.12
(+0.80)
Industrial 25
76313.17
(-1.44)
Resource 10
52502.29
(-0.16)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
I'm not really directly affected
18% - 1912 votes
I am taking a hit, but should be able to recover in the next year
23% - 2519 votes
My finances have been devastated
34% - 3746 votes
It's still too early to know what the full effect will be
25% - 2681 votes
Vote