Ratings agency Fitch downgraded South Africa’s credit rating to sub-investment grade on Friday, saying a recent cabinet reshuffle that saw respected finance minister dismissed will likely result in a change in economic policy direction.
Fitch changed its outlook for South Africa to stable from negative. Fitch’s downgrade to BB+ from BB- on both foreign and local currency debt follows that of S&P Global Ratings which also cut South African foreign debt to “junk” status.
Downgrades to junk from the two agencies could see South Africa drop out of some widely used global bond indexes and force international funds which track them or which are prohibited from holding sub-investment grade securities to sell.
Fitch’s move will almost certainly lead to a rise in government debt-servicing costs, which will mean less money for critical services such as housing, education and sanitation, which could incite even more protests over service delivery that have already rocked towns across the country.
Source: Reuters
