EDITORIAL: Downgrades a warning of precipitous slide ahead
S&P’s particularly scathing report cited too much emphasis on redistribution at the expense of growth
Just like banks, ratings agencies make judgments on borrowers’ ability to pay the interest on their loans and ultimately repay these. That’s all they really do when they rate countries (sovereigns) such as SA, but since the ratings fundamentally affect the price and availability of those loans, what the ratings agencies say is a powerful discipline on the countries they rate. On Friday night, S&P Global Ratings exercised that discipline, telling SA, in effect, that it had fallen way behind the emerging-markets class when it came to economic growth and that there was no way it could fix its rapidly deteriorating public finances without risking further damage to growth. S&P’s verdict took its rating on domestic rand-denominated bonds to junk status, after it did the same to the hard-currency bonds in April. It comes after Fitch junked both ratings in April, after Pravin Gordhan was ousted as finance minister. Moody’s has been kinder to SA, giving it the benefit of the doubt even as gr...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.