HILARY JOFFE: There's something worse than junk status - and that's deep junk
A Moody's downgrade would trigger capital outflows because international fund managers who can own only investment-grade bonds would be forced to sell
Does it matter if SA is just junk, or even more junky? Ratings agency Moody's recent decision to put SA on negative outlook caused consternation. But S&P Global's decision to do the same caused hardly a murmur - because S&P already has SA at sub-investment grade "junk" status, as does rival Fitch, whereas Moody's has kept us at investment grade. In S&P's case, SA's foreign currency rating - the rating on our dollar-, euro- or yen-denominated debt - is already two notches into "junk", or speculative grade. A further downgrade would take us down to BB- (double B minus). It would put us on par with countries such as Brazil, Bolivia and Bangladesh, as well as Greece and Guatemala.
In a way, that confirms that SA is just another emerging market on the S&P scale - not a weak one (Zambia is rated CCC), but not one of the strong ones such as India or Mexico, either. At Moody's, too, emerging markets are typically junk - a recent report showed just 32 of the 106 emerging-market soverei...