Fitch may be next to slap South Africa with 'junk' rating

Fitch may be next to slap South Africa with 'junk' rating

Fitch may be next to slap South Africa with 'junk' rating

SA's banking index hit its biggest daily loss since December 2015 on Thursday, dragging the bourse down after S&P cut the credit ratings of major lenders following a sovereign downgrade.

The overwhelming message from experts is not to panic in the current turmoil, pay off debt while you can and cut costs, however small they may be.

JOHANNESBURG, April 6 South Africa's banking sector fell by almost three percent on Thursday after S&P cut the credit ratings of several major financial institutions following a sovereign downgrade.

South Africa's (P) Baa2 Senior Unsecured Shelf and MTN program ratings were also placed under review for downgrade, as was the (P) P-2 Senior Unsecured Short-Term rating. Although South Africa has low foreign currency-denominated debt, about one third of government's rand-denominated bonds is held by non-residents, implying higher yields and rollover risk exposure should investor confidence be undermined.

So far, only one of the six ratings - three for sovereign debt and three for local - from the major global ratings agencies has slipped into junk. South Africa's constitutional arrangements remain robust.

The rating agency however noted that the country' financial institutions have been resilient.

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Prior to joining S&P Global in 2012, Gardner worked as an Economist in Western Cape Government Fiscal Policy Division for three years and also taught undergraduate economics at Rhodes University for two years.

There are expectations that the country may approach global debt markets this year.

Rasethaba was the leader of the Azanian People's Organisation (Azapo) in the (then) Northern Province of South Africa. For countries with complex internal political structures and a lethargic fiscal policy response, it took a much longer time to shake off the effects of the downgrade - it took Colombia 12 years.

However, several aspects of the government's reform programme remain outstanding, particularly in completing the legislative and administrative framework governing the mining sector, product market competition, in the labour market, in relation to the development of the private sector, and in encouraging a more even distribution of wealth.

If a country gets downgraded into non-investment grade by both Moody's and S&P on its long-term domestic credit. The short- to medium-term impacts could prove painful.

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