Ratings agency Standard and Poors (S&P) has maintained its assesment of South Africa’s sovereign credit rating at BBB- one level above junk status, but downgraded long- term local currency by one notch to BBB, while maintaining a negative outlook.
South Africa retains investment grade from all three rating agencies, but S&P decision to lower local ccy rating to 'BBB' is a warning
— Razia Khan (@raziakkhan) December 2, 2016
Following the news, the rand gained more than 1.5 % against the U.S dollar.
S&P however noted that political events in the country have distracted growth- enhancing reforms.
“Ongoing continued tension and the potential for event risk could weigh on investor confidence and exchange rates, and potentially affect government policy direction,” S&P added.
President Jacob Zuma has been rocked by a series of corruption scandals in recent months with calls for him to step down getting louder.
South Africa’s National Treasury welcomed the decision adding that by working together, South Africa can achieve remarkable outcomes.
Analysts say that keeping foreign currency rating at investment grade may boost investor sentiment. Last week, Fitch also retained its rating on South Africa’s debt but cut its outlook from stable to negative.