Judgement day for South Africa’s credit ranking as junk status looms large

Moody’s and S&P, the world’s top credit agencies, will pass judgement on South Africa’s rand-priced debt today—accounting for some 80% of the country’s public debt.

A downgrade by both agencies would see indexes with minimum investment-grade rules forced to offload some $10 billion worth of bonds, along with a steep devaluation of the rand.

Corruption and political jockeying between President Zuma and former Finance Minister Pravin Gordhan has pushed business confidence to a 32-year low, leading the country into its second recession in a decade.

But with Zuma’s successor as party leader set to be chosen in mid-December and the 2018 budget due in February, credit agencies are likely to adopt a wait-and-see approach today. This would mean placing South Africa’s rand-denominated debt on review, leaving 90 days before an official downgrade is applied.

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