South Africa’s President Zuma Sacked Finance Minister Gordan: Market Reactions

LAGOS (Capital Markets in Africa) – South African CEOs see severe consequences after the cabinet reshuffle. South African President Jacob Zuma’s decision to dismiss Finance Minister Pravin Gordhan has severe consequences for the economy and is a setback to the work done to avoid a credit rating downgrade, a group of business leaders said on Friday. “This decision and the manner in which it was taken is likely to cause severe damage to an economy that is in dire need of growth and jobs,” said the CEO Initiative, an organization that includes the chief executives of Nedbank, Standard Bank, the JSE, and Investec.

South Africa CDS jump 24 basis points after Finance Minister exits. The cost of insuring South African
government debt against default hit the highest level in 15 weeks on Friday 31st March 2016, after President Jacob Zuma sacked his Finance Minister Pravin Gordhan as part of a wider cabinet reshuffle. Five-year credit default swaps (CDS) jumped 24 basis points to 223 bps from Thursday’s close of 199 bps, according to data provider IHS Markit.

Fitch says South Africa’s cabinet reshuffle heightens political risk. Fitch said on Friday South Africa’s
President Jacob Zuma’s cabinet shake-up heightened political risk and signaled policy change, an outcome that risks the country’s sovereign investment-grade credit ratings. Zuma’s midnight sacking of Pravin Gordhan as finance minister shook South African markets, undermining his authority and threatening to split the African National Congress (ANC) that has governed since the end of apartheid.

South Africa local debt rating downgrade could spark $10 bln outflows. The sacking of South Africa’s respected finance minister leaves the country risking a two-notch downgrade on its local currency credit rating, which would see it ejected from a key bond index and cause up to $10 billion in outflows, UBS said on Friday. Investment outflows at that level would effectively double South Africa’s current account gap, UBS said.

South Africa’s credit rating downgraded to junk by S&P.S&P Global Ratings downgraded South Africa’s
sovereign credit rating to BB+ from BBB- grade on Monday, saying the recent firing of its internationally
respected finance minister posed a risk fiscal policy. The downgrade reflects our view that the divisions in the ANC-led government that have led to changes in the executive leadership, including the finance minister, have put policy continuity at risk,” S&P said in a statement.

Moody’s pushes back South Africa credit rating decision. Moody’s said on Tuesday it will not issue a
sovereign credit rating decision on South Africa this Friday, as previously planned, but will do so after a
review that could take 30 to 90 days. Moody’s announced on Monday that it had placed South Africa on
a review for a downgrade after a cabinet reshuffle that saw a respected former finance minister dismissed from his post. Moody’s currently has South Africa’s sovereign at two notches above non-investment grade at Baa2.

Rand tumbles after S&P downgrades South Africa to “junk. South Africa’s rand fell more than 2 percent on Monday to its weakest in almost three months after S&P Global Ratings cut the country’s credit score to sub-investment grade with a negative outlook after last week’s dismissal of the South African finance minister. Stocks were higher on the day, led by gold shares, as demand for the safe-haven asset rose globally in response to worries U.S. President Donald Trump will use trade to pressure China in security talks.

Standard Bank says South African lenders can withstand downgrades. South African banks are financially sound and well-positioned to withstand the impact of sovereign credit rating downgrades, Standard Bank, the country’s second largest lender by value, said on Tuesday. Rating agency S&P cut South Africa’s credit rating to junk status on Monday, saying the dismissal by President Jacob Zuma of a respected finance minister heralded a damaging policy shift.

Nedbank in “good shape” to deal with South Africa credit downgrade: South Africa’s No.4 bank by value Nedbank said on Tuesday it was in good shape and well-prepared to deal with the volatility and pressure of sovereign rating downgrades. S&P cut South Africa’s credit rating to junk status on Monday, saying the dismissal by Zuma of a respected finance minister heralded a damaging policy shift.  

South Africa must work harder to grow economy after S&P downgrade, South Africa’s new Finance Minister Malusi Gigaba said on Tuesday. Gigaba said South Africa’s rand-denominated debt was still rated as investment grade and that the government’s fiscal policy remained unchanged despite the switch in finance ministers following the reshuffle last week. S&P cut the country’s credit rating to BB+ with a negative outlook from BBB- in an unscheduled review, saying the dismissal of respected Pravin Gordhan as finance minister raised the risk a damaging policy shift.

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