Political upheavals in South Africa pose a risk to its sovereign credit rating, ratings firm Standard & Poor’s said on Wednesday, a day after President Jacob Zuma survived an impeachment motion in parliament for ignoring the constitution.
S&P said last week’s constitutional court ruling that Zuma had breached the constitution by ignoring an order to repay some of the $16 million in state funds spent on renovating his home and the subsequent political fallout could divert government’s attention from implementing growth policies.
Zuma came through the impeachment move thanks to the African National Congress’s big majority in the 400-seat assembly.
“Recently we have seen focus shift to political issues in parliament and the Constitutional Court, and this could divert government’s attention from issues around policy implementation,” associate director for sovereign ratings at S&P Gardner Rusike said at a conference in Johannesburg.
The rand relinquished earlier gains against the dollar, turning weaker after S&P’s said weak economic growth remained a pressure point on South Africa’s credit rating.
The currency hit a session low of 15.2800 to the greenback, down 1.1 percent from Tuesday’s New York close of 15.1050.
S&P currently rates the debt of Africa’s most industrialised economy just one notch above sub investment grade, the same level as fellow ratings agency Fitch. Moody’s has it two notches above junk, but on review for a downgrade.
S&P’s said South Africa needed to grow at much quicker rate if hoped to avoid a downgrade, and that state firms reliant on government funds remained a risk to the country’s rating.
Last month, the central bank trimmed its 2016 growth forecast to 0.8 percent from the 1.5 percent it forecast in November, saying that household debt, electricity shortages and weak global growth were persistent negative influences.