South African investors want the ruling African National Congress to explain in detail what the &#8220;radical economic transformation&#8221; it has pledged in recent speeches means, Finance Minister Malusi Gigaba said on Wednesday.
President Jacob Zuma has said he will redistribute wealth in the economy &#8211; still largely held by a white minority &#8211; to poor black people, a call echoed by Gigaba since he was named finance minister in a shock cabinet reshuffle last month.
However, there were few concrete policies on how this will be achieved, and Zuma&#8217;s transformation push has been criticised by opponents who say it echos populist promises made by the ruling party since the end of apartheid in 1994.&#8221;
&#8220;The sense from the investors is we need to explain in detail what we mean by radical economic transformation &#8230; we don&#8217;t want to create a disjuncture between growth and development,&#8221; Gigaba said after speaking to local investors at the Development Bank of South Africa.
Last week Fitch downgraded South Africa&#8217;s foreign and local currency debt to speculative grade, while S&amp;P Global Ratings cut the hard currency borrowing to &#8220;junk&#8221;.
Both cited likely changes in economic policy after respected finance minister Pravin Gordhan was fired, a move that rattled markets and sparked opposition protests against Zuma. [nL8N1HF20O]
Gigaba also said Treasury is committed to fiscal consolidation plans outlined in the 2017 budget by his predecessor Gordhan after S&amp;P and Fitch downgraded the country.
Gigaba said the Treasury aims to stabilise the government&#8217;s net debt over the next three years at 50 percent of gross domestic production (GDP). It now stands at 45.5 percent and projected to reach 48.1 percent in 2019.
&#8220;To accomplish this we are tightly controlling expenditure,&#8221; Gigaba said. &#8220;Fiscal sustainability is a prerequisite for inclusive development &#8230; we are therefore committed to the fiscal consolidation plans as outlined in the February budget.&#8221;
With unemployment at a near record, the ANC is under increasing pressure to address gaping inequality that persists 23 years after the end of white-minority rule.
Black people make up 80 percent of the population, yet the lion&#8217;s share of the economy in terms of ownership of land and companies remains in the hands of white people, who make up about 8 percent of the population.
Gigaba reiterated that South Africa&#8217;s nuclear-expansion plan will be implemented &#8220;at a pace and scale that the country can afford&#8221; in brief remarks to reporters. &#8220;Any procurement of nuclear energy will follow due process,&#8221; he said.
Critics of the expansion plan estimated to cost 1 trillion rand ($73 billion), say Treasury can ill afford the project.
&nbsp;
(Writing by Nqobile Dludla and James Macharia; Editing by Toby Chopra)
&nbsp;

Investors want ANC to explain “radical economic transformation”: Gigaba

By Tiisetso Motsoeneng
Barclays&#8217; plan to sell its African business and pull out of the continent are being hindered by South Africa&#8217;s political upheaval and credit-rating downgrades, according to banking sources and fund managers.
The British bank gave itself 2-3 years to sell its controlling stake in Johannesburg-based Barclays Africa when it announced the plan in early 2016, and sold 12 percent last May in an &#8220;accelerated bookbuild&#8221; &#8211; a share sale held over a short period of time.
It had been planning another accelerated bookbuild in the last two weeks but pushed it back because of concerns over investor appetite due to political and economic uncertainty in South Africa, according to a banking source familiar with the plans.
The source, who asked not to be named as they are not authorised to speak publicly, did not say when the deal might now take place.
A spokesman for Barclays in London declined to comment.
South Africa has been mired in business uncertainty since late last year when the ruling African National Congress (ANC) pledged to radically transform the economy following losses in local elections that were partly caused by anger over deep inequality that persists more than two decades after apartheid.
It said it would redistribute the wealth of the country to the black majority, but has not outlined how it plans to do so.
Investor unease increased significantly two weeks ago with the sacking of respected finance minister Pravin Gordhan which led to S&amp;P Global Ratings cutting the credit rating of South Africa and its banks to junk.
Fitch also pushed Pretoria&#8217;s debt into junk territory and is expected to also downgrade local banks in the coming days because their large exposure to sovereign debt closely links their credit profile to that of the government.
The downgrades have heightened the risk of a prolonged economic stagnation and rattled investor confidence in banks, whose performance is closely linked to the economy, wiping out more than 132 billion rand ($9.5 billion) from their market value in two weeks.
The pool of potential buyers to which Barclays&#8217; can sell shares in its African business to is also shrinking, according to bankers, because the mandates of some institutional investors, including some pension funds, do not allow them to hold an asset that&#8217;s sliding on credit ratings.
<blockquote>&#8220;Barclays Plc have to make a tough call – go ahead and sell Barclays Africa at a low enough price that will attract investors or wait, possibly a few years, until the situation has stabilised,&#8221; said Kokkie Kooyman, portfolio manager at Dekker Capital in Cape Town.</blockquote>
&#8216;PAYING PRICE&#8217;
The British bank said early last year that it planned to reduce its 62 percent stake in its African business to below 20 percent by 2019 as part of its plan to exit Africa to focus on the United States and Britain.
As well as hindering its global strategy, delays in the sale timetable could throw up regulatory problems.
Barclays is partly relying on funds raised from the stake sale to meet capital requirements that were identified as a concern by the Bank of England in a November &#8220;stress test&#8221; aimed at gauging its ability to withstand financial shocks.
The lender faces the annual test again late this year, and the British regulator could ask it to submit plans to raise extra capital if it has not met the requirements.
Barclays is increasingly looking at selling its remaining 50 percent stake in chunks because it is struggling to find one strategic buyer that will satisfy South African regulators, sources have previously said.
Barclays Africa earns more than 80 percent of its revenue in South Africa, but also operates in nine other including Kenya, Ghana, Botswana and Mozambique.
It has been hit hard by the economic uncertainty and credit downgrades in South Africa, along with domestic peers Standard Bank, Nedbank and FirstRand. They are heavily dependent on wholesale funding sources such as bonds, whose costs have surged following the downgrades, and exposed to the effects of economic problems such as rising unemployment.
South Africa&#8217;s &#8220;top four&#8221; banks have shed between 7 and 13 percent over the past two weeks.
Faced with possibility of losing more supporters in the 2019 national elections, the ANC party has pledged to overhaul the economy, with the central plank being the redistribution of wealth, but has not disclosed details of its plans.
The policy is aimed at winning back core voters in a country where black people make up 80 percent of the 54 million population, yet the lion&#8217;s share of the economy in terms of ownership of land and companies remains in the hands of white people, who account for around 8 percent of the population.
<blockquote>&#8220;Banks are paying the price for political uncertainty that we&#8217;ve seen in the country over the past two weeks,&#8221; said Ron Klipin, a fund manager at Cratos Capital in Johannesburg.
&#8220;As an investor, when you hear words like &#8216;radical economic transformation&#8217;, it creates some uncertainty in terms of the economic policy, in terms of further downgrades and the cost of funding for banks.&#8221;</blockquote>
($1 = 13.8876 rand)
(Additional reporting by Lawrence White in London; Editing by Pravin Char)

South African tumult hinders Barclays’ exit from continent

<div class="storify"><iframe loading="lazy" src="//storify.com/cnbcafrica/live-oppositionmarch/embed?border=false" width="100%" height="750" frameborder="no"></iframe><script src="//storify.com/cnbcafrica/live-oppositionmarch.js?border=false"></script><noscript>[<a href="//storify.com/cnbcafrica/live-oppositionmarch" target="_blank">View the story &#8220;LIVE: #OppositionMarch protesting for SA President Zuma to step down&#8221; on Storify</a>]</noscript></div>

LIVE: National #OppositionMarch protest for SA President Zuma to step down

South Africa is among a plethora of countries on the continent whose long-term foreign currency credit rating is <a href="http://cnbc.africa/news/southern-africa/2017/04/03/south-africa-long-term-foreign-currency-rating-cut-bb-political-institutional-uncertainty-outlook-negative/">rated junk</a> by S&amp;P Global Ratings whilst Botswana is the only country with a very strong investment grade. According to the table below, the majority of country’s on the continent rated by the organisation are rated at junk making the cost of borrowing excessive. S&amp;P’s ratings express its opinion about the ability and willingness of a government, to meet its financial obligations in full and on time.
The agency states that “credit ratings can also speak to the credit quality of an individual debt issue, such as a corporate or municipal bond, and the relative likelihood that the issue may default”.
S&amp;P describes those with an:
<ul>
<li>A investment grade as “having a very strong capacity to meet their financial commitments but somewhat susceptible to adverse economic conditions and changes in circumstances”.</li>
<li>BBB – adequate capacity to meet financial commitments, but more subject to adverse economic conditions.</li>
<li>BB speculative grade &#8211; less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.</li>
<li>B speculative grade &#8211; more vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.</li>
<li>D – speculative grade, payment default on a financial commitment or breach of an imputed promise, also used when a bankruptcy petition has been filed or similar action taken.</li>
</ul>
<table width=620>
<tbody>
<tr>
<td width="163">Country</td>
<td width="67">Rating</td>
<td width="63">Outlook</td>
<td width="75">Date</td>
</tr>
<tr>
<td width="163"> Algeria</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Angola</td>
<td width="67">B</td>
<td width="63">Negative</td>
<td width="75">2016/08/12</td>
</tr>
<tr>
<td width="163"> Benin</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75">2013/11/01</td>
</tr>
<tr>
<td width="163"> Botswana</td>
<td width="67">A-</td>
<td width="63">Negative</td>
<td width="75">2016/04/29</td>
</tr>
<tr>
<td width="163"> Burkina Faso</td>
<td width="67">B-</td>
<td width="63">Positive</td>
<td width="75">2016/05/27</td>
</tr>
<tr>
<td width="163"> Burundi</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Cameroon</td>
<td width="67">B</td>
<td width="63">Stable</td>
<td width="75">2012/02/20</td>
</tr>
<tr>
<td width="163"> Central African Republic</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Chad</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Congo, D. R.</td>
<td width="67">B-</td>
<td width="63">Negative</td>
<td width="75">2016/02/05</td>
</tr>
<tr>
<td width="163"> Congo, Republic</td>
<td width="67">B-</td>
<td width="63">Stable</td>
<td width="75">2016/08/09</td>
</tr>
<tr>
<td width="163"> Djibouti</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Egypt</td>
<td width="67">B-</td>
<td width="63">Stable</td>
<td width="75">2016/11/11</td>
</tr>
<tr>
<td width="163"> Equatorial Guinea</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Eritrea</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Ethiopia</td>
<td width="67">B</td>
<td width="63">Stable</td>
<td width="75">2014/05/09</td>
</tr>
<tr>
<td width="163"> Gambia</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Ghana</td>
<td width="67">B-</td>
<td width="63">Stable</td>
<td width="75">2014/10/24</td>
</tr>
<tr>
<td width="163"> Guinea</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Guinea-Bissau</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Kenya</td>
<td width="67">B+/B</td>
<td width="63">Stable</td>
<td width="75">2017/04/07</td>
</tr>
<tr>
<td width="163"> Liberia</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Libya</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75">2011/03/10</td>
</tr>
<tr>
<td width="163"> Madagascar</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75">2009/05/11</td>
</tr>
<tr>
<td width="163"> Malawi</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Mali</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75">2008/07/03</td>
</tr>
<tr>
<td width="163"> Mauritius</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Morocco</td>
<td width="67">BBB-</td>
<td width="63">Stable</td>
<td width="75">2014/05/16</td>
</tr>
<tr>
<td width="163"> Mozambique</td>
<td width="67">SD</td>
<td width="63"></td>
<td width="75">2017/04/06</td>
</tr>
<tr>
<td width="163"> Namibia</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Niger</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Nigeria</td>
<td width="67">B</td>
<td width="63">Stable</td>
<td width="75">2016/09/16</td>
</tr>
<tr>
<td width="163"> Rwanda</td>
<td width="67">B</td>
<td width="63">Stable</td>
<td width="75">2016/09/09</td>
</tr>
<tr>
<td width="163"> São Tomé and Príncipe</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Senegal</td>
<td width="67">B+</td>
<td width="63">Stable</td>
<td width="75">2013/07/05</td>
</tr>
<tr>
<td width="163"> Seychelles</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75">2009/08/17</td>
</tr>
<tr>
<td width="163"> Sierra Leone</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Somalia</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> South Africa</td>
<td width="67">BB+</td>
<td width="63">Negative</td>
<td width="75">2017/04/03</td>
</tr>
<tr>
<td width="163"> South Sudan</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Sudan</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Swaziland</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Tanzania</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Togo</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
<tr>
<td width="163"> Tunisia</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75">2013/12/18</td>
</tr>
<tr>
<td width="163"> Uganda</td>
<td width="67">B</td>
<td width="63">Stable</td>
<td width="75">2014/01/17</td>
</tr>
<tr>
<td width="163"> Zambia</td>
<td width="67">B</td>
<td width="63">Negative</td>
<td width="75">2016/03/18</td>
</tr>
<tr>
<td width="163"> Zimbabwe</td>
<td width="67">Not rated</td>
<td width="63"></td>
<td width="75"></td>
</tr>
</tbody>
</table>
Source: Wikipedia 
&nbsp;

SA is not alone, Africa has a plethora of countries that have junk status, here’s the list…

Fitch Ratings-Hong Kong-07 April 2017: Fitch Ratings has downgraded South Africa&#8217;s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to &#8216;BB+&#8217; from &#8216;BBB-&#8216;. The Outlooks are Stable.
The issue ratings on South Africa&#8217;s senior unsecured foreign- and local-currency bonds have been downgraded to &#8216;BB+&#8217; from &#8216;BBB-&#8216;. The rating on the sukuk trust certificates issued by RSA Sukuk No. 1 Trust has also been downgraded to &#8216;BB+&#8217; from &#8216;BBB-&#8216;, in line with South Africa&#8217;s Long-Term Foreign-Currency IDR.
The Short-Term Foreign-and Local-Currency IDRs and the rating on the short-term local-currency securities have been downgraded to &#8216;B&#8217; from &#8216;F3&#8217;. The Country Ceiling has been revised down to &#8216;BBB-&#8216; from &#8216;BBB&#8217;.
KEY RATING DRIVERS
The downgrade of South Africa&#8217;s Long-Term IDRs reflects Fitch&#8217;s view that recent political events, including a major cabinet reshuffle, will weaken standards of governance and public finances.
In Fitch&#8217;s view, the cabinet reshuffle, which involved the replacement of the finance minister, Pravin Gordhan, and the deputy finance minister, Mcebisi Jonas, is likely to result in a change in the direction of economic policy. The reshuffle partly reflected efforts by the out-going finance minister to improve the governance of state-owned enterprises (SOEs). The reshuffle is likely to undermine, if not reverse, progress in SOE governance, raising the risk that SOE debt could migrate onto the government&#8217;s balance sheet.
Differences over the country&#8217;s expensive nuclear programme preceded the dismissal of a previous finance minister, Nhlanhla Nene, in December 2015 and in Fitch&#8217;s view may have also contributed to the decision for the recent reshuffle. Under the new cabinet, including a new energy minister, the programme is likely to move relatively quickly. The state-owned electricity company, Eskom, has already issued a request for information for nuclear suppliers and is expected to issue a request for proposals for nuclear power stations later this year. The treasury under its previous leadership had said that Eskom could not absorb the nuclear programme with its current approved guarantees, so the treasury will likely have to substantially increase guarantees to Eskom.
This would increase contingent liabilities, which are already sizeable. According to the 2017/18 budget, the government&#8217;s guarantee exposure to public institutions was ZAR308.3 billion at end-March 2017, up from ZAR255.8 billion a year earlier. The main SOEs had additional liabilities of ZAR463 billion in 2016 with no explicit guarantee but with a significant probability that the government would step in should SOEs be unable to service the debt. The government has repeatedly needed to support SOEs, including Eskom, which is responsible for a large share of liabilities.
The new finance minister has stated that he does not intend to change fiscal policy and remains committed to expenditure ceilings that have been a pillar of fiscal consolidation. However, Fitch believes that following the government reshuffle, fiscal consolidation will be less of a priority given the president&#8217;s focus on &#8220;radical socioeconomic transformation&#8221;. This means that renewed shortfalls in revenues, for example as a result of lower than expected GDP growth, are less likely to be compensated by expenditure and revenue measures. This could put upward pressure on general government debt, which at an estimated 53% of GDP at end-March 2017 was already slightly above the &#8216;BB&#8217; category median of 51%.
The tensions within the ANC will mean that political energy will be absorbed by efforts to maintain party unity and fend off leadership challenges and to placate rising social pressures for addressing inequality, poverty and weak public service delivery. The Treasury&#8217;s ability to withstand departmental demands for increased spending may also weaken.
Political uncertainty was already an important factor behind weak growth last year, as in Fitch&#8217;s assessment it has affected the willingness of companies to invest. The agency believes that the cabinet reshuffle will further undermine the investment climate. Fitch forecasts GDP growth of 1.2% in 2017 and 2.1% in 2018, but the reshuffle has raised downside risks.
South Africa&#8217;s ratings also reflect the following key rating drivers:
The current account deficit narrowed to 3.3% of GDP in 2016 from 4.4% in 2015, on the back of import compression reflecting weak domestic demand, low oil prices and increasing investment income from abroad. This improvement, together with the flexible exchange rate, will contain pressures should external financing dry up. The government&#8217;s low reliance on foreign-currency financing, which accounted for just 11.3% of debt at end-March 2017, is also helping to contain external pressures.
Most indicators of economic development are in line with &#8216;BB&#8217; category medians. GDP per capita at market prices is estimated at USD5,207 for 2016, compared with a median of USD5,007. The World Bank&#8217;s governance indicator, at the 59th percentile, is well above the &#8216;BB&#8217; median and more in line with the &#8216;BBB&#8217; median. However, this may not adequately reflect governance issues that were highlighted in the recent state of capture report by the public prosecutor and governance may deteriorate as a result of the reshuffle. The rating is supported by a sound banking sector, which has a Fitch Bank Systemic Risk Indicator of &#8216;bbb&#8217;.
SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO)
Fitch&#8217;s proprietary SRM assigns South Africa a score equivalent to a rating of &#8216;BBB&#8217; on the Long-Term FC IDR scale.
Fitch&#8217;s sovereign rating committee adjusted the output from the SRM to arrive at the final LT FC IDR by applying its QO, relative to rated peers, as follows:
&#8211; Macroeconomic Performance, Policies and Prospect: -1 notch, to reflect South Africa&#8217;s weak growth prospects relative to the &#8216;BBB&#8217; category median, with important repercussions for public finances.
&#8211; Structural Features: -1 notch, to reflect the expected deterioration in governance standards, particularly related to SOEs.
Fitch&#8217;s SRM is the agency&#8217;s proprietary multiple regression rating model that employs 18 variables based on three year centred averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR. Fitch&#8217;s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.
RATING SENSITIVITIES
The following risk factors could, individually or collectively, result in negative rating action:
&#8211; A failure to stabilise the government debt/GDP ratio or an increase in contingent liabilities.
&#8211; Failure of GDP growth to recover sustainably, for example, due to sustained uncertainty about economic policy.
&#8211; Rising net external debt to levels that raise the potential for serious financing strains.
The following risk factors could, individually or collectively, result in positive rating action:
&#8211; An improvement in governance standards that is supportive of a stronger business and investment climate and a sustained upturn in economic growth.
&#8211; A marked narrowing in the budget deficit and a reduction in the government debt/GDP ratio.
&#8211; An improvement in the country&#8217;s net external debt/GDP ratio.
KEY ASSUMPTIONS
Fitch expects global economic trends and commodity prices to develop as outlined in Fitch&#8217;s March Global Economic Outlook.

Fitch Downgrades South Africa to junk for both local & foreign currency

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LIVE: Mass marches in South Africa

By Ed Stoddard
President Jacob Zuma&#8217;s pledge to expropriate South African land is unlikely to lead to violent seizures of farms like those that impoverished neighbouring Zimbabwe, but could still hurt the economy by scaring off investors worried about property rights.
Zuma is fighting to retain control of South Africa against opponents within the ruling African National Congress who want him to resign the party leadership.
http://cnbc.africa/news/southern-africa/2017/04/05/s-anc-rejects-calls-zuma-quit/
The confrontation came to a head last week when Zuma sacked Finance Minister Pravin Gordhan, who was often at odds with the president but widely respected by financial markets and whose dismissal triggered a credit downgrade.
Faced with opposition mainly from urban constituencies within the ANC, the president has doubled down on appeals to the rural poor, renewing promises to change the constitution to expropriate land without compensation and redistribute it.
<blockquote>&#8220;You can’t have a constitution that keeps people in poverty,&#8221; he told traditional leaders last week.</blockquote>
Zuma has reminded the party that &#8220;expropriation without compensation&#8221; was adopted as official policy at the ANC&#8217;s 2012 conference.
More than two decades after the end of apartheid rule, most of South Africa&#8217;s land is still in the hands of minority whites. Zuma&#8217;s ruling ANC has long been committed to the principle of redistributing it.
But the pace has been slow, relying mostly on a &#8220;willing buyer, willing seller&#8221; policy intended to respect property rights seen as vital to sustaining Africa&#8217;s most industrialised economy.
South Africa has many safeguards that should prevent the sort of lawlessness and violence that took place when followers of Zimbabwean President Robert Mugabe stormed onto white-owned farms in the early 2000s.
Zuma himself has said South Africa will not embark on the kind of lawless land grabs that saw Zimbabwe slide from breadbasket to basket case. Unlike Zimbabwe, South Africa has a robust, independent judiciary to keep the government in line.
Nor is South Africa as dependent on farming for its income as its northern neighbour: agriculture accounts only for about two percent of gross domestic product.
But the threat to redistribute land could still harm a sector which is a major employer and feeds a drought-prone nation, and any move to curb property rights could have wider economic repercussions by alarming investors in other sectors.
RHETORIC TO REALITY?
Changing the constitution as Zuma says he intends would not be easy, with the ANC so sharply divided over his leadership.
<blockquote>&#8220;The checks and balances in South Africa and the waning political support for the ANC itself make it difficult to disregard or change the constitution,&#8221; said Daniel Silke, the director of Political Futures Consultancy. &#8220;We are in a very different space to what was a very autocratic Zimbabwe.&#8221;</blockquote>
Zuma&#8217;s political woes, including electoral setbacks in major urban centres in local elections last year, explain his populist approach to the land issue.
It is part of a &#8220;radical economic transformation&#8221; drive aimed at the ANC&#8217;s increasingly rural support base. His plans will be high on the agenda of a major party policy conference in June-July, and another in December when Zuma&#8217;s successor as ANC leader is to be picked ahead of a general election in 2019.
<blockquote>&#8220;Deploying populist rhetoric is a powerful campaign strategy that has worked for Zuma before,&#8221; said Ruth Bookbinder, Africa Analyst at risk consultancy Verisk Maplecroft.</blockquote>
The Department of Rural Development and Land Reform says only 8 million hectares of arable land has been transferred to black people since 1994, less than 10 percent of the 82 million hectares available and a third of the ANC&#8217;s 30 percent target.
Yet the ANC has not yet fallen into line behind Zuma&#8217;s call for constitutional change. In February, ANC MPs voted down a motion by the ultra-left Economic Freedom Fighters (EFF) party to amend the constitution to take land without compensation.
ZIMBABWE PARALLELS
Zuma&#8217;s bid for rural support has parallels with Zimbabwe in 2000, when Mugabe, then in power for two decades, faced a challenge from an opposition rooted in the urban trade union movement.
Mugabe responded by unleashing violent invasions of white-owned farms that proved devastating to an economy already in meltdown, with acute balance of payments pressures, raging inflation, slowing growth, a depreciating currency and a dependency for funding on the International Monetary Fund.
Zuma too faces challenges from urban quarters, including calls for him to resign from the South African Communist Party and labour federation Cosatu, both allies of the ANC.
The economy is barely growing, the rand currency is vulnerable, inflation could reignite, and further ratings downgrades could push South Africa into the IMF&#8217;s embrace, which would see it forced to adopt austerity measures that ANC populists would baulk at.
Damaging South Africa&#8217;s high-tech agriculture sector through land seizures could have far-reaching consequences. Wandile Sihlobo, an economist at the agricultural business chamber, told Reuters he reckons the debt book for commercial agriculture is around 160 billion rand ($11.6 billion).
Food security is a concern as South Africa recovers from a drought, with forecasts showing another potentially looming.
Some analysts say such consequences will not dissuade Zuma.
&#8220;Zuma has shown he can be absolutely reckless in pursuit of his political agenda,&#8221; said NKC African Economics political analyst Gary van Staden.
($1 = 13.7680 rand)
(Editing by James Macharia and Peter Graff)

S.Africa’s land expropriation unlikely to end like Zimbabwe

On April 3, 2017, S&amp;P Global Ratings lowered its foreign currency ratings on South Africa to &#8216;BB+/B&#8217; from &#8216;BBB-/A-3&#8217;. The outlook is negative. We also lowered our national scale rating on South Africa to &#8216;zaAA-&#8216; from &#8216;zaAAA&#8217;.
• We do not rate financial institutions in South Africa above the foreign currency sovereign ratings, due to the direct and indirect impact that a sovereign distress would have on banks&#8217; operations.
• As a result, we are lowering our ratings on FirstRand Bank Ltd., FirstRand Ltd., Nedbank Ltd., Investec Bank Ltd., Absa Bank Ltd., Barclays Africa Group Ltd., and BNP Paribas Personal Finance South Africa Ltd. (BNPPPF), and our rating on the domestic medium-term note program issued by BNP Paribas (acting through its local branch).
• The negative outlooks on the first four entities reflect that on the sovereign and indicate that we could lower the ratings further if we lower our foreign currency ratings on South Africa.
• The other three entities and the note program carry national scale ratings only, to which we do not assign outlooks.
S&amp;P Global Ratings said today that it has lowered its ratings on five South Africa-based financial institutions and two related holding companies, as well as its national scale rating on the domestic medium-term note (MTN) program issued by BNP Paribas through its local branch.
More specifically, we lowered, to &#8216;BB+/B&#8217; from &#8216;BBB-/A-3&#8217;, our long- and short-term counterparty credit ratings on FirstRand Bank Ltd., Nedbank Ltd., and Investec Bank Ltd. In addition, we lowered our long-term counterparty credit rating on FirstRand Ltd. to &#8216;BB-&#8216; from &#8216;BB+&#8217;, while affirming the &#8216;B&#8217; short-term counterparty credit rating. The outlooks are negative.
At the same time, we lowered our long-term South Africa national scale ratings on FirstRand Bank, Nedbank, Investec Bank, and BNP Paribas Personal Finance South Africa Ltd. (BNPPPF) to &#8216;zaA&#8217; from &#8216;zaAA-&#8216;. We affirmed our &#8216;zaA-1&#8217; short-term national scale ratings on the four entities.
We have lowered to &#8216;zaBB+/zaB&#8217; from &#8216;zaA/zaA-2&#8217; our long- and short-term national scale ratings on Barclays Africa Group Ltd. and FirstRand Ltd., the nonoperating holding companies (NOHCs) of their respective financial services groups.
We also lowered our long-term national scale ratings on Barclays Africa Group&#8217;s subsidiary, Absa Bank Ltd., to &#8216;zaA&#8217; from &#8216;zaAA-&#8216;, while affirming our &#8216;zaA-1&#8217; short-term national scale rating. 
Lastly, we lowered to &#8216;zaA&#8217; from &#8216;zaAA-&#8216; our long-term national scale rating on the South African rand (ZAR) 10 billion MTN program issued by BNP Paribas (acting through its local branch). We affirmed our &#8216;zaA-1&#8217; short-term national scale rating on the program.
The rating actions follow the lowering of our foreign and local currency sovereign credit ratings on South Africa (see &#8220;South Africa Long-Term Foreign Currency Rating Cut To &#8216;BB+&#8217; On Political And Institutional Uncertainty; 
Outlook Negative,&#8221; published April 3, 2017, on RatingsDirect).
We lowered our ratings on the financial institutions because we do not rate South African banks above the foreign currency sovereign credit ratings. This is because of the likely direct and indirect influence of sovereign distress on domestic banks&#8217; operations, including their ability to service foreign currency obligations. The more pronounced downgrades of the NOHCs of the Barclays Africa Group and FirstRand Group reflect our view of the increasing risk of structural subordination following the downgrade of the operating bank entities to speculative grade (below &#8216;BBB-&#8216;). As a result of this,combined with the respective downgrades of the operating entities, we lowered our national scale ratings on the NOHCs by five notches, in line with our mapping 
criteria.
The national scale ratings on the ZAR10 billion domestic MTN program are supported by the global scale ratings on BNP Paribas, but constrained by the foreign currency sovereign credit ratings on South Africa. The lowering of the ratings on South Africa reflects our view that political and institutional stability in the country has weakened. However, amid slow economic growth and political turbulence, South African banks have been 
performing resiliently.
The sector&#8217;s average return on assets improved to 1.3% in 2016 from 1.1% the previous year, while total capital adequacy increased to 15.7% from 14.2%. We anticipate that credit losses for the top-tier banks will 
stabilize at 0.8%-1.0% in 2017. However, if decreasing investor confidence materially damages the local currency, sparking rising inflation and interest rates, banks&#8217; credit losses could accelerate toward the year&#8217;s end, due to the over-leveraged South African households and pressure on their disposable income to service their debt. Accordingly, this could erode the top-tier banks&#8217; profitability, resulting in lower returns on equity in 2017 than the currently anticipated 15%-19%.
The negative outlooks on FirstRand Bank, FirstRand Ltd., Investec Bank, and Nedbank reflect that on the sovereign. We would lower our ratings on these entities or revise the outlooks to stable should there be a similar action on 
the sovereign. Outside a sovereign action, we see positive or negative rating actions on these four banks as a remote possibility in the next 12 months, unless there is significant deterioration of the economy, due for example to weaker investor confidence.
Our national scale ratings have no outlooks but, for financial institutions in 
South Africa, are exposed to changes in the ratings on the sovereign and the 
economic environment.

S&P downgrades seven South African banks

The Office of the ANC Chief Whip confirms the resignation of former Deputy Finance Minister and ANC MP Cde Mcebisi Jonas as a member of parliament effective 31 March 2017. 
Comrade Jonas has served both as Deputy Minister and MP with absolute distinction and dedication. He has also served the movement and the South African people in various capacities over the years. On behalf of the ANC in Parliament we thank comrade Jonas for his selfless service to the movement as its public representative.
We are confident that he will continue serving the country and our movement in other capacities in future. We wish him well.

Former Deputy SA finance minister Mcebisi Jonas resigns as MP

If South Africa loses two of its prized investment grade credit ratings for foreign and local currency borrowing in the turmoil triggered by the sacking of the finance minister, the country could lose more than $10 billion in investment funds.
S&amp;P Global has already struck. In an unscheduled review on Monday that prompted a selloff in South African assets, it cut the sovereign rating for external debt to BB+, one notch below investment grade &#8211; or &#8220;junk&#8221; status in market parlance.
It cited the impact of the divisions in government that led to Pravin Gordhan&#8217;s removal.
Moody&#8217;s later placed South Africa on review for downgrade. A third major international ratings firm Fitch warned that President Jacob Zuma&#8217;s shake-up intensified political risk and signalled policy changes that could undermine its credit score.
Being downgraded to junk by at least two agencies will see South Africa drop out of some widely used global bond indexes that rely on investment grades only and force international funds who track these or who are prohibited from holding sub-investment grade securities to sell.
&#8220;The problem has just started in South Africa &#8211; there was a lot of complacency on the ratings shift,&#8221; said Salman Ahmed, chief global strategist at Lombard Odier.
The prospect of such a demotion is more imminent for hard currency debt, where Fitch&#8217;s standing rating is just one notch above junk. The Moody&#8217;s rating is two rungs above.
But a bigger impact on the country&#8217;s access to funds could come if two of the three agencies also demoninate the rand-denominated government debt as sub-investment grade. S&amp;P&#8217;s local currency rating is just one level above junk as well, with Moody&#8217;s two notches above.
So far, only one of the six ratings &#8211; three for sovereign debt and three for local &#8211; from the major international ratings agencies has slipped into junk.
JPMorgan &#8211; which compiles some of the most widely used emerging market debt indexes &#8211; estimates that a junk rating for South Africa&#8217;s mostly dollar-denominated foreign currency Eurobonds could see forced selling of up to $2.4 billion.
Roughly half the total would come from funds dedicated to investment grade emerging market debt, the other half from global investment grade bond funds, JPMorgan said, adding this was much less than the forced selling risk the bank had ascribed in recent years to Brazil at $6 billion or Turkey at $7 billion.
&#8220;The more modest figure for South Africa is explained by the smaller bond stock, and therefore smaller weights particularly in widely used global bond indexes, coupled with an underweight positioning by investors,&#8221; the bank said.
LOCAL DANGER
Yet South Africa&#8217;s outstanding $14.6 billion hard-currency debt is just a 10th of total public government debt, with local sovereign bonds tallying up to 1.722 trillion rand ($125 billion), according to data from the National Treasury.
For UBS, the real danger lies in local bond markets. In a note this week, UBS estimated some $10 billion of South African bond holdings are indexed to Citi&#8217;s World Government Bond Index (WGBI), tracked by $3 trillion worldwide.
JPMorgan, which compiles the GBI-EM IG-only index, said it estimated that a downgrade of local currency debt could lead to total index-related selling of as much as $8.5 billion.
Inclusion in both indexes hinges on investment grade ratings on local debt from both Moody&#8217;s and S&amp;P Global. Whle a formal index exclusion could take up to a year, many funds would likely exit the debt in advance.
Partially offsetting that hit is the fact that countries which find themselves downgraded to junk &#8211; so-called &#8220;fallen angels&#8221; &#8211; often draw in a different investor base seeking higher yields and more speculative investments, said Nafez Zouk, senior economist at Oxford Economics.
In other words, these fallen credits become bigger fish in smaller ponds.
Some dedicated emerging market fund managers are waiting for those opportunities.
&#8220;(South Africa&#8217;s) trajectory is quite negative and is likely to continue to be negative until we see renewal in South African politics which could be a few years from now,&#8221; said Jan Dehn at emerging market fund manager Ashmore Investment Management.
&#8220;Even in a gradually deteriorating credit like South Africa, asset prices can move into oversold territory relative to the risk &#8230; If prices fall enough that the credit has been oversold relative to how risky it is, then clearly that’s a buying opportunity.&#8221;
($1 = 13.7390 rand)
(Additional reporting by Sujata Rao in Moscow, Mfuneko Toyana in Johannesburg and Claire Milhench in London; Editing by Alison Williams)

“Junk”-rated debt could cost South Africa more than $10bn in lost funds

We have noted Standard and Poor’s (S&amp;P) decision to downgrade South Africa’s foreign currency credit rating to sub-investment grade, and the local currency to just one notch above investment grade, as well as their latest decision to downgrade South African banks in line with the sovereign rating. As a result, the national scale rating of Absa Bank Limited has been reduced to ‘zaA’ from its previous rating of ‘zaAA’.
Due to the intermediary role banks play in any economy it is the norm for their credit rating to be very closely linked to that of the country, and their decision to reduce the Absa Bank rating was therefore expected in light of recent events. S&amp;P does not rate South African banks above the foreign currency rating of the sovereign. Therefore, the downgrade of the sovereign has a direct impact to banks that are systemic to the economy.
We also acknowledge Moody’s announcement that they are putting South Africa under review for a downgrade.
These are very disappointing developments because until last week the country was building momentum towards better economic growth by the end of this year. During the past 14 months, Barclays Africa has actively participated in various initiatives in support of government’s efforts to effect much-needed structural reforms, in order to stimulate inclusive economic growth. We remain committed to doing so, but an abrupt interruption to this program is unhelpful and places at risk the livelihoods of many South Africans.
Barclays Africa is well-capitalised with a strong liquidity position and a balance sheet of over R1trillion. We remain well capitalised in terms of our strategy, risk appetite, risk profile, business activities and the macroeconomic environment in which we operate. We have a diversified portfolio of businesses with geographical presence across 10 countries in Africa and are determined to continue growing across all our markets.
For the year ended 31 December 2016 we released a solid set of results which included R239billion of liquidity reserves and we expect to remain robust from a liquidity and funding perspective. Our Common Equity Tier 1 (CET1) capital position as at 31 December 2016 remained strong at 12.1% (R105bn) &#8211; above our board target range of 9.5% to 11.5% and well above the regulatory minimum of 6.9%.
It takes enormous effort over many years to regain an investment grade sovereign rating. It is therefore very important that all stakeholders continue to work together to rediscover consensus on how to achieve inclusive growth.
&nbsp;

Barclays Africa responds to S&P downgrade of South African banks

South Africa&#8217;s ruling African National Congress said on Tuesday it will brief media on Wednesday on decisions taken by senior officials after two days of meetings over a cabinet reshuffle by President Jacob Zuma.
The reshuffle has triggered divisions within the party.
S&amp;P Global Ratings cited the dismissal of respected former finance minister Pravin Gordhan as one reason for its downgrade of South Africa to &#8220;junk&#8221; in an unscheduled review on Monday, which sparked calls from several quarters for Zuma to quit.
(Reporting by James Macharia; editing by John Stonestreet)

South Africa’s ANC to give briefing on Wednesday after meetings on Zuma reshuffle

South Africa&#8217;s Standard Bank Group Ltd reported a 4 percent rise in full-year profit on Thursday as the threat of a sovereign ratings downgrade weighed on its home market.
Standard Bank posted headline earnings per share (EPS) of 1,389 cents for the period to end-December, compared with 1,359 cents the previous year. Headline EPS is the main profit measure in South Africa and excludes certain one-off items.
&#8220;In South Africa, the threat of a sovereign downgrade by rating agencies to sub-investment grade persisted throughout the year. This in turn negatively impacted the already weak business and consumer confidence and further delayed much needed domestic investment and job creation opportunities,&#8221; Standard Bank said in a statement.
 
(Reporting by TJ Strydom; Editing by Subhranshu Sahu)﻿

South Africa's Standard Bank posts 4 pct rise in FY profit

South Africa&#8217;s economy is recovering, supported by improved electricity supply, easing drought and a depreciation in the real exchange rate among other factors, Finance Minister Pravin Gordhan said on Monday.
Gordhan however told a labour union conference that macroeconomic stability was crucial to cushion the economy from potentially volatile capital flows in an uncertain global environment.
In his October mid term budget statement to parliament, Gordhan slashed the 2016 economic expansion forecast to 0.5 percent from the 0.9 percent predicted earlier by the Treasury, but said GDP growth would recover to 1.3 percent next year.
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&#8220;In terms of the numbers that we see, we believe we are in the process of recovering as an economy,&#8221; he said on Monday at a conference of the National Union of Metal Workers of South Africa (Numsa) in Cape Town.
Data showed last week that the economy had barely advanced, expanding by 0.2 percent in the third quarter as manufacturing contracted sharply.
Africa&#8217;s most industrialized country held on to its investment grade credit ratings with Moody&#8217;s, S&amp;P and Fitch all affirming its investment status, albeit with a negative outlook, and a warning that the weak economy was a risk.﻿

South Africa's economy recovering says FinMin Gordhan

Fitch Ratings has revised the Outlooks on South Africa&#8217;s Outlook to Negative from Stable, while affirming the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at &#8216;BBB-&#8216;.
The issue ratings on South Africa&#8217;s senior unsecured long-term foreign- and local-currency bonds have also been affirmed at &#8216;BBB-&#8216;. The Country Ceiling has been affirmed at &#8216;BBB&#8217;. The Short-Term Foreign and Local Currency IDRs and the issue ratings on senior unsecured short-term local currency securities have been affirmed at &#8216;F3&#8217;. The rating on the RSA Sukuk No. 1 Trust has also been affirmed at &#8216;BBB-&#8216;, in line with South Africa&#8217;s Long-Term Foreign Currency IDR.
KEY RATING DRIVERS
The revision of the Outlooks on South Africa&#8217;s Long-Term IDRs to Negative reflects the following key rating drivers:
Political risks to standards of governance and policy-making have increased and will remain high at least until the electoral conference of the African National Congress (ANC) in December 2017, negatively affecting macroeconomic performance. The conference will elect a new ANC leader, who will be the ANC&#8217;s presidential candidate in national elections in 2019.
The in-fighting within the ANC and the government is likely to continue over the next year. In Fitch&#8217;s view, this will distract policymakers and lead to mixed messages that will continue to undermine the investment climate, thereby constraining GDP growth. A report by the public protector made allegations of influence peddling and improper procurement practices involving close allies of the president, although it will be subject to a judicial review and a commission of enquiry. The report underlines the risks to state-owned enterprise (SOE) governance and has led to the resignation of the CEO of the state-owned electricity company Eskom.
The South African economy may have started recovering from a series of shocks, but business confidence remains depressed and investment has continued to contract. We expect only modest GDP growth of 1.3% in 2017 and 2.1% in 2018, although this is an improvement from 0.5% in 2016. The economy had been hit in 2015 and 2016 by electricity shortages, the worst drought in decades, a sharp fall in international prices for some of South Africa&#8217;s main mining commodities and rising policy uncertainty.
As a result of low GDP growth and weaker-than-expected tax revenues, the government in its Medium-Term Budget Policy Statement (MTBPS) raised the budget deficit forecast for the fiscal year ending March 2017 (FY16/17) to 3.4% of GDP from 3.2% in the February budget, with a gradual narrowing to 3.1% in FY17/18, 2.7% in FY18/19 and 2.5% in FY19/20. The deterioration would have been worse without the government&#8217;s decision, announced in the MTBPS, to raise additional revenue of ZAR13bn and lower the expenditure ceiling in FY17/18. Together with measures included in the February budget, fiscal tightening in FY17/18 relative to previous plans will amount to 1% of GDP. The government has not announced which taxes are to be raised, but the fiscal targets now look only mildly optimistic. Fitch expects the deficit to shrink to 2.8% in FY18/19 from 3.2% in FY17/18.
Total general government debt (including local government debt not covered by the MTBPS debt numbers) will rise to 55% at end-March 2019 from 51.5% at end-March 2016. The debt structure remains highly favourable, with 90.7% of debt denominated in local currency and an average maturity of government debt securities of 14.6 years at end-September 2016.
Additional spending on student bursaries as a result of student protests was absorbed by using the contingency reserve, some one-off financing and a re-prioritisation of other expenditures, but the protests showed that social pressures could lead to further spending needs. Growth of the working age population of around 2% and high and rising unemployment, at 27.1% in the third quarter, also contribute to spending pressures. However, the fact that expenditure ceilings introduced in 2012 have never been breached suggests such pressures have so far been well managed.
Debt of SOEs remains an important contingent liability to the sovereign. Debt of the nine major SOEs amounted to ZAR743bn (18.2% of GDP) at end-March 2016, of which ZAR280bn was subject to government guarantees. In addition, the government provides guarantees on electricity prices to independent power producers complementing Eskom&#8217;s electricity generation.
ANC factional battles may undermine government efforts to improve the governance of SOEs, which could affect the plan to stream-line the SOE portfolio. The plan to build nuclear power stations has run into substantial opposition because of concerns about governance. As a result, the government announced in November that the first plant will not be commissioned until 2037, alleviating concerns over any medium-term fiscal impact.
The &#8216;BBB-&#8216; Long-Term IDRs also reflect the following drivers:
The net international investment position turned positive in 2015, at 13% of GDP, for the first time since at least 1990, although this was largely due to the depreciation of the rand. The current account deficit also remained on a narrowing trend in 1H16, partly reflecting import compression as well as a lagged effect of earlier depreciation on competitiveness so that the current account deficit is likely to shrink to 3.9% of GDP, from 4.3% in 2015. However, imports will strengthen again as the economy recovers gradually and gains in competitiveness could be eroded by continued high wage growth, leading to a renewed widening in the current-account deficit in 2017 and 2018.
Despite weak macroeconomic conditions, the banking sector remains a rating strength. The total capital adequacy ratio of the system increased to 15.5% in September from 14.2% at end- 2015. However, total domestic credit growth slowed to 7.5% in August, the lowest since 2014 and only moderately above inflation. Non-performing loans stood at 3.2% of total assets, barely above the trough of the current cycle of 3.1%, although a gradual rise is expected, reflecting the rising average age of assets and the impact of continued economic weakness on asset quality. Inflation has risen back above the upper limit of the inflation target range of 3%-6% of the South African Reserve Bank (SARB) but is likely to ease, to an average of 5.6% in 2018, so that SARB is unlikely to further raise its interest rates beyond the current level of 7%.
Indicators of economic development are weaker than &#8216;BBB&#8217; category medians. GDP per capita at market prices is estimated at USD5,140 for 2016, compared with a median of USD9,188. The World Bank&#8217;s governance indicator is broadly in line with the median but this might not fully reflect the recent political tensions.
SOVEREIGN RATING MODEL (SRM) and QUALITATIVE OVERLAY (QO)
Fitch&#8217;s proprietary SRM assigns South Africa a score equivalent to a rating of &#8216;BBB-&#8216; on the Long-Term Foreign Currency IDR scale.
In accordance with its rating criteria, Fitch&#8217;s sovereign rating committee decided not to adopt the score indicated by the SRM as the starting point for its analysis because the SRM output has migrated to &#8216;BBB-&#8216; from &#8216;BBB&#8217;, but in our view this is potentially a temporary deterioration that may not be sustained.
Consequently, Fitch&#8217;s sovereign rating committee kept the starting point for the qualitative overlay adjustment at &#8216;BBB&#8217; and adjusted the output from the SRM to arrive at the final Long-Term Foreign Currency IDR by applying its QO, relative to rated peers, as follows:
&#8211; Macroeconomic Performance, Policies and Prospect: -1 notch, to reflect South Africa&#8217;s weak growth prospects relative to the &#8216;BBB&#8217; category median, with important repercussions for public finances.
Fitch&#8217;s SRM is the agency&#8217;s proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a Long-Term Foreign Currency IDR. Fitch&#8217;s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable or not fully reflected in the SRM.
RATING SENSITIVITIES
The following risk factors could, individually or collectively, result in a downgrade:
&#8211; Continued political instability that adversely affects standards of governance, the economy or public finances.
&#8211; A failure to stabilise the government debt/GDP ratio or an increase in contingent liabilities.
&#8211; Failure of GDP growth to recover sustainably, for example, due to sustained uncertainty about economic policy.
&#8211; Rising net external debt to levels that raise the potential for serious financing strains.
The Outlook is Negative. Consequently, Fitch does not currently anticipate developments with a high likelihood of leading to an upgrade. However, future developments that may, individually or collectively, lead to a positive rating action include:
&#8211; A track record of improved growth performance.
&#8211; A marked narrowing in the budget deficit and a reduction in the government debt/GDP ratio.
&#8211; A narrowing in the current account deficit and improvement in the country&#8217;s net external debt/GDP ratio.
KEY ASSUMPTIONS
Fitch expects global economic trends and commodity prices to develop as outlined in Fitch&#8217;s September Global Economic Outlook. ﻿

Fitch Revises South Africa's Outlook to Negative

South Africa has given credit ratings agencies &#8220;positive news&#8221; in recent meetings, the nation&#8217;s deputy president said on Sunday after announcing a proposal for a national minimum wage.
&#8220;We have made tremendous progress on the labour instability issues,&#8221; Cyril Ramaphosa said.
South Africa faces a possible downgrade to sub-investment grade by ratings agencies next month, with often violent strikes by labour unions a major concern among investors.﻿

South Africa's has given ratings agencies positive news

South Africa&#8217;s Finance Minister Pravin Gordhan said on Tuesday that the country must tackle corruption and weak economic growth or face the risk of a credit rating downgrade to &#8220;junk&#8221; status.
Credit ratings agencies are due to visit South Africa next week ahead of reviews of its credit ratings, he said at a business gala event. All three major agencies have warned that slowing growth and political infighting could trigger downgrades.
&#8220;It is very important that we are able to recognise our weaknesses when they arise. We don&#8217;t need a downgrade to junk to wake all of us up,&#8221; he said.
Ratings agency Moody&#8217;s has South Africa on a rating two notches above subinvestment, or &#8220;junk&#8221;, grade with a negative outlook, and it is due to publish its next review later this month. Fellow ratings firms Standard and Poor&#8217;s and Fitch, whose reviews are also due before year-end, have the country just a step above junk.
Gordhan also reiterated that he had not, while head of the tax department, overseen the setting up of a surveillance unit which police say illegally spied on politicians.
Gordhan last month slashed the 2016 growth forecast for Africa&#8217;s most industrialised economy to 0.5 percent from 0.9 percent, raising fears of a credit rating downgrade from Moody&#8217;s, Fitch and S&amp;P Global Ratings by year-end.
Investors and the ratings agencies alike are worried that the police probe into Gordhan&#8217;s role in the surveillance unit could be part of a political ploy to pressure the Treasury into abandoning its prudent fiscal stance.
 
(Reporting by Stella Mapenzauswa; Editing by Hugh Lawson)﻿

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Investors want ANC to explain “radical economic transformation”: Gigaba

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SA is not alone, Africa has a plethora of countries that have junk status, here’s the list…

Fitch Downgrades South Africa to junk for both local & foreign currency

LIVE: Mass marches in South Africa

S.Africa’s land expropriation unlikely to end like Zimbabwe

S&P downgrades seven South African banks

Former Deputy SA finance minister Mcebisi Jonas resigns as MP

“Junk”-rated debt could cost South Africa more than $10bn in lost funds

Barclays Africa responds to S&P downgrade of South African banks

South Africa’s ANC to give briefing on Wednesday after meetings on Zuma reshuffle

South Africa's Standard Bank posts 4 pct rise in FY profit

South Africa's economy recovering says FinMin Gordhan

Fitch Revises South Africa's Outlook to Negative

South Africa's has given ratings agencies positive news

S.A must tackle graft, weak growth to avoid junk ratings – FinMin

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