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JOHANNESBURG, April 3 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
The rand fell by as much 2 percent to the dollar in
response to the news of the downgrade, while government bonds
also weakened sharply.
"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.
S&P assigned South Africa a negative outlook, saying this
reflected its view that political risks will remain high this
year, and that "policy shifts are likely which could undermine
fiscal and growth outcomes more than we currently project."
A downgrade to junk would increase South Africa's
debt-servicing costs, seen at 144 billion rand ($11 billion) in
the 2016/17 fiscal year.
Paying higher debt costs would mean less money for critical
services such as housing, education and sanitation, which could
incite more protests that have rocked towns across the country.
The new Finance Minister Malusi Gigaba said earlier on
Monday he had spoken to the ratings agencies, and informed them
he would maintain Pretoria's fiscal stance.
His appointment last week, after the sacking of Pravin
Gordhan by President Jacob Zuma, has seen the currency plunge
and threatens to split the ruling African National Congress.
(Reporting by Mfuneko Toyana; Editing by James Macharia)