S&P downgrades South Africa’s credit rating to junk status

President Jacob Zuma faces calls to resign from South Africa’s biggest trade union, as credit ratings agency (CRA) Standard & Poor’s (S&P) reduced the country’s rating to junk status.

S&P downgraded its long-term foreign currency sovereign credit rating for South Africa from BBB- to BB+ following the sacking last week of the country’s finance minister, Pravin Gordhan.

Moody’s said that it was reviewing the Baa2 credit rating – two notches above junk -that it currently assigns to South Africa following Gordhan’s dismissal.

The Congress of South African Trade Unions (COSATU) said that it no longer believed in Zuma’s ability to lead and wanted to restructure its alliance with the party: “The time has arrived for him to step down and allow the country to be led forward by a new collective at a government level. We no longer believe in his leadership abilities,” read a statement issued by the union.

The union’s general secretary, Bheki Ntshalintshali, added that Zuma was not indispensable. “The African National Congress (ANC) is capable of filling that position,” he said at a briefing. The ANC had not been found wanting when it recalled then-president Thabo Mbeki in September 2008, he added.

Zuma subsequently phoned COSATU’s president, S’dumo Dlamini, to discuss its call for him to step down.

S&P cited Gordhan’s departure as the main reason for its downgrade. In his first response since last Thursday’s reshuffle, Zuma urged people to remain calm after the move and stressed that Gordhan’s dismissal, which has also seen the rand (ZAR) depreciate by around 13% against the US dollar in the past 10 days, did not mean the government’s fiscal policies would change.

Zuma urged his cabinet to reach out and reassure international investors. However, Gordhan’s successor as finance minister, Malusi Gigaba, told a news conference that the ratings cut would push up South Africa’s borrowing costs and force the government to step up efforts to expand the economy.

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