South Africa’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 “junk” 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.
“It is very important that we are able to recognise our weaknesses when they arise. We don’t need a downgrade to junk to wake all of us up,” he said.
Ratings agency Moody’s has South Africa on a rating two notches above subinvestment, or “junk”, grade with a negative outlook, and it is due to publish its next review later this month. Fellow ratings firms Standard and Poor’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’s most industrialised economy to 0.5 percent from 0.9 percent, raising fears of a credit rating downgrade from Moody’s, Fitch and S&P Global Ratings by year-end.
Investors and the ratings agencies alike are worried that the police probe into Gordhan’s role in the surveillance unit could be part of a political ploy to pressure the Treasury into abandoning its prudent fiscal stance.