Photographer: Dean Hutton/Bloomberg

South Africa Vows to Avoid Downgrade to Junk, Business Day Says

  • Nation to act with urgency to avoid junk status, Gordhan says
  • Borrowing more `is not the easy answer to our difficulties'

South Africa’s government, businesses and labor unions must act together to claw back lost fiscal credibility and avoid a credit-rating downgrade to junk, Business Day reported, citing Finance Minister Pravin Gordhan.

“Government is very alive to our environment both global and local so we will make the right decisions in the interests of the country,” the Johannesburg-based newspaper reported Gordhan as saying. “We have now reached the point where borrowing more is not the easy answer to our difficulties.”

Standard & Poor’s cut the outlook on South Africa’s BBB- credit assessment to negative from stable last month, indicating it may downgrade the nation’s debt to junk. Fitch Ratings Ltd. has an equivalent reading of BBB- with a stable outlook, while Moody’s Investors Service has South African debt one level at Baa2.

South Africa will stay on the path of fiscal consolidation, Business Day cited Gordhan as saying. The country has had a “very consistent record in matching action to words and intent on the fiscal side” in the 20 years since democracy, the newspaper reported him as saying.

Gordhan is seeking to reassure financial markets after President Jacob Zuma caused the currency to plunge after last month firing Finance Minister Nhlanhla Nene and replacing him with a little-known lawmaker David van Rooyen. Zuma reconsidered his decision four days later, replacing Van Rooyen with Gordhan, who had held the position for five years through 2014.

Phumza Macanda, a spokeswoman for the National Treasury, didn’t immediately answer her mobile phone when Bloomberg News called seeking comment.

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