Poll: SA’s credit rating is in jeopardy

Johannesburg – South Africa’s sovereign credit rating will probably be cut to junk status this year, at least by Standard & Poor’s, amid concerns the government could fail to reach its budget targets, a Reuters poll found on Wednesday.

All but one of the 16 economists surveyed by Reuters this week expect South Africa to lose its investment grade status this year, further hitting markets that have already reacted to expectations of a downgrade.

“A downgrade has been somewhat priced in. Government bond yields are in line with junk status already,” said Rajiev Rajkumar, analyst at 4CAST in London.

“Nevertheless, a downgrade would trigger some forced selling by institutional investors as many have a mandate to only hold investment grade bonds.”

Ten economists said a cut to junk, which would put it on a par with peer Brazil, would be negative for markets and six said it would be very negative. None thought it would be positive.

Economists accurately predicted Brazil’s downgrades in two similar Reuters polls last year.