Fitch’s downgrade is a vote of no confidence in finance minister’s ability to hold the fiscal line and stabilise debt
The new Minister of Finance, Malusi Gigaba’s, attempts to restore confidence and engage ratings agencies failed to convince Fitch Ratings (“Fitch”) not to downgrade South Africa.
The fact is that the decision by Fitch to downgrade our long-term foreign currency debt and long-term local currency debt to “BB+”, or “junk status”, with a “stable outlook”, is a vote of no confidence in the minister’s ability to hold the fiscal line and stabilise debt.
This should come as no surprise given that the minister is trying to convince the ratings agencies that he can hold the fiscal line and implement “radical economic transformation”, which is simply not credible.
It’s not good enough for the minister to simply concede the ratings downgrade was a “setback”. The minister needs to roll up his sleeves and get into the fight to avoid further ratings downgrades.
The minister’s number one priority should be to avoid the nightmare scenario where massive forced selling of our debt triggers an economic meltdown that will spare nobody, rich or poor.