(Combines S&P, ANC strands)
* S&P cuts rating by one notch to BB+
* Rand, govt bonds weaken on news of downgrade
* ANC top brass split over ex-finmin Gordhan's sacking
* New finmin plans radical economic transformation
* Opposition blames Zuma for credit downgrade
By James Macharia
JOHANNESBURG, April 3 S&P cut South Africa's
credit rating to junk status on Monday, saying the dismissal of
Pravin Gordhan as finance minister threatened a damaging policy
shift, while President Jacob Zuma readied for a showdown with
other ANC leaders over the sacking.
In an unscheduled review that prompted a selloff in South
African assets, the credit agency cited the impact of divisions
in the ANC-led government that led to leadership changes
including Gordhan's departure on Zuma's orders late on Thursday.
"This has increased the likelihood that economic growth and
fiscal outcomes could suffer," said S&P, which cut its rating by
one notch to BB+ - its highest non-investment grade mark - and
also assigned Africa's most industrialised economy a negative
Zuma's dismissal of Gordhan, widely respected in financial
circles, threatens to split the upper echelons of the ruling
African National Congress down the middle.
The move drew public criticism from Deputy President Cyril
Ramaphosa, ANC Secretary General Gwede Mantashe and
Treasurer-General Zweli Mkhize before Monday's regular meetings
of the party leadership.
Zuma still had the support of Chairwoman Baleka Mbete and
Deputy Secretary-General Jessie Duarte, marking a straight split
among the party's "Top Six" leaders, sources said.
Spokesman Zizi Kodwa said the party's National Working
Committee would meet on Tuesday before a decision was taken on
how to handle the fallout from the sacking of Gordhan.
"The ANC must remain and it must emerge stronger than it was
last week," Kodwa said.
New Finance Minister Malusi Gigaba said earlier on Monday he
had spoken to the ratings agencies, and informed them he would
maintain Pretoria's current fiscal stance.
His appointment hit an already weak rand currency.
The currency has fallen 11.5 percent since last Monday, when
Zuma ordered Gordhan to return home "immediately" from an
investor roadshow abroad, and it fell by as much as a further 2
percent to the dollar after the downgrade. Government bonds also
"We will be working closely with S&P's to ensure the issues
they are raising are dealt with," Gigaba's spokesman, Mayihlome
Tshwete said. "We will assure them that although the political
environment is a bit concerning, we should be clear that we have
all agreed to the same policy direction."
Gigaba, said on Monday he would pursue "tough and unpopular
choices" to oversee growth and a redistribution of wealth to the
black majority through radical economic transformation, a stance
echoing recent comments by Zuma.
NO EASY ANSWERS
Gigaba has so far given no details of how the transformation
would be carried out.
It is unlikely to be easy in a divided ANC and with the
economy expected to take a hit after Zuma's cabinet reshuffle
The opposition leader Mmusi Maimane, head of the Democratic
Alliance, blamed Zuma for the downgrade.
"Zuma has just ended the chances of South Africans to create
and find work," Maimane said on his Twitter feed. "We should all
downgrade him #ZumaMustGo."
Maimane has called for a no-confidence vote against Zuma and
a protest march on Friday in the commercial hub of Johannesburg.
South Africa has been facing the risk of being downgraded to
junk status due to weak growth and the political upheavals after
it got a reprieve last year.
S&P's move will lead to a rise in projected debt-servicing
costs of 144 billion rand ($11 billion) in the 2016/17 fiscal
That will mean less money for critical services such as
housing, education and sanitation, which could incite even more
protests over service delivery that have already rocked towns
across the country.
South Africa's economic growth slowed to 0.3 percent in 2016
from 1.3 percent in the previous year.
"The road to #JunkStatus recovery will be long & arduous.
And it won't be possible with current policy and politics in
place," political analyst Daniel Silke said.
"Today’s decision was hardly a surprise," John Ashbourne,
Africa analyst at Capital Economics, said in a note.
"The loss of the rating will bolster opponents of President
Zuma, who will use it as evidence that his recent reshuffle is
harming the country."
Moody's is expected to review its Baa2 rating, which is two
notches above sub-investment grade, on Friday. Fitch, one notch
above junk, is not bound by a timeline.
Fitch said on Friday Zuma's cabinet shake-up heightened
political risk and signalled policy change, an outcome that
risks the country's credit rating.
"This substantially raises the risk that Moody’s ... could
similarly downgrade South Africa," Razia Khan, chief economist,
Africa at Standard Chartered bank, said.
(Additional reporting by Mfuneko Toyana; Editing by John