JOHANNESBURG (Reuters) - President Jacob Zuma moved to reassure foreign investors on Saturday after all three major rating agencies kept South Africa’s investment-grade status, granting the scandal-prone leader a reprieve after prolonged political turmoil.
S&P Global Ratings downgraded the local debt of Africa’s most industrialized country by one notch on Friday but retained its sovereign credit rating at one level above “junk” status, meaning Pretoria still holds investment-grade status with all three major agencies, including Fitch and Moody‘s.
With the economy seen growing by only half a percent this year and unemployment near record levels, pressure is mounting on Zuma and rating agencies warned that political tensions surrounding him could derail efforts to boost economic growth.
Zuma called for a focus on boosting growth and creating jobs and “assured international investors that South Africa remains an important and strategic investment destination”, a statement from the president’s office said.
The president faced censure this week from several party officials who called for his resignation, but a majority of the African National Congress’ (ANC) national executive committee backed him. Since taking office in 2009, Zuma, 74, has repeatedly denied accusations of corruption.
Zuma will face the ANC’s integrity commission this weekend following persistent allegations of corruption and poor election results, the party has previously said.
A prolonged investigation into Finance Minister Pravin Gordhan - whom financial markets see as a guarantor of stability - has also rattled South Africa’s financial markets.
Pretoria needs to borrow about 165 billion rand ($12 billion) this fiscal year to help plug its budget deficit, and the Treasury warned this month that its borrowing costs could double or triple if it falls into sub-investment grade.
David Maynier, shadow finance minister of the main opposition Democratic Alliance party, said all the rating agencies cited political tensions as a blight on the economy, “underlining the fact that it’s the politics that is killing the economics in South Africa”.
The rand gained 2 percent against the dollar after S&P’s decision, but analysts said this could be a brief rally for the currency, warning that a downgrade loomed if the trend of political instability and slow economic reforms was not reversed.
“Ultimately South Africa is not a shock wham bam crisis country that jumps to junk. It is a slow grind of under performance,” Peter Attard Montalto, a London-based Africa analyst at Nomura, said.
Reporting by James Macharia; editing by Susan Thomas