Public Protector Adv. Busisiwe Mkhwebane during the release of her report Nelson Mandela's funeral funds inquiry on December 04, 2017 in Pretoria. (Phill Magakoe/ The Times/Gallo Images/Getty Images) ~ Gallo Images
As South Africa awaits a crucial rating decision from Moody’s on Friday evening, Public Protector Busi Mkhwebane has weighed in with a veiled attack on the global credit ratings system.
In the early hours of Friday morning, Mkhwebane tweeted:
Moody’s currently rate South Africa’s at Baa3, the last rung before a sub-investment grade rating, or junk. The agency has so far kept the country’s outlook stable.
Other agencies, Fitch and Standard & Poor's relegated South Africa to junk status in 2017. They have been critical about a lack of economic reforms in South Africa, ballooning public debt and the burden placed by the country's state-owned enterprises on the fiscus.
Their downgrades were met with harsh criticism from the Zuma government, with KwaZulu-Natal provincial chairperson, Sihle Zikalala accused the credit rating agencies of waging an economic war against the country and Zuma.
In response to the impact of their downgrades, former minister of water affairs and sanitation, Nomvula Mokonyane, told ANC supporters in a rally, "Let the rand fall, we will pick it up".
There has also been calls by BRICS nations to establish its own credit-rating agency to service developing economies.
If Moody's downgrade South Africa all the way to junk, global foreign investors - who aren't allowed to hold junk bonds in their portfolios - will be forced to sell an estimated R200bn in South African government bonds. This could hurt the rand, as foreigners bail out of local assets.
A junk rating will also push up the interest rate investors demand from the SA government, which will raise the cost of government borrowing.
The agency is expect to release its latest decision on SA's rating later on Friday.