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S&P Global Ratings changed its outlook on South Africa's sovereign credit rating to negative on Friday evening, citing low GDP growth, rising fiscal deficits and a growing debt burden.
The rating agency did not downgrade SA further into junk, however.
It warned that it may lower the rating if it observed continued fiscal deterioration due to higher pressure on spending, rising interest costs, or the "crystallization of contingent liabilities related to state-owned enterprises, especially Eskom".
The assessment was broadly anticipated by analysts. In a Bloomberg survey, 16 out of 22 analysts said they expected the outlook to change from stable to negative.
S&P in November 2017 already downgraded SA's credit rating to junk. Of the three major international credit rating agencies, only Moody's still has SA at investment grade.
Following Friday's decision, S&P has SA's long-term foreign currency rating at BB (Negative) and the country's long-term local currency rating at BB+ (Negative).
Moody's, meanwhile, changed its outlook on SA's credit rating to negative at the beginning of November.
On Friday S&P said its SA rating was constrained by low GDP per capita growth, weak economic expansion, a large and rising government debt burden, and sizable contingent liabilities primarily tied to debt-laden power utility Eskom.
"The ratings are supported by the country's monetary flexibility, well-capitalized and regulated financial sector, and deep capital markets. South Africa also has moderate external debt, in particular low levels of external debt denominated in foreign currency," it said.
S&P said it would be closely monitoring SA's economic performance to see if it weakens further.
"We could also consider lowering the ratings if the rule of law, property rights, or enforcement of contracts were to weaken significantly, undermining the investment and economic outlook. We currently view this as unlikely."
