NEW YORK, International rating agency Moody’s Investor Service has placed the South African government’s Baa2 rating on review for downgrade, a move likely to further shake investor confidence and believed to be prompted by the abrupt change in leadership of key government departments and comes after Standard and Poor’s (S&P) downgraded South Africa to junk status.

Moody’s, which has rated South Africa two notches above sub-investment grade, announced in a statement here Tuesday that President Jacob Zuma’s decision to change key positions has raised questions regarding progress on reforms previously identified as essential to sustain South Africa’s fiscal and economic strength.

After S&P’s decision Monday to cut the country’s credit rating to junk status, all eyes were on whether the other two global ratings agencies, Fitch and Moody’s, would follow suit. What Moody’s has done by issuing this statement is to put the government on notice that they are initiating a review for downgrade over the Cabinet reshuffle, but also because it raises concerns about the future effectiveness of the country’s policy-making institutions and the immediate implications for growth and public debt.

In justifying its decision, S&P said internal government and party divisions could delay fiscal and structural reforms and potentially erode the trust which had been established between business leaders and labour.

Source: NAM NEWS NETWORK