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Miners say latest downgrades push South Africa 'deeper into junk territory'

The Minerals Council South Africa has again called for urgent action to address the country’s economic crisis, this time after sovereign ratings downgrades by both Moody’s and Fitch which it said “push South Africa even deeper into junk territory”.
Miners say latest downgrades push South Africa 'deeper into junk territory' Miners say latest downgrades push South Africa 'deeper into junk territory' Miners say latest downgrades push South Africa 'deeper into junk territory' Miners say latest downgrades push South Africa 'deeper into junk territory' Miners say latest downgrades push South Africa 'deeper into junk territory'

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Staff reporter

Moody's Investors Service last week downgraded the government's long-term foreign-currency and local-currency issuer ratings to Ba2 from Ba1 and maintained a negative outlook.

Fitch Ratings downgraded South Africa's long-term foreign currency issuer default rating from BB to BB-, saying the downgrade and negative outlook reflected "high and rising government debt, exacerbated by the economic shock triggered by the COVID-19 pandemic".

The very low trend growth and exceptionally high inequality would continue to complicate fiscal consolidation efforts, Fitch said.

"While not unexpected, the ratings downgrades reinforce the fact that South Africa faces a deep economic crisis which, if not rapidly arrested, will continue to plunge the country into a vicious socio-economic downward spiral towards a full-blown sovereign debt crisis which will cause significant economic pain to all South Africans," the mining lobby group said.

It warned it normally took countries a decade to recover from a sovereign debt crisis.

CEO Roger Baxter said the government's economic reconstruction and revival plan announced in October was a start but did not address the critical structural and institutional reforms that would make a significant difference, to first arresting the crisis and then getting the country's economy growing out of the crisis.

"Our industry is committed to investing in our sector and in South Africa, but we can only do so if long-standing and repeatedly identified structural and institutional reforms are acted upon," Baxter said.

"There is no further time for debate.

"This is the time for action."

South Africa's finance minister Tito Mboweni criticised the rating downgrades on Twitter yesterday.

"There is something called the Queensbury Rule," he said.

"You do not continue to beat up somebody who is on their knees. You do not … Ratings agencies should treat us the same way. During a global crisis!"