Moody’s has downgraded the credit rating of South Africa’s top five banks, the ratings agency announced at the close of business on Monday.
In a statement it said: “Moody’s has today downgraded to Baa3 (negative outlook) from Baa2 (Rating Under Review outlook), the long-term local- and foreign-currency deposit ratings of the five largest South African banks: The Standard Bank of South Africa Limited, FirstRand Bank Limited, Absa Bank Limited, Nedbank Limited, and Investec Bank Ltd.”
Moody’s also downgraded 10 South African regional and local governments and three development finance institutions.
“This rating action concludes the review initiated on 4 April 2017, and follows the weakening of the South African government’s credit profile,” read the statement.
The ratings agency on Friday said it had downgraded South Africa a notch over gloomy growth prospects and the political instability unleashed by corruption scandals engulfing President Jacob Zuma.
Africa’s most advanced economy was knocked down from Baa2 to Baa3 – one notch above junk status – with a negative outlook, Moody’s said.
Fitch and Standard and Poor’s, the other two main global ratings agencies, already downgraded South Africa to junk status after Zuma’s shock purge of critical ministers in March, including respected finance minister Pravin Gordhan.
The decision outraged the opposition and part of Zuma’s own ruling African National Congress (ANC), with tens of thousands taking to the streets to demand the president’s resignation.
Moody’s had delayed its decision but finally announced the downgrade Friday citing “the weakening of South Africa’s institutional framework” as well as worsening growth prospects and rising public debt, according to the agency’s vice president Zuzana Brixiova.
The downgrade came after official statistics released Tuesday showed South Africa entering its first recession since 2009 after the economy unexpectedly contracted by 0.7 percent in the first quarter.
South Africa has had sluggish growth for years, with record unemployment of more than 27 percent.
“The urgent priority is reigniting confidence as well as reclaiming and maintaining the investment grade ratings,” the Treasury department said in a statement, vowing to improve “investor and consumer confidence” through faster reforms.