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Assessing and promoting civil and minority rights in South Africa.

[Source: U.S. News by Adrian Saville.]

Rating agency Standard & Poor’s has cut South Africa’s foreign currency rating to sub-investment grade status and two other global ratings agencies may well follow suit.

Ratings downgrades are a clear signal to policymakers, investors, business and society more broadly that things are not on track. Although S&P’s decision to downgrade South Africa was only announced on Monday night after President Jacob Zuma’s disastrous cabinet reshuffle, it’s probably fair to argue that the decision was already in the price and that it has been there for some time.

To substantiate this claim, South African government bond yields have been priced similarly to the likes of Brazil and Russia for the best part of a year. Indeed, based on economic growth projections alone, South Africa has been failing S&P’s acid test for investment grade status for some time.
If anything, then, the decision to downgrade South Africa is overdue. In the same breath, even though S&P has expressed growing concern about politics getting in the way of policy, strength in institutional fabric and policy consistency has given the country a stay of execution. All of this was put paid to by Zuma’s night of the long knives.

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South Africa at a Glance
58 780 000 (mid 2018 estimate)
4.5% y/y in June 2019 (CPI) & +5.8 y/y in June 2019 (PPI)
-3.2% q/q (1st quarter of 2019)
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