Economists: Pravin fallout bound to plunge SA into junk status

There’s agreement the probe raises doubt about whether Gordhan has the power to implement fiscal reforms.

FILE: Finance Minister Pravin Gordhan at the Sars briefing on 01 April 2016. Picture: Christa Eybers/EWN

JOHANNESBURG - A Reuters poll of economists has found that there is general agreement that South Africa's credit rating is heading towards junk status due to the fallout over Finance Minister Pravin Gordhan.

The poll of 23 economists was conducted after police summoned Gordhan to appear before the Hawks to obtain a warning letter regarding a covert unit.

Nineteen of 23 economists surveyed by Reuters said that the investigation posed a "significant" risk of leading to a downgrade of South Africa's sovereign rating to speculative non-investment grade at Standard & Poor's (S&P) December review.

The other four said it would be "marginally" significant.

However, the respondents overwhelming expected at least one agency to cut the rating to junk this year, with S&P seen the most likely.

There's agreement that the probe raises doubt about whether Gordhan has the political space to implement much-needed fiscal reforms.

The poll shows that South Africa's economic growth is already expected to slow to just 0.2 percent this year from 1.3 percent last year and only recover slightly to 1.1 percent in 2017, which will put extreme pressure on the government's finances.