Junk leader, junk country

International financial ratings agency Standard & Poor's Global junked South Africa's economy yesterday.

Its decision coincided with the ANC integrity commission's calls on President Jacob Zuma to resign immediately, adding to the pressure on a man now widely reviled as a junk president.

S&P had planned to take its next decision on South Africa's investment rating in June. But in an emergency meeting at the weekend, it decided to set the rating yesterday because of the serious political instability.

• Moody’s says it may downgrade SA’s credit rating after Cabinet reshuffleMoody’s on Monday put South Africa on watch for a possible ratings downgrade‚ dealing a double blow to the country’s image as an investment destination in one day.

The cost of interest on government debt from April 2015 to March 2016 was R128-billion, or 3.2% of GDP. S&P expects this to rise to 4.2%. In the immediate aftermath of the downgrade the rand sank by almost 3%.

In its reaction to the S&P downgrade, the Treasury said its new leadership did not mean government policy would change.

"South Africa is committed to a predictable and consistent policy framework, which responds to changing circumstances in a measured and transparent fashion," it said.

"Open debate in a democratic society should not be a cause for concern but reflects an important means to accommodate different views."

• Clamour for Zuma's head grows after SA relegated to junk statusPresident Jacob Zuma should be recalled as leader of the African National Congress after South Africa’s downgrade to “junk status”‚ said the Organisation Undoing Tax Abuse (OUTA) on Monday evening‚ a call quickly echoed by opposition politicians.

But S&P said the reshuffle posed a risk to fiscal policy.

"The downgrade reflects our view that the divisions in the ANC-led government that have led to changes in the executive leadership, including the finance minister, have put policy continuity at risk.

"This has increased the likelihood that economic growth and fiscal outcomes could suffer."

The agency pointed to financial instability in the parastatals, including SAA, Eskom and Sanral, as reasons for the downgrade.

• 'Executive changes initiated by President Zuma have put at risk fiscal and growth outcomes' - Read the full statement by ratings agency S&PS&P Global Ratings cut South Africa’s sovereign credit rating to junk status on Monday. Read S&P’s full statement explaining why they took the decision.

"The rating action also reflects our view that contingent liabilities to the state, particularly in the energy sector, are on the rise, and that previous plans to improve the underlying financial position of Eskom might not be implemented in a comprehensive and timely manner.

"An additional risk is that businesses might now choose to withhold investment decisions that would otherwise have supported economic growth ."

The ANC integrity commission hand-delivered a letter to ANC secretary-general Gwede Mantashe yesterday in which it called for Zuma's axing as president of South Africa and the ANC.

In a copy of speaking notes, the commission states: "The country is dying because of the president's leadership. The ANC is divided and fractured."

• Downgrade to junk status - what does it mean?While international markets worry about what a credit downgrade might mean for South Africa‚ an economist says most citizens were unlikely to feel a big impact immediately.

Commission deputy chairman Frene Ginwala last night refused to comment on the letter or the notes.

The commission is among a growing number of voices, inside and outside the ANC, demanding Zuma's head after his dismissal on Thursday of Finance Minister Pravin Gordhan and his deputy, Mcebisi Jonas.

Gordhan was recalled last week while meeting investors in London.

Gordhan and Jonas were replaced by Malusi Gigaba and Sifiso Buthelezi.

In a two-page letter to Mantashe,commission chairman, Andrew Mlangeni, said the committee was deeply perturbed by Zuma's decision to shuffle the cabinet without consulting the top officials of the ANC or the tripartite alliance.

"We do not accept the reasons given for this decision, namely, that Pravin conspired with Western governments to destabilise the government or the economy."

• BREAKING: SA’s sovereign credit rating downgraded to junk statusS&P Global Ratings cut South Africa’s sovereign credit rating to junk status on Monday following an emergency meeting over the weekend.

Mlangeni said that, although the commission accepted that Zuma had the constitutional prerogative to constitute his cabinet as he saw fit, "by electing to shuffle the cabinet without consulting the officials of the ANC, the president has disregarded the principle and tradition of collective leadership, both within the ANC and with our alliance partners.

"President Zuma's conduct has divided the ANC. Public utterances by the SG (Mantashe), the deputy president (Cyril Ramaphosa) and the treasurer-general (Zweli Mkhize), distancing them from the president's conduct, are deeply distressing and unprecedented in the history of our movement."

He added that the commission met Zuma in December.

"We asked him to resign as president of the country, in the interests of the ANC and of the country. He refused. We do not know whether the president informed the officials or the [national executive committee of the ANC] of our request to him to resign, or of his refusal to do so.

• Gigaba to take "tough, unpopular choices" to grow economyThe new finance minister, Malusi Gigaba, said on Monday he would pursue "tough and unpopular choices" to oversee economic growth and a redistribution of wealth to the black majority and help grow a flagging economy.

"The commission is scheduled to meet the president on 9 April at Liliesleaf. At this meeting we intend repeating our request for [Zuma] to resign as president of the republic and of the ANC."

Mlangeni told Mantashe that on Saturday the commission had resolved to request an urgent meeting with ANC officials to communicate this resolution.

Political analyst Keith Gottschalk said the commission had no power and could only report to the secretary-general urging action.

"It is entirely up to the ANC to take action."

Speaking on condition of anonymity, a member of the ANC's national executive committee last night said members were "extremely worried".

"We're worried because we haven't heard anything from our leaders. The ANC is completely leaderless at the moment. We're calling for a [special] NEC meeting at which answers will be provided because it's clear that the left hand doesn't know what the right hand is doing," she said. - Additional reporting by BDLive, Reuters