Malusi Gigaba, the new finance minister, has said he will use the National Treasury to push for inclusive economic growth, while sticking within spending frameworks already in place.Photo: Bloomberg

Johannesburg – On the back of SA being cut to junk by S&P – the first rating agency to do so – the National Treasury says it is committed to fiscal consolidation.

On Monday evening, S&P downgraded South Africa’s credit rating to junk, less than a week after a Cabinet shuffle.

The rating, which comes after President Jacob Zuma unceremoniously axed Finance Minister Pravin Gordhan and his deputy late last Thursday – sending the rand down at least 5 percent – is almost three months ahead of its scheduled ratings action.

In a statement, the global credit agency, says “the executive changes initiated by President Zuma have put at risk fiscal and growth outcomes”.

Zuma instituted a wide-ranging Cabinet reshuffle last week, which saw nine ministers lose their posts.

In a statement, National Treasury says government has noted the announcement, but it points out that, although S&P lowered its rating of foreign currency-denominated debt to a sub-investment grade, rand-denominated debt – which constitutes 90 percent of the debt portfolio – retains its investment-grade rating.

“While the leadership of the finance portfolio has changed, government’s overall policy orientation remains the same.”

Read also: 'Executive changes' risk growth – S&P

National Treasury reiterates newly-appointed Minister Malusi Gigaba’s April 1 statement in which he said: “Government has been, and will remain, committed to a measured fiscal consolidation that stabilises the rise in public debt”.

National Treasury adds South Africa is committed to a predictable and consistent policy framework, which responds to changing circumstances in a measured and transparent fashion.

“Open debate in a democratic society should not be a cause for concern, but reflects an important means to accommodate differing views. South Africa’s constitutional arrangements remain robust.”

It also points out these key institutional strengths are acknowledged by rating agencies.

“This rating announcement calls for South Africans to reflect on the need to sustain and act with urgency to accelerate inclusive growth and development so that we can reverse the triple challenge of poverty, unemployment and inequality.

“Reducing reliance on foreign savings to fund investment and relying less on debt to finance public expenditure will secure South Africa’s fiscal sovereignty and economic independence.”

S&P had SA a notch above junk status – non-investment grade – and was due to reassess the country in June. Moody’s, which rates SA two notches above junk, will access SA this month. Fitch also rates SA a notch above junk, but has not yet indicated when it will reassess the country’s rating.

Read the full statement here

A lowering to junk status means that it will be harder and more expensive for SA to borrow money to invest in vital areas at a time when the budget deficit and debt to gross domestic product ratio must be carefully limited.

S&P says SA’s long-term foreign currency sovereign credit rating was dropped to 'BB+' from 'BBB-', while the long-term local currency rating was bumped down to 'BBB-' from 'BBB'.

The rating agency adds it also lowered the short-term foreign currency rating to 'B' from 'A-3' and the short-term local currency rating to 'A-3' from 'A-2'. The outlook on all the long-term ratings is negative.

National Treasury adds government remains committed to making sure that its work with business, labour and the civil society continues to improve the business confidence and implement structural reforms to accelerate inclusive economic growth.

Gigaba will address the media on Tuesday to discuss the rating.