The rand extended losses against the dollar yesterday after Fitch Ratings downgraded South Africa’s sovereign credit rating, saying its economic growth prospects had deteriorated.

The rand hit a session low of R8.683 to the dollar after the downgrade, down 1 percent on the day, before regaining some ground to be bid at R8.6287 at 5pm.

Fitch downgraded South Africa’s long-term foreign currency credit rating to BBB from BBB+, the long-term local currency credit rating to BBB+ from A and the short-term credit rating to F3 from F2.

The rating agency placed the country on a stable rating outlook.

In a statement yesterday, the National Treasury’s director of communications, Phumza Macanda, expressed disappointment at the rating cut. She decried the fact that policy set out at the ANC’s Mangaung conference last month was not taken into consideration by Fitch.

Macanda touted the National Development Plan (NDP), which identifies constraints to faster growth and presents a road map to a more inclusive economy to address South Africa’s socio-economic imbalances as giving “certainty on economic policy, which the Fitch report does not seem to fully appreciate”.

According to the Treasury’s statement, Fitch cited the following factors as reasons for the downgrade:

n South Africa’s deteriorated economic growth performance, which it said was likely to affect public finances and exacerbate social and political tensions.

n A secular decline in competitiveness, which reflects wage settlements above productivity and infrastructure constraints, which it believes to have contributed to a widening current account deficit;

n A deterioration in public finances; and

n An increase in social and political tensions.

Fitch indicated that the stable outlook was due to its belief that South Africa’s credit strength would limit the speed, magnitude and likelihood of a further downgrade over the typical two-year outlook horizon.

Macanda said: “Some of the drivers of the downgrade have their roots in the protracted crisis in the euro zone, South Africa’s significant trading partner. [The] government is aware of the challenges of poverty and unemployment the country is facing.”

She said the government would prioritise the implementation of the NDP with the aim of achieving higher levels of growth.

Peter Attard Montalto of Nomura said the cut was “a little bit of a surprise, but not much”. – Additional reporting by Reuters