File photo: Nadine Hutton.

Johannesburg - A team from S&P Global Ratings visited South Africa last week for meetings, the Treasury said, ahead of a review due to be published on June 3, which could see the country’s debt rating cut to junk.

South African officials also spoke to Fitch Ratings by phone, National Treasury spokeswoman Phumza Macanda said.

Read: S&P, Fitch meet SA over review

Fitch has not given a date for its next rating decision.

S&P rates the debt of Africa’s most industrialised country at BBB-, one notch above speculative grade and with a negative outlook, while Fitch assigns a similar rating after a downgrade in December.

Seen by numerous analysts as the most likely to push South Africa to “junk” status, S&P said earlier this month that the weak economy posed an immediate risk to the rating.

“S&P was here last week and concluded all their meetings… They met with government, labour representatives, some political leaders and some business leaders as well,” Macanda said this week.

Borrowing costs

A cut to below investment grade would push up South Africa’s borrowing costs.

Last week, the Reserve Bank cut its 2016 growth forecast to 0.6 percent from 0.8 percent, reflecting the risk the economy will tip into recession. Major sectors are already in decline.

“While we pray and hope for a reprieve, it would be sensible and pragmatic for any business person and anyone engaged in the economy to anticipate the worst,” Standard Bank chief economist Goolam Ballim said.

Fitch said after Finance Minister Pravin Gordhan unveiled his Budget in February it saw a number of implementation risks to his plan to cut spending and lower debt.

The other major rating agency, Moody’s, kept South Africa’s rating on hold at Baa2 with a negative outlook, two notches above junk, on May 6.

Government officials said afterward that they did not expect South Africa’s rating to be downgraded by S&P or Fitch.

Downgrades of six sub-Saharan Africa sovereigns since the start reflect government budgets are under pressure, debt burdens are rising and low commodity prices are constraining a dominant revenue source.

In a report released this week in Lusaka at the African Development Bank’s 51st annual meeting, Moody’s said negative outlooks on sovereign credit ratings pointed to the risk of further credit quality deterioration over the next year.

Moody’s has downgraded Zambia, Nigeria, Mozambique, Ghana and Angola this year.

The ratings agency said after two decades of robust growth, sub-Saharan Africa was undergoing a protracted slowdown linked to the global commodities downturn.

“The weaker growth outlook poses a credit risk for a region whose once-healthy economic growth prospects helped it attract foreign capital and investment. In the past, rapid growth assisted in offsetting credit challenges linked to poverty, lack of development and weak institutional capacity.”

Moody’s said all of its rated sub-Saharan Africa economies – except Kenya, Namibia and Senegal – were experiencing a slowdown in growth this year, highlighting the region’s vulnerability to lower commodity prices.

The agency said Angola, Gabon, Ghana, Nigeria and Zambia had experienced the sharpest slowdown, having grown rapidly before the commodity price shock.

* With additional reporting by Reuters

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