VENTURES AFRICA – More South African companies were likely to face downgrades this year, it emerged on Tuesday, as the effect of wide spread strikes in the country took their toll on the country’s economy.
Rating agency Standard and Poor’s (S&P) warned that in addition the tentative global and domestic environment was also not helping the situation.
Analysts told Ventures Africa that other rating agencies like Fitch and Moodys would also follow suit.
“We have seen in the past that when one of the rating agencies downgrade South Africa’s companies others do the same,” the Johannesburg-based analyst said.
Rating agencies have already downgraded several large companies, including parastatals Eskom and Transnet. “It’s the uncertainty of the political environment which is weighing heavily on companies… they are somewhat paralysed by the inertia in government policies and are sitting on cash reserves waiting for more clarity on political developments,” Meganomics economist Colen Garrow said in a statement.
Garrow said advanced downgrades would make it more pricy for businesses to borrow money to help finance government’s expansion programmes.
According to Business Day, investors were anticipating the outcomes of the African National Congress’ (ANC) December elective conference to get direction on hotly debated issues such as nationalisation in the mining sector.