Ratings agencies put pressure on South Africa after finance minister’s sacking

Moody’s said its decision to initiate a review for downgrade was “prompted by the abrupt change in leadership of key government institutions”. The review will consider questions including whether “changes in leadership signal a weakening in the country's institutional, economic and fiscal strength”.

The agencies’ announcements came after President Jacob Zuma recalled Gordhan from a trade mission overseas towards the end of last month – to replace him with a former minister of home affairs and public enterprises Malusi Gigaba.

However, Gigaba said while the rating agencies’ announcements were a “setback”, he pledged to “radically transform” South Africa’s economy and work with the Central Bank “to take steps to strengthen and transform the financial sector so that it serves all South Africans”.

In a separate speech following his appointment, Gigaba said: “I am fully aware that we are at a highly politicised, polarised and contentious moment in the history of our young democracy... I will not be distracted by external issues.”

 “Whilst we accept that states justifiably incur the scrutiny of ratings agencies and investors when they borrow, we trust and hope that this scrutiny will not preclude our ability creatively and still within our means to pursue progressive policies to achieve our development objectives,” Gigaba said. “We must have the courage and the space to develop and implement policies of our choice appropriate for our particular challenges and aspirations.”

Gigaba said “the ownership of wealth and assets remains concentrated in the hands of a small part of the population. This must change…We must grow the economy to finance rising public provision for social needs. It will not be easy, but we have no choice.”

Meanwhile, opposition parties in South Africa’s parliament have said they will press ahead with plans to hold a vote of no confidence in President Zuma.

Last year, African private fixed-income money manager, Futuregrowth Asset Management, said it was temporarily halting lending money to six of South Africa’s largest state companies “because it’s concerned about how they are being run, government in-fighting and threats to the independence of the finance ministry”.

Ratings agency Fitch warned last year that proposals to introduce a national minimum wage in South Africa might be a populist move – but also a measure that could hit investment.

Fitch’s head of sovereign ratings for Europe, Middle East and Africa, Jan Friedrich, reportedly said: "The authorities may see a need to react to the discontent about insufficient improvement to living standards by pushing costly social programmes.”