South Africa's foreign-currency credit rating has been downgraded to junk status by credit rating agency Standard & Poor's (S&P), hitting the country's government bonds and sending the rand tumbling.
The agency blamed the rating cut to the "divisions in the ANC-led government that have led to changes in the executive leadership, including the finance minister, have put policy continuity at risk."
It has cut the country's foreign-currency credit rating to BB+ with a negative outlook, saying this reflected its view that political risks will remain high in 2017 and that "policy shifts are likely which could undermine fiscal and growth outcomes more than we currently project."
It also lowered South Africa's local-currency rating to BB- from BBB. The agency announced the rating cut after South Africa's markets closed for business on Monday (3 April).
Only last week, President Jacob Zuma fired respected Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas. The move is believed to be the result of differences within the African National Congress government over plans to redistribute wealth to the country's black majority.
However, the decision has drawn a backlash from within the ANC and opposition members have been calling for a vote of no-confidence in Zuma.
The Wall Street Journal (WSJ) notes that the downgrades were seen as a "rebuke" to the new Finance Minister Malusi Gigaba who only hours before the downgrade said that the government would continue to reduce its deficit.
"We are not a bunch of wild gunmen running amok, gung-ho into Treasury to do different things. We are going to maintain the programmes that are being implemented," Gigaba told reporters. His words however failed to impress S&P.
The newspaper said that the opposition Democratic Alliance and five other parties have called on their supporters to embark on a street protest on Friday (7 April). They have also threatened legal action against the speaker of Parliament should she refuse to convene a special session to consider a no-confidence motion against Zuma.
Moody's Investors, which currently has South Africa two notches above junk status, is expected to publish its assessment of Africa's most-developed economy on Friday.
The National Assembly is on recess until early May.