JOHANNESBURG (Reuters) – Ratings agency Moody's said on Wednesday that political tensions within the ruling African National Congress (ANC) would weigh on South Africa's growth, a week after President Jacob Zuma quit after surviving a no-confidence vote in the country's parliament.
The no-confidence motion signals waning support for Zuma among ANC lawmakers, raising the possibility of political turmoil within the party and potentially affecting the fight to choose his successor at the party's conference in December.
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With the economy sliding back into recession and questions growing about the reliability of financial institutions, there is a growing risk that Africa's most industrialized economy will lose its remaining investment-grade rating from Moody's.
“The main constraints to growth are domestic, including political tensions and policy uncertainty,” the ratings agency said in its credit opinion statement on South Africa.
In June, Moody's downgraded South Africa's debt by one notch after President Zuma abruptly fired the widely respected finance minister, Pravin Gordon.
The country was removed from the JPMorgan Global Emerging Markets Bond Index after being downgraded to “junk” status by S&P Global Ratings and Fitch in April.
S&P and Fitch maintained the ratings at BB+ in a scheduled debt review following the unexpected downgrade, but both warned they would lower the rating by a larger amount if policy uncertainty continues to hinder economic reforms.
Since Gordon's sacking, there have been growing calls for him to step down from within Zuma's party, which has been in power since the collapse of apartheid in 1994.
Moody's said in a statement that South Africa's economy is expected to grow 0.5 percent this year and 1.2 percent in 2018.
Last week, about 30 ANC lawmakers defected from the party and sided with the opposition in a motion of no confidence in President Zuma, calling for his removal from office.
“The results reflect growing political tensions within the ruling party ahead of a leadership meeting of the African National Congress in December 2017,” Moody's said.
Corruption allegations in President Zuma's awarding of billions of dollars worth of government contracts to state-owned companies have also eroded investor confidence, and the threat of a downgrade is growing as political infighting drags down the economy.
The reports, which Zuma has denied, were based on leaked emails and have embroiled international companies in a scandal that has widened divisions within the ANC and led leading politicians to call for Zuma to resign.
(Reporting by TJ Strydom; Editing by James Macharia and Matthew Mpouku Bigg)