South Africa’s currency plunges after Moody’s downgrades credit rating to “junk”

The plunging of the currency to a historic low is likely to affect the country’s ability to deal with the COVID-19 outbreak. South Africa has recorded the maximum number of cases in the continent

March 30, 2020 by Peoples Dispatch

The South African currency, Rand, plunged to a historic low on March 30, Monday, after Moody’s downgraded the country’s credit rating to “junk” on Friday. This is likely to trigger a massive sell-off of the Rand and local bonds, seriously compromising the country’s financial ability to deal with the COVID-19 pandemic.

At least 1,187 of 4,282 confirmed cases across 46 African countries have been reported in South Africa.

The rate of increase in the number of cases in South Africa appears to have slightly slowed down since the lockdown which began on Friday, March 27. Over the two days prior to the lockdown, the number of cases had risen from 554 to 927. It has since increased to 1,280 as of March 30.

However, “these numbers do not indicate a reduction in the number of infections. It is merely a reflection of positive results that were received, verified and ready for today’s reporting,” health minister Zwelini Mkhize said in a statement on Sunday.

Almost half of all the confirmed cases are concentrated in Gauteng Province, which had at least 533 confirmed cases as of Saturday, followed by Western Cape which had 271 cases and Kwazulu-Natal with 156 cases.

Moody’s downgrading of South Africa’s economy to “junk” by Moody’s “could not have come at a worse time”, the government said. Finance minister Tito Mboweni added, “To say we are not concerned and trembling in our boots about what might be in the coming weeks and months is an understatement.”

According to Nasdaq, this will be “triggering up to $12 billion of forced selling, treasury and analysts estimate.” However, anxious about upsetting the finance capital, Lesetja Kganyago, South Africa’s Central Bank governor, clarified at a teleconference yesterday that no capital controls will be introduced to stop the anticipated sell off of the Rand and local bonds.

Instead, the government will approach the IMF, the World Bank or the Development Bank, “only if we run out of finance for health interventions,” the finance minister said in the same conference.

Already, the country is short of flu vaccinations, and the government has declared that the shortage cannot be addressed this year.

“We must inform our people that South Africa received a very limited stock of flu vaccines. These are pre-ordered a year in advance. At the time, the country (both public and private) placed its orders, we had not anticipated this COVID-19 pandemic. This means that as it stands, our flu vaccines are understocked,” health minister Mkhize said on March 28.

“We therefore,” he said, “plead for the understanding of all South Africans who may unfortunately not have access to the flu vaccine this year.”

The government has decided to rationalize the use of flu vaccines. Treating health workers, who are most prone to the infection while working on the frontlines to contain the pandemic, will be the first priority in using these vaccines.

So far, six doctors from Gauteng province, and three doctors, one nurse and a neurophysicist in Free State have tested positive for the infection. One of them, a 70-year old doctor in Free State, has died, while the rest, he said, “are in a good medical condition with most of them having mild or no symptoms.”

The health minister has further clarified that “none of these health workers were infected by patients that they were treating. They came into contact with their family members, friends and other colleagues who had tested positive for COVID-19. All individuals who were identified as contacts of these health workers have been put in quarantine and are being monitored.”

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