It was a late night firing. But its results were immediately obvious and a sign that international markets seldom if ever sleep as the dismissal of South African Finance Minister Pravin Gordhan and his Deputy Mcebisi Jonas showed on the night of Thursday, 30 March.

Replaced by a former ANC Youth League chairperson Malusi Gigaba, Gordhan learned of his dismissal from a television report. Sfiso Buthelezi replaced Jonas.

The dismissals was part of a Cabinet clearout that saw 10 Ministers and 10 Deputy Ministers being dismissed.

Not that Gordhan and Jonas’ axing was a well-kept secret. It was expected when President Jacob Zuma recalled them from London where they were doing a roadshow to promote South African economy earlier that week.

According to the New York Times the sackings sent the rand falling by at least 5% at one point. The cost of borrowing for the South African government increased as fears were rising that international rating agencies would downgrade South Africa’s government bonds to junk status.

A day after the firing, Morgan Stanley said in a research note: “This could create further uncertainty in South Africa’s financial markets.”

But London-based credit analyst Trieu Pham, told the New York Times that there were important differences between Gordhan’s dismissal and that of Nhlanhla Nene in 2015.

According to him, Gordhan’s departure, if not the timing, had been expected, while his replacement, unlike Nene’s (Des van Rooyen), was a Cabinet Minister, albeit one with limited experience in finance.

He added that the rand and stock prices have risen in recent months, allowing some room for maneuver.

“The long waiting time indicates that Zuma has well weighed the factors for and against the reshuffle, and thinks that he has garnered enough support to resist a power struggle and a breakup of the ANC,” Pham said.

South African economist Dawie Roodt was blunt about the effects of the Finance Minister and his Deputy.

Roodt told an online publication:

“I don’t think the rating agencies are going to give us a second chance…this will be bad for ordinary South Africans. Already the weakening of the rand is going to have an impact on the cost of petrol.

“We were expecting a significant drop in the price of petrol next month but thanks to the impact of this instruction that drop will not be as great.”

Days after the Cabinet reshuffle, ratings agency S&P Global Ratings

downgraded South Africa to sub-investment grade or junk status. This move was followed by a similar downdgrade by Fitch Ratings.

Moody’s ratings agency placed South Africa on negative outlook, meaning a downgrade is under consideration.

S&P said: “The downgrade reflects our view that 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. This has increased the likelihood that economic growth and fiscal outcomes could suffer.

“The rating action also reflects our view that contingent liabilities to the state, particularly in the energy sector, are on the rise, and that previous plans to improve the underlying financial position of Eskom may not be implemented in a comprehensive and timely manner.

“In our view, higher risks of budgetary slippage will also put upward pressure on South Africa’s cost of capital, further dampening already-modest growth.”

The net effect of all of this was that it would be harder for the Government to borrow money.

Also, according to investment strategist Magnus Heystek the result of a downgrade was that it would automatically lead to a downgrade of an affected country’s parastatals, banks and other global companies.

International credit would still be available, but it would cost the lending party substantially more in terms of interest costs.

“For a state, this therefore, reduces the amount of money that it can spend on infrastructure while companies normally pass these higher costs on to their clients, thereby reducing economic activity,” he said online.

Heystek said small to medium-sized companies were particularly vulnerable to a slow-down in bank lending and it was expected that many under-capitalized companies would not survive a prolonged economic slump.

“This does not bode well for the unemployment rate, which is already in excess of 35%, according to latest figures,” said Heystek.

He believed that the immediate impact would be negligible. However Heystek said within a month the weaker currency could translate into higher fuel prices at the pump, an increase that would quickly affect household budgets and business margins.

Despite these projections, new Finance Minister Gigaba has tried to reassure the financial world of the Government’s commitment to staying on the course of fiscal consolidation.

And the Treasury added its voice to reassure the world. Stating that  Fitch’s decision was a setback, it said  that the Government remained committed to continuing its work with business, labour and civil society to improve business confidence and also implement structural reforms that would accelerate inclusive economic growth.

According to Dawie Roodt, the downgrade would make it difficult for the SABC to get a bailout from the National Treasury.

“The reality is that they need to get money somewhere. That institution has been destroyed to such an extent that they need to get money urgently,” he was quoted as opining about the financial crisis at the state broadcaster.

Transnet, the State-owned freight and logistics company, was a casualty of the S&P demotion, which it said had downgraded its long-term foreign and local currency ratings to subinvestment grade.

Transnet said about 26% of its debt portfolio had a subinvestment-grade trigger, but it had renegotiated this between May and November 2016.

“S&P’s affirmation and acknowledgement of the critical role that Transnet plays in SA’s economy as a provider of essential infrastructure services is testament of the strong and agile manner in which Transnet management is navigating the tough macroeconomic challenges,” group CEO Siyabonga Gama said in a statement.

The SOE’s group chief financial officer Garry Pita said that the company had more than R16 billion in unused short-term credit facilities and long-term specific committed funding of more than R15 billion.

According to Pita, this, along with access to domestic and global capital markets, amounted to about R93 billion to meet funding commitments.

Transnet is involved in a massive infrastructure spend to improve South Africa’s rail, port and pipeline infrastructure. However, due to a constrained outlook, the company had scaled back investment in the 2016-17 financial year, but it still expects to spend about R273 billion over the next six years.