Credit agencies continue to cut South African ratings

Credit agency Moody's on Monday cut its rating on South African power utility Eskom , fixed-line operator Telkom SA and 12 municipalities, following a similar downgrade of the South African government bond rating last week.

It also lowered its outlook on miner Gold Fields Ltd to "stable" from "positive", citing concern about the impact of labour unrest on South Africa's mining industry.

The agency said in a statement it cut Eskom's senior unsecured bond rating by one notch, to Baa3 from Baa2, a move that could drive up borrowing costs for the utility as it looks to fund infrastructure spending. The state-owned utility is expected to tap the bond market for some of a planned R300 billion in funding.

Moody's made a similar cut to Telkom's rating, which was also lowered to Baa3, while 12 local governments had their long-term ratings cut.

The investors service cut South Africa's government bond debt rating and retained its negative outlook, as the country's leadership struggles to maintain economic and political stability. Moody's said its one-notch downgrade to Baa1 from A3 reflected the "reduced capacity" of South African officials "to handle the current political and economic situation" and to "place the economy on a path to faster and more inclusive growth."

Investor sentiment has been soured by a series of wildcat strikes in the mining industry in recent weeks, which have hamstrung production in the world's top platinum producer and No.4 gold producer. Critics have also charged that the strikes have exposed President Jacob Zuma's ruling African National Congress as ineffectual and out of touch with millions of poor South Africans.

Moody's rating for Africa's largest economy, however, had been higher than those of its two leading peers. The downgrade brings Moody's into line with equivalent appraisals by Fitch Ratings and Standard & Poor's.