"In our view, economic decisions in recent years have largely focused on the distribution - rather than the growth of - national income. If both Moody's and S&P downgraded South Africa's local currency debt to junk‚ South African bonds would fall out of the Citigroup's World Government Bond Index (WGBI)‚ causing large global tracker funds to sell out of their holdings of such bonds‚" said Matthews.
Moody's and S&P Global Ratings are due to announce their decisions on Friday.
In a statement on Friday released just after 11pm, S&P said the downgrade "reflects our opinion of further deterioration of South Africa's economic outlook and its public finances".
By not downgrading the country further, Fitch is providing South Africa with an opportunity to address issues that can lead to an upward revision to the ratings.
"The 2018 budget will outline decisive and specific policy measures to strengthen the fiscal framework", the finance ministry said in a statement, without giving more detail, Reuters reported. This as the nation's yet another Finance Minister Malusi Gigaba said he expects the economic growth to sharply slow down even further, whilst the budget deficit and government debt are poised to increase.
Standard Chartered Bank's Chief Africa Economist Razia Khan said South Africa now has to show concrete signs of reform.
Fitch Ratings on Thursday affirmed South Africa's foreign and local debt scores at its highest non-investment grade with a stable outlook.More news: Facebook to alert users influenced by fake Russian accounts
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"Granted, it's not as bad as a downgrade from both rating agencies might have been, but it is not much better either", Khan said.
After rising earlier in the week on Mugabe's resignation, South African Rand (ZAR) exchange rates dipped as annual consumer price growth in South Africa decelerated to 4.8% in October, sliding from the previous period's 5.1% and missing the 5% forecast.
The rand fell as much as 2 per cent to 14.1585 per United States dollar Friday, and has lost 7.5 per cent of its value since the middle of the year.
The country dodged a credit rating downgrade on Thursday from Fitch, which kept both the local and foreign currency credit ratings unchanged at BB+, one notch below investment grade, with a stable outlook.
That could have forced index-tracking and rating-constrained funds to sell more than $10 billion in debt, analysts have predicted.
S&P has already cut South Africa's foreign debt to sub-investment grade, but Moody's still rates the country above "junk" status for debt denominated in both foreign and local currency.
"Sub-investment grade credit rating (and in this instance on the local denominated sovereign debt)‚ prevents many institutional investors from holding South African bonds‚ resulting in capital outflows".