Johannesburg — RATING agency Standard & Poor's downgraded its outlook for FirstRand Bank, FirstRand Bank Holdings and Sasol yesterday, from stable to negative. It also revised the outlook on Rand Water's local and foreign currency ratings to negative from stable.

This followed the agency's similar outlook downgrade on SA.

Standard & Poor's said the outlook downgrade on SA reflected "a deteriorated macroeconomic environment, risk of fiscal deficits and further strong depreciation in the rand". With about 80% of Sasol's operating profits in financial 2008 generated from domestic operations, Sasol's foreign currency ratings were influenced by SA's.

"Increased country risk factors for Sasol include heightened risks of inflation, lower local demand for oil and chemical products, and the potential for higher taxes should fiscal pressure increase for the government of SA," Standard & Poor's credit analyst Karl Nietvelt said yesterday.

With regard to the FirstRand group Standard & Poor's affirmed the counterparty credit ratings.

"The ratings on FirstRand Bank reflect its focused strategy, strong market position, sound business practices, healthy profitability, and robust risk management," said Standard & Poor's credit analyst Matthew Pirnie.

"The negative outlook reflects growing, although manageable, macroeconomic and industry risks, Pirnie said.

"The ratings will go down if the ratings on the sovereign are lowered or operating challenges exceed our current expectations.

"However, our base case scenario is that the group's business productivity, revenue, and efficiency initiatives will help it to maintain good financial performance, despite the slowing South African economy. Capital and liquidity will be prudently managed, with no material change from current levels."

FirstRand was not keen to comment. The downgrade was in line with Fitch's Absa, Nedbank and Investec downgrades.

Sasol spokeswoman Jacqui O'Sullivan said: "It seems to us that this is a knock-on effect arising from the revised sovereign outlook (rather) than any Sasol specific matters. We continue to manage our balance sheet conservatively, particularly given the global financial situation. Fortunately our balance sheet is strong, we are cash positive and we will continue to invest for growth".

The agency said Sasol operating and financial outlook remained strong. Ironically, Sasol benefited from the falling rand and strong synfuels and chemicals profits. The agency gave Sasol's hedging strategy a thumbs up.

Sasol's share price shed 1,74% to close at R253,50. First Rand fell 26c to end the day at R13,75.