South Africa says it has done enough to show credit rating agencies it can boost economic growth, but an ongoing power struggle within the ruling African National Congress could push it into junk status next week.
The country needs to borrow about 165bn rand ($12bn) this fiscal year to help plug its budget deficit, and the treasury warned earlier this month that its borrowing costs could double or triple if it falls into sub-investment grade.
On Friday, Moody's will review its Baa2 rating, which is two notches above sub investment grade, while S&P and Fitch, which rate South Africa just one rung from junk, are expected to give their verdicts next week, on Friday.
S&P threatened a downgrade earlier this month, saying political infighting could undermine and delay effective policy choices.
Moody's, which has a negative outlook, and Fitch whose outlook is stable, both say the government needs to do more to lift growth from an expected 0.5% in 2016.
Turmoil within the ANC has deepened since the previous reviews, with prosecutors last month announcing plans to lay fraud charges against Finance Minister Pravin Gordhan.
Gordhan, seen by investors and ratings agencies as fiscally prudent, denied the charges, which his allies said were politically motivated, and state lawyers withdrew the case.
But investors are worried his tenure remains under threat due to an investigation into his role in setting up a tax department unit which police say illegally spied on politicians.
"The charges against Gordhan have been dropped, so that's good, but we've heard from the National Prosecuting Authority that they're still looking into this rogue unit, so there's no conclusion," KPMG senior economist Christie Viljoen said.
"The chances are 60/40 that a ratings downgrade is going to happen. If it doesn't happen now, next year will definitely be it."
Gordhan has denied that the unit set up while he was the tax commissioner operated outside the law, but analysts say the investigation could undermine the treasury's efforts to grow the economy, slash unemployment of 27.1% and rein in debt, currently close to 50% of GDP.
After Gordhan cut the growth forecast last month and announced wider budget deficit targets for the next three years, Moody's singled out the weak economy, wage pressures and liabilities linked to cash-strapped state-owned firms as key risks to South Africa's credit quality.
Fitch said that while fiscal consolidation remained a government priority, debt was still too large compared with output and would remain so given low growth.
Gordhan, who had been finance minister from 2009-14, was reappointed in December to calm investors after President Jacob Zuma abruptly fired Nhlanhla Nene, also highly regarded by investors, replacing him with an unknown politician and triggering a sell-off in the rand and government bonds.
"Our pessimistic view with regard to South Africa’s upcoming rating review stems from persistent headwinds that have given little indication of receding, including delayed fiscal consolidation efforts," NKC African Economics analyst Hanns Spangenberg said.
Zuma has been dogged by scandals for much of his presidency, and the country's anti graft watchdog has called for a judicial inquiry into allegations of influence-peddling. He denies his close associates have had a say in appointments.
The president, who has survived two no-confidence votes and an impeachment motion in parliament this year, said on Wednesday South Africa had done enough to avoid sovereign rating cuts, and accused opposition parties of overly politicising the issue.
Officials and some analysts see some credit rating positives, including an announcement that costly nuclear power expansion plans are being slowed and plans for a minimum wage aimed at avoiding economically damaging strikes.
But sceptics say these and other measures aimed at appeasing ratings agencies could be too little, too late.
"We are not persuaded that these reform efforts go far enough to transform South Africa's growth prospects or durably remove the risk of ratings downgrades," HSBC Securities economist David Faulkner said.