JOHANNESBURG (Reuters) - S&P Global Ratings downgraded South Africa's sovereign credit rating to BB+ from BBB- grade on Monday, saying the recent firing of its internationally respected finance minister posed a risk fiscal policy.


The rand <ZAR=D3> fell by as much 2 percent to the dollar in response to the news of the downgrade, while government bonds also weakened sharply.


"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," S&P said in a statement.


S&P assigned South Africa a negative outlook, saying this reflected its view that political risks will remain high this year, and that "policy shifts are likely which could undermine fiscal and growth outcomes more than we currently project."


A downgrade to junk would increase South Africa's debt-servicing costs, seen at 144 billion rand ($11 billion) in the 2016/17 fiscal year.

Paying higher debt costs would mean less money for critical services such as housing, education and sanitation, which could incite more protests that have rocked towns across the country.

The new Finance Minister Malusi Gigaba said earlier on Monday he had spoken to the ratings agencies, and informed them he would maintain Pretoria's fiscal stance.

His appointment last week, after the sacking of Pravin Gordhan by President Jacob Zuma, has seen the currency plunge and threatens to split the ruling African National Congress.

(Reporting by Mfuneko Toyana; Editing by James Macharia)