Shit hits the fan in South Africa

South Africa is definitely NOT the place to invest, and might even look worse that Zimbabwe which shows signs of a revival. While the South African government will issue its annual budget to strengthen its fiscal framework, not a lot of people are buying it. 

The country’s Finance Minister, Malusi Gigaba, already predicted weaker growth, a growing budget deficit and rising government debt.

S&P late last week cut South Africa’s local-currency debt score to JUNK while Moody’s is threatening to slash its ratings for the country. 

The reduction by S&P “reflects our opinion of further deterioration of South Africa’s economic outlook and its public finances,” the company said in a statement. “Economic decisions in recent years have largely focused on the distribution -- rather than the growth of -- national income. As a consequence, South Africa’s economy has stagnated and external competitiveness has eroded.”

If Moody’s downgrades the debt, it could force a global selloff and trigger as much as R100-billion in outflows. The selloff of the rand bonds, which account for about 90% of South Africa’s outstanding liabilities, would trigger much higher interest rates, something the country can’t afford. 

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