SA economy ‘moves into dark hole’

Money down the drain. Picture: Pinterest

Independent political analyst Ralph Mathekga said rating agencies were worried about the pace of South African reforms – particularly the ballooning public sector wage bill.

With South Africa’s debt borrowing level said to be at R2.1 billion a day, analysts yesterday warned that the country’s economy has moved into a dark hole.

The Southern African Venture Capital and Private Equity Association said the latest downgrade of SA to two notches below investment grade, by Moody’s and Fitch, would lead to “a further stretching of strained resources”.

Independent political analyst Ralph Mathekga said rating agencies were worried about the pace of South African reforms – particularly the ballooning public sector wage bill.

Rating agencies were “worried that if the market centrists – those that are going to introduce reforms and cut the public sector wage bill – are not winning, then SA will face a long-term economic challenge”.

“The downgrade is not just about finance,” said Mathekga.

The contributing factor was about political alignment.

Economist Mike Schussler said SA was “going from a noninvestment grade to a speculative grade”. This could happen in the next 18 months to two years.

“That would increase interest rates even more,” said Schussler.

Sanusha Naidu, senior research fellow with the Institute for Global Dialogue, said: “This completely amplifies, or deepens, our economic malaise to a large extent.”

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