South Africa downgraded to junk status
The decision follows the cabinet reshuffle at midnight on Friday by President Jacob Zuma.
POLOKWANE – Standard & Poor’s (S&P) Global announced early on Monday evening that South Africa’s sovereign credit rating has been downgraded to BB+.
The agency cites political and institutional uncertainty as reasons for their downgrade #JunkStatus
— Polokwane Review (@PolokwaneReview) April 3, 2017
In December 2016, S&P kept South Africa’s credit rating unchanged at BBB-, just one level above junk status.
The agency said in their opinion, the executive changes initiated by President Jacob Zuma have put fiscal and growth outcomes at risk.
S&P also expressed concern over government debt and in particular, the expense of supporting Eskom.
But what does junk status mean?
In the long term, this downgrade could lead to higher interest rates‚ making it harder for families to pay for vehicles and their home loans among other daily necessities.
The downgrade will lead to lower access to credit and perhaps, an interest rate increase.
This in turn would affect many South Africans as they would be paying more to borrow money with some analysts saying it could take up to five years to recover.
Ratings agencies evaluate a country based on a range of variables that gauge stability and predictability, such as economic performance, unemployment rates and inflation.
The downgrade is likely to make it more expensive for South Africa to borrow money on the international markets, as lending to the country would be seen as riskier.
Tell us, what are your thoughts on the downgrade? How do you think it’s going to affect you?
