President Jacob Zuma’s ill-advised move to axe Ministry of Finance Pravin Gordhan and his deputy Mcebisi Jonas fuelled downgrade to “junk status”. They were initially rescinded from an investor roadshow that was intended meticulously, to provide good significant opportunities to South Africa.
Supposedly, the duo were a formidable team that made a significant progress in building confidence to amongst SA investors and rating agencies amid the last 18 months which South Africa was placed under review.
As a result, Having been rated “junk” comes with lot of repercussions as we learnt that the country is enormously reliant on foreign investments which is presently affecting the rand. We are likely to see inflation rates, food pricing goes up and this will however compels Reserve Bank (SARB) to rapidly raise interest rates with intent to shield the rand and redress financial in flows.
Analysts have also warned more downsize, should the Moody’s follow Fitch and S & P’s decision. Notwithstanding, a slight relief may transpire as the newly appointed minister of finance Malusi Gigaba reassured that fiscal policies will not change and no reckless decision set to transpire under his reign.
Moreover, Gigaba’s key focus is to expedite radical economic transformation, which others have seen as a “rhetoric”.
Under the negative ratings, one economist stressed that its unlikely to sustain the projected growth this quarter and will take a maximum of 10 years to recover in a stable political environment.