FISCAL OUTLOOK
Hope is not enough now that SA has felt the pull of the downgrade vortex
Junk status for foreign currency debt is bad enough but we will reap the whirlwind if local currency is relegated
Two years ago, on these pages, we warned that SA was on course to lose its sovereign investment grade credit rating (BBB-or above). Sadly, this projection has become reality. After the rating downgrades of a fortnight ago, two of the three main ratings agencies (S&P Global Ratings and Fitch) now rate the country’s foreign currency as subinvestment grade (BB+), with Fitch also rating the local currency as "junk". Though this is a huge setback, worse may be to come as SA now faces the danger of losing its local currency investment rating by all rating agencies. This would be a much bigger blow, with the country likely to take years to recover from the dire consequences. As things are, heightened economic and policy uncertainty are likely to kick-start a chain of events that will further damage an already frail economy. When bombarded with negative shocks, such as now, companies and consumers tend to turn defensive. We will see this in lower business confidence making companies even le...
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