An economist has revealed how long the current South Africa’s junk status will last.
A lot has been predicted about what is ahead concerning the state of the South African economy since it was downgraded to junk status and later recessed.
Lesiba Mothata who is the executive chief economist for Alexander Forbes Investment Solutions predicts that the South African credit rating which was downgraded earlier this year, would stay until 2023 (6) but added that this wasn’t ‘the end of the world’ as there’s light at the end of the tunnel for the country.
Mothata said: “People ask if SA is more like Zimbabwe or more like Venezuela. Yet, we have seen the spectacular bond performance and globally it looks like there will be continued demand for emerging market debt.
“I am not saying there are no risks. There are, for instance, concerns about left leaning policy here.”
The economist, however, noted that the state-owned entities including the South African Airways (SAA), SABC and Eskom, are causing the most stress to the economy as their ill performances undermined investor confidence.
Privatisation is, however, not the answer.Especially not for Eskom, who could “make electricity very expensive, he said.
Six years seems a long time to wait for economic improvement, but somehow, the rand has survived a barrage of setbacks in 2017. This is our biggest source of optimism.
Downgrading SA to junk would increase South Africa’s debt-servicing costs, seen at R144-billion in the 2016/17 fiscal year. Thus, paying higher debt costs would mean less money for critical services such as housing, education and sanitation, which could incite more protests that have rocked towns across the country.