South African businesses fear further economic downgrades

JOHANNESBURG – Economists have warned of further economic downgrades in the country as global rating agencies, Moody’s and Standard and Poor’s Global remain tight-lipped to the country’s financial state.

The agencies are in the process of assessing the country’s economic status and expected to reveal their results on Friday.

According to economists, further downgrades by global agencies will detriment businesses in South Africa with more and more international investors losing trust and eventually pulling out; adding that the South African rand will lose major ground in the international market.

Standard Bank chief economist Goolam Ballim raised his concerns about significant outflows if the global agencies further offer downgrades of the economy.

“This announcement could result in approximately 10 billion dollars of sales of local bonds.”

Moody’s has already raised its concerns last month saying the medium-term budget policy statement as presented by Finance Minister Malusi Gigaba in parliament signalled a change in policy direction that was credit negative.

S&P Global on the other hand has South Africa’s foreign currency debt at junk status, although the local currency debt is still one notch above sub-investment grade.

Nedbank economist Isaac Mashego is adamant that if the economy is not downgraded now, there are possibilities to get further downgrades next year.

Stuart Bird, the chief executive of Mr Price, says there are concerns about the potential impact relating to sovereign rating reviews and political outcomes.

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