Last night, a couple of minutes into the Cape Town APC lecture, news broke that S&P had downgraded SA debt to Junk.
This is an event that Treasury has been working hard to prevent for the past 18 months. S&P however cited the recent removal of the Finance Minister as the catalyst for their move:
“In our opinion, the executive changes initiated by President Zuma have put at risk fiscal and growth outcomes.”
Read the full S&P statement here.
What doe this mean?
Jayson Coomer, a former Academic Trainee at UCT, has written a great blog all about it. Here is his summary:
“So in two (very long) sentences:
“Junk status means that South Africa’s government, the parastatals, and South African corporates, will have lost access to much of the world’s investing money. Being cast out of the investment quality club means that: any first world comforts will be now be more expensive, anything financed with debt will cost more, the economy will stutter, jobs will be lost, and the South African taxpayers that are left will have to absorb the freshly-higher borrowing costs of the government’s debt – even as it might try to borrow more than before in order to keep up the levels of government spending that caused the cast-outedness in the first place.”
Gloom, eh? Let’s hope that Moody’s and Fitch feel differently to S&P.”
Read the full blog, at Rolling Alpha, here.
What do you guys think? What are your clients telling you today? How do you stay calm during these uncertain times?