Global rating agency Standard & Poor (S&P) has downgraded South Africa’s status to ‘junk’.
You read that right. Our country’s sovereign credit rating is now junk – or, in financial terms, a double-B-plus, according to EWN.
The rating agency says its decision was made on the back of the political and institutional uncertainty following President Jacob Zuma’s cabinet reshuffle last week, which also led to a countrywide #BlackMonday movement that sparked even more racial divide amongst the country’s citizens.
While the rand has not depreciated as much as economists predicted, other rating agencies will be announcing their SA ratings in the coming weeks, which may impact South Africa’s financial future even more, including the living standards of South Africans.
Not only does this complicate the country’s ability for economic recovery but it will also impact employment growth and, according to S&P CEO, may stagnate or even decline revenue collection. However, Times Live reports that Wits University Associate Professor of Economics Chris Malikane says the rating won’t affect the average South African in the short term. But the downgrade will mean higher interest rates and lower net worths overall, making it difficult for many SA households to pay for vehicle and home finance.