Moody's downgrades South Africa to junk status

Fulcrum29

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I actually don't expect much of a reaction from the markets on Monday, if anything it will be a relief.

Banker friends I've spoken to all indicated that junk has been priced in for a very long time now.
I will have to wait and see how the market reacts next week, and once COVID-19 is nothing more than having a cold. Further 'radical' policy may also worsen the situation. Say you are right, then the Rand is a pretty strong currency under the circumstances.
 

genetic

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Quite a big claim.

Our economy is trash-tier because half the labour force is untrained. This is because of half a century of intentionally low-quality education for black people. We can't supply skilled labour to firms. Add to this highly rigid labour markets and low quality institutions (excluding the legal system) and investment runs away.
A result of BEE.
 

Magnum

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Yah because that’s why we were downgraded.. not the huge debt, structural reform, government labour cost, corruption, fraud, soe mismanagement etc

I think people need to learn to chose their battles better. Fighting gross incompetence, cronyism, corruption, fraud etc all achieves what SA needs. Dropping BEE to appease your minority achieves nothing when the write up causes greater political turmoil. <— something I don’t understand why people who claim to be so clever don’t get.. but then they support Trump too so..
IMF wont borrow us money if we support apartheid. You have to change a couple of laws first.
 

Klipdrif

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I was watching enews for some corona updates and the moody topic came up. They switch over to a young black economist who blabbers on that the reason for junk status is because the wealth of the country is in the hands of the white minority....my blood was boiling...really. Once again disinformation being fed to masses.
 

Brenden_E

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Too simple an explanation for an incredibly complex situation.
You are overcomplicating it. South Korea was absolutely trash tier and become an economic powerhouse in a very short time.

I can tell you what they didn't do. They didn't blame someone else for their troubles decades after the fact. They took responsibility and solved their problems. SA is getting worse and worse 25 years later. This failure lies squarely on the leadership and those that keep electing the same failing leadership.
 

RVQ

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It seems the pandemic overshadowed some notable news. Prior to the downgrade there was a mass selloff of bonds in to an extent there was no more buyers and SARB had to step in to keep the money flowing, becoming the buyer to prevent default. If this downgrade causes further outflows when the market opens this week, SARB might have to intervene again, this is going to push up inflation resulting in a much higher cost of living for all South Africans, further to that building and maintaining infrastructure (roads, schools, hospitals, power stations...) is going to get really expensive as high risk bonds equals high interest rates.

I believe almost 50 countries have now approached the IMF, the IMF will need additional funding except the US has veto powers and Mr Trump is no fan of charity. So the IMF is more likely going to have to choose who its going to save. A country lead by a party that spent two decades ignoring theirs and other expert advice is least likely to be on top of their agenda especially when there's more willing countries in much dire positions. If the ANC does go cap in hand and the IMF entertains them, it means the stubborn ANC will have to cut government expenses, cut salaries, perform mass retrenchments, open power generation/government to privatisation, sell off non-essential SOE's and assets which is most likely going to rally the unions, people, opposition parties, alliance partners and internal factions against them, potentially resulting in extensive unrest. Hopefully BRICS comes to South Africa's aid although I'm not confident it has the means to foot the full bill.

South Africa can only hope that the virus is the least of its nations problems but I think the Economic storm that's about to follow is going to be far more devastating...
 

jackshiels

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You are overcomplicating it. South Korea was absolutely trash tier and become an economic powerhouse in a very short time.

I can tell you what they didn't do. They didn't blame someone else for their troubles decades after the fact. They took responsibility and solved their problems. SA is getting worse and worse 25 years later. This failure lies squarely on the leadership and those that keep electing the same failing leadership.
Economic systems are extremely complicated by nature. As is pretty obvious from all literature and historical evidence, apartheid's economic effects are far reaching and play a majority role in our current problems. Structural inequality is a long-lasting phenomenon, and SA is statistically one of the most unequal nations on the planet.

Regarding the ANC, many metrics show serious improvements (e.g. those living below the poverty line after UCGs etc.) under the current govt. However, these things are not easily solved.
 

Brenden_E

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Economic systems are extremely complicated by nature. As is pretty obvious from all literature and historical evidence, apartheid's economic effects are far reaching and play a majority role in our current problems. Structural inequality is a long-lasting phenomenon, and SA is statistically one of the most unequal nations on the planet.

Regarding the ANC, many metrics show serious improvements (e.g. those living below the poverty line after UCGs etc.) under the current govt. However, these things are not easily solved.
Of course, apartheid has a legacy. However, it has become the crutch to excuse persistent underperformance, poor governance, and corruption in practically every state department.

We are where we are because of fearmongering by the ANC and the exploitation of apartheid as a tool to deflect attention from the ANC's failures.

Where are the serious improvements? Any improvements that did happen occurred under Thabi Mbeki, and they have long since been reversed. In 2020 I wouldn't be surprised if more lived below the poverty line in absolute terms, but it's hard to verify since there are no credible stats.
 

jackshiels

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Of course, apartheid has a legacy. However, it has become the crutch to excuse persistent underperformance, poor governance, and corruption in practically every state department.

We are where we are because of fearmongering by the ANC and the exploitation of apartheid as a tool to deflect attention from the ANC's failures.

Where are the serious improvements? Any improvements that did happen occurred under Thabi Mbeki, and they have long since been reversed. In 2020 I wouldn't be surprised if more lived below the poverty line in absolute terms, but it's hard to verify since there are no credible stats.
Ever heard of Stats SA? Its considered stellar.
 

JayM

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IMF deals primarily with foreign exchange crises. We borrow almost exclusively in rand, and have $50bn in reserve. It may happen, but not right now.
 

BBSA

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