Share

Downgrade will lead to SA job losses - economist

Cape Town - South African jobs will be lost as a direct result of Friday night's downgrade of SA's long-term local currency debt to junk status by S&P Global Ratings, according to Lesiba Mothata, chief economist at Alexander Forbes Investments. 

Mothata, speaking to Fin24 after the downgrade took place, said it would contribute to a knock-on effect resulting in higher borrowing costs, increased interest rates and tighter lending from banks. 

"The entire structure of costs when you have borrowed money in the economy goes up – which means it will be harder for the economy to grow further. Which actually means that people will lose their jobs," he said. 

"And once you lose your job, you are not able to finance that debt. It could create the problem, where people don’t really have money to pay off their debt while they have lost their jobs, and that could then create a problem in the banking sector, through higher defaults." 

SA's unemployment rate currently stands at 27.7%.

Late on Friday evening S&P downgraded South Africa's long-term local currency rating to 'BB+' - or junk - with a stable outlook, while rival ratings agency Moody's placed the country on review to be downgraded.

READ: S&P Global downgrades SA to junk, Moody's places SA on downgrade review

On Thursday, meanwhile, the third major ratings agency Fitch affirmed SA's long-term foreign and local currency debt ratings at junk with a stable outlook.

This means that, of the three major ratings agencies, only Moody's has kept SA's sovereign debt at investment grade.

Moody's said it would reassess SA's debt after the ANC elective conference in December, and the main budget in February next year. 

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.98
-0.2%
Rand - Pound
24.14
-0.1%
Rand - Euro
20.63
-0.2%
Rand - Aus dollar
12.39
+0.2%
Rand - Yen
0.13
+0.3%
Platinum
911.84
-1.3%
Palladium
1,018.92
-4.4%
Gold
2,160.36
0.0%
Silver
25.11
+0.3%
Brent Crude
86.89
+1.8%
Top 40
66,252
0.0%
All Share
72,431
0.0%
Resource 10
53,317
0.0%
Industrial 25
100,473
0.0%
Financial 15
16,622
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders