MyMoney Online

Rating Agencies circle…two down one to go.

Standard and Poors decided to hold off the decision this week to hold off on the decision to downgrade South Africa to ‘non investment grade speculative’ commonly called ‘Junk Status’. It's a place every country tries to avoid as the consequences are devastating.

Getting out of the dreaded ‘Junk Status’ is much harder than preventing it. It’s like falling into an icy pond and trying to get out on the slippery side.

It takes years of struggle and hardship to correct and restore the credibility investors look for, let alone the damage that it does to the image of a country. Who wants to be a citizen of a country which has a high risk of meeting its investment obligations?

What are the ramifications for South Africa?

Foreigner investors will disinvest from SA projects, companies, bonds and stock markets, leading to a devaluation of assets. In turn the flight of capital out of the country the - divestment - leads to a weaker currency.

A weaker rand means that our imports will be more expensive (including oil) which translates into a rise in the cost of living.

High inflation and and a weakening currency will lead to higher interest rates, which will mean that the cost of debt will increase.

Take advantage of the reprieve.

So we were been given a little breathing space by Moody’s last month us and now by Standard and Poors.

We have been given a reprieve, but there is a third rating agency, Fitch, to come.

They will be making a decision this month, and as they are the smaller of the three, will likely follow their counterparts.

This brief period of grace creates a chance for us to turn things around.

In the meantime South Africans should be saving as much as they can and paying off debt as quickly as possible. If we don’t, we will have a much harder landing should a downgrade takes place. A sound financial plan make provisions for the worst scenario. So, we should not be complacent.

Hopefully, our key decision makers can pull off a remarkable turnaround in the meantime.

Listen to the audio below for more information

Read more from Paul Roelofse at www.investforlife.co.za

CapeTalk welcomes all comments that are constructive, contribute to discussions in a meaningful manner and take stories forward.

However, we will NOT condone the following:

  • Racism (including offensive comments based on ethnicity and nationality)
  • Sexism
  • Homophobia
  • Religious intolerance
  • Cyber bullying
  • Hate speech
  • Derogatory language
  • Comments inciting violence.

We ask that your comments remain relevant to the articles they appear on and do not include general banter or conversation as this dilutes the effectiveness of the comments section.

We strive to make the CapeTalk community a safe and welcoming space for all.

CapeTalk reserves the right to: 1) remove any comments that do not follow the above guidelines; and, 2) ban users who repeatedly infringe the rules.

Should you find any comments upsetting or offensive you can also flag them and we will assess it against our guidelines.

CapeTalk is constantly reviewing its comments policy in order to create an environment conducive to constructive conversations.

Read More
3 best investments on the JSE right now

3 best investments on the JSE right now

Stock picks of the week, by Mergence Investment Managers Portfolio Manager Peter Takaendesa.

2 best investments on the JSE right now (and one from the USA)

2 best investments on the JSE right now (and one from the USA)

It’s Stock Pick Monday on Bruce Whitfield’s The Money Show. He interviews I-Capital Managing Director Lance Williams.

Women are better investors than men

Women are better investors than men

Warren Ingram explains why it is that women clearly outperform men.

Hottest shares you can buy right now (by Fairtree Capital)

Hottest shares you can buy right now (by Fairtree Capital)

The Money Show’s Bruce Whitfield interviews Portfolio Manager Jean-Pierre Verster.

Unsure where to invest? These are the best shares right now (by Anchor Capital)

Unsure where to invest? These are the best shares right now (by Anchor Capital)

Sumitra Nydoo (on The Money Show) interviews Anchor Capital Analyst Henry Biddlecombe.

How accurate (or off the mark) stock pickers on The Money Show have been in 2017

How accurate (or off the mark) stock pickers on The Money Show have been in 2017

Bruce Whitfield grills three stock pickers he interviewed in January on the performance of their picks for 2017.

Popular articles
An expert guide on 'hotwifing' and 'cuckolding' in the bedroom

An expert guide on 'hotwifing' and 'cuckolding' in the bedroom

Clinical sexologist Dr Eve shares insights into sexual fetishes and how partners negotiate them in their bedroom and relationship.

[Watch] John Maytham shuts down victim shamer on air

[Watch] John Maytham shuts down victim shamer on air

A caller wanted to know what the alleged victim had done in order for Grace Mugabe to assault her.

Cape officials to harvest 500 million litres of new water a day

Cape officials to harvest 500 million litres of new water a day

Mayor of Cape Town speaks to CapeTalk's Kieno Kammies about plans to provide more water amidst the ongoing drought.

LISTEN:  Reformed car hijacker sheds light on hijacking underworld

LISTEN: Reformed car hijacker sheds light on hijacking underworld

This reformed car hijacker was convicted for hijacking, robbery and murder and served almost 16 years jail time. Hear his story.

Journos walk out of Bathabile Dlamini's briefing after 2 hour wait

Journos walk out of Bathabile Dlamini's briefing after 2 hour wait

EWN's Gia Nicolaides says journalists walked out of the media briefing on social grants after waiting for hours for her to arrive.

3 emergency numbers you should have on speed dial and how they work

3 emergency numbers you should have on speed dial and how they work

These are the emergency numbers you should have on your cellphone and this is what you must understand about how they work.