Head of economic researcher at Old Mutual Investment Group, Rian Le Roux, says the downgrade was expected following President Jacob Zuma's decision to axe Finance Minister Pravin Gordhan and his deputy Mcebisi Jonas last week.
Standard & Poor’s (S&P) global downgraded South Africa's sovereign credit rating to junk status or double B plus due to political uncertainty on Monday evening.
Another international rating agency, Moody’s have placed the country's sovereign credit rating on review for downgrade.
Le Roux explains that those with bonds will be negatively affected by higher interest rates.
It's the poor that suffer the most under these kind of things. What is likely to happen is the Rand will weaken, inflation will fall, interest rate will stay high, and it's really the poor that suffer the most.— Rian Le Roux, economist
If the Rand was to keep on weakening, obviously inflation is not gonna fall as the Reserve Bank in the statement last said it expected it to do in the next couple of months.— Rian Le Roux, economist
If inflation stays high, there is no way the Reserve Bank could lower interest rates.— Rian Le Roux, economist
The impact is not absolute immediate. But, what we can say at this stage, we were looking at interest rate falling— Rian Le Roux, economist
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This article first appeared on 702 : SA junk status is treason against the poor- economist