Consequences of being downgraded to junk status: Magda Wierzycka

Lack of capital collapsed the National party in South Africa. Sanctions are exactly that - no capital investment in South Africa, and it brought down that government.

Magda Wierzycka, Chief Executive Officer of Sygnia Group

We cannot underestimate how serious this rating downgrade has been...

Magda Wierzycka, Chief Executive Officer of Sygnia Group

The downgrade of South Africa's credit status to sub-investment grade (junk status) by rating agency Standard & Poor’s (S&P) means we are regarded a bad risk by foreign investors.

This is an analysis by Magda Wierzycka, Chief Executive Officer of Sygnia Group.

As a consequence, any investor who will lend South Africa money will demand a much higher interest rate.

Magda Wierzycka, Chief Executive Officer of Sygnia Group

We need to borrow R149 billion just to make up the gap in government budget.

Magda Wierzycka, Chief Executive Officer of Sygnia Group

This problem is multi-tiered because increasing taxes in an economy that is not growing and there's no job creation means that collective revenue of the country reduces while inflation is going up.

Magda Wierzycka, Chief Executive Officer of Sygnia Group

Everything has a gradual slide down rather than a rapid sharp fall – such as what we saw in 2015 – but now things are almost more serious. We are all frogs in a pot and the water is getting hotter and hotter.

Magda Wierzycka, Chief Executive Officer of Sygnia Group

To hear more of this interview, listen below:

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