MyMoney Online

Avoid your own personal downgrade...

South Africa is being reviewed this week by Moody’s rating agency which has a negative outlook on our economy.

The probable downgrade to BAA3 will bring it inline with Standard and Poors and Fitch which have already downgraded us to their equivalent BBB-.

The next notch is categorised as “Non-investment grade speculative” otherwise known as “Junk” status.

Here are some links which explain the details:

http://www.tradingeconomics.com/south-africa/rating

https://en.wikipedia.org/wiki/Bond_credit_rating

What does this mean for South Africa?

Most of our national debt is raised through bonds. These debt instruments offer a fixed rate of interest for a defined period with a commitment to repaying the original capital at the end. South Africa needs to generate enough income through growth to pay it’s debt obligations. Servicing the cost of debt is one issue, however, the country needs to be economically sound to repay the original amount borrowed as well. The rating points to the risks of defaulting on this obligation as growth forecasts are weak placing a strain on being able to cover expenditure.

There are global investment companies which have rules that disallow them to invest in countries with a “Junk” status. So future borrowing will be even tougher for South Africa.

Following what happened to Brazil when it was down graded to “Junk”, the cost of borrowing will increase, the currency will weaken and the Reserve Bank will continue raising interest rates.

What this means for South Africans

The probable weakening of the rand will lead to a rise in inflation as we will pay more for imports, which will lead to a rise in interest rates which will deplete our ability to save.

Research shows that it takes around 7.5 years to for a country to recover from a junk status rating. This poses a gloomy outlook for us, especially as households are already on their knees struggling to make ends meet.

What can we do?

Avoid our own personal downgrade by getting tougher with ourselves.The cost of debt which rise faster as interest rates hike. Forget the illusion of getting through tough times by borrowing. Instead, nail down your exposure to debt and focus on being able to afford your lifestyle .This way you will be able to cope far better if and when the storm arrives. You will also protect your creditworthiness keeping you in good standing should you need a loan in the future.

Listen to the audio below for more information

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

702 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 702 community a safe and welcoming space for all.

702 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.

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

Read More
Where to invest money you intend to leave to your kids

Where to invest money you intend to leave to your kids

The Money Show’s Bruce Whitfield interviews Galileo Capital Personal Financial Advisor Warren Ingram.

How to survive retrenchment

How to survive retrenchment

Your rights (and their responsibilities) upon retrenchment. Bruce Whitfield interviews Personal Financial Advisor Warren Ingram.

3 shares that'll bring home the bacon

3 shares that'll bring home the bacon

The Money Show’s Bruce Whitfield interviews Overberg Asset Management analyst Kirk Swart.

The best investment on the JSE right now and one from abroad (by Anchor Capital)

The best investment on the JSE right now and one from abroad (by Anchor Capital)

Bruce Whitfield interviews Anchor Capital Aggressive Long Short Fund Portfolio Manager Liam Hechter for his “stock picks” feature.

You’re wrong if you think you (or anybody else) can time the market

You’re wrong if you think you (or anybody else) can time the market

Don’t even try, because inflation will eat you for lunch, says personal financial advisor Warren Ingram.

3 best companies to invest in right now (by Nefg Fund Managers)

3 best companies to invest in right now (by Nefg Fund Managers)

The Money Show’s Bruce Whitfield interviews Nefg Fund Managers Chief Investment Officer Gerbrand Smit.

Popular articles
Banting, the drive behind butter shortage in the world

Banting, the drive behind butter shortage in the world

The shortage of butter is a global problem as more people are switching low-fat for full-fat milk, says Dr Koos Coetze.

Why the PAC wants South Africa renamed Azania

Why the PAC wants South Africa renamed Azania

Pan Africanist Congress's Narius Moloto explains why it supports the name Azania, a word which he says has Arabic origins.

Opinion:  Bishop Lekganyane is right

Opinion: Bishop Lekganyane is right

Stephen Grootes weighs in on comments made by the Zion Christian Church Bishop at the weekend.

Getting to know MP, Dr Makhosi Khoza

Getting to know MP, Dr Makhosi Khoza

Dr Khoza is admired by South Africans for her role in the SABC inquiry as a ANC member of parliament.

It's not the end of the road... Top tips to improve your matric

It's not the end of the road... Top tips to improve your matric

"Recognise that it’s not the end, it’s the beginning." Expert advise for school-leavers who want to improve their results.

Who is Advocate Tembeka Ngcukaitobi?

Who is Advocate Tembeka Ngcukaitobi?

The EFF lawyer stole the show during the state capture report court battle.

How to make your first million

How to make your first million

Warren Ingram discusses his new book in which he shares practical ways for ordinary people to achieve financial freedom.

3 easy questions could bag you R2000!

3 easy questions could bag you R2000!

WIN R2000! But only if you can prove you're a whiz of the MTN Biz Quiz by answering the following three questions...

Blesserfinder: Matching you with a sugar daddy near you

Blesserfinder: Matching you with a sugar daddy near you

Is social trend Blesserfinder, where girls are allegedly matching up with rich 'benefactors' in exchange for sex, a real thing?