Economist Xhanti Payi says the latest S&P Global Ratings downgrade comes at a heavy price.
The ratings agency cut South Africa's local-currency debt score to junk on Friday, citing a further deterioration in the country’s economic outlook and public finances, sending the rand tumbling.
The downgrade comes after Finance Minister Malusi Gigaba shocked markets on 25 October by flagging sharply weaker growth expectations, a wider budget deficit and rising government debt.
Payi explains the large scale effect this will have.
People will start taking their money away and that actually puts pressure on the rand with some weakening and that has implications for inflation in the first place.— Xhanti Payi, economist and head of research at Nascence Advisory and Research
We will hear banks are also being downgraded, and then it costs more to borrow. So that comes at a heavy price.— Xhanti Payi, economist and head of research at Nascence Advisory and Research
These are difficult days.— Xhanti Payi, economist and head of research at Nascence Advisory and Research
Click on the link below to hear Payi's take on some of the changes that need to be made going forward....