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Why economist believes Moody's will downgrade SA

Professor at the Wits School of Economics and Business Jannie Rossouw on why he thinks a downgrade is imminent.

I am one of the people who is expecting a downgrade to be announced this evening.

Professor Jannie Rossouw - Wits School of Economics and Business

He believes the Reserve Bank has been too optimistic in its forecast for economic growth this year and these are factors considered when determining a country's credit/risk rating.

I believe we will have much lower growth than the reserve bank predicts, and if we have load shedding again, we might even go into a recession this year.

Professor Jannie Rossouw - Wits School of Economics and Business

There are degrees of junk status, he adds.

Once you are in junk status, you can go lower and lower in junk status.

Professor Jannie Rossouw - Wits School of Economics and Business

This will result in higher interest rates on South African debt to compensate for risk.

He outlines short and long-term steps government needs to take. One short-term step is to sort out the Eskom crisis, and another is to reduce civil servants remuneration packages.

And in the long run?

Government needs to make South Africa an interesting and exciting place to invest again and that rests squarely on the question of ownership rights and asset rights.

Professor Jannie Rossouw - Wits School of Economics and Business

Take a listen to why Prof Rossouw believes SA will receive a downgrade:


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