Are we really on our way to junk status?
Sandton - Many South Africans are concerned about the effect of junk status on our economy – all was revealed at a talk in Hyde Park.
A talk on junk status and the effects that it will have on the South African economy was held in Hyde Park.
CEO of Allianz, a corporate and industrial insurer in Africa, Delphine Maidou, was the keynote speaker and she began by saying that South Africans were experiencing their toughest time since the birth of democracy.
Maidou explained that junk status meant that South Africa would be below investment grade. In essence, the country becomes too much of a risk for investors.
She highlighted that South Africa was not at junk status yet and that South Africa and Morocco were the only African countries that could say this. However, the heated discussion on whether or not South Africa is on its way to junk status has prompted debates such as the one presented by Maidou.
To summarise what junk status would mean for the economy, she presented a flow diagram in which she explained that it would result in a recession which would cause lower growth and tighter fiscal and monetary policies. This will, in turn, result in a weaker consumer and investor sentiment.
She added, “Unfortunately, those companies who are choosing to invest abroad are making the situation worse. As South Africans, we have to support our economy and, if we don’t, how do we expect others to?”
In terms of the good news, Maidou highlighted that South Africa had many positive qualities. “South Africa has a strong legal framework, good infrastructure and an advanced financial system.”
She stressed that one of the best ways to avoid junk status was to ‘educate, educate, educate’.”
Maidou remains largely optimistic and one of the quotes that she used during her presentation was one by Pravin Gordhan which stated, “The country is stable and has a healthy economy.”
