Latest Credit Rating Updates in South Africa

South Africa’s current credit rating

Keep up to date with the latest in credit rating updates with Quick Consolidation Loans. We also know that not everyone understands how the global credit rating will impact their finances, which is why we’ve also included a list of ways that these ratings will affect South Africans.

Fitch Ratings agency

On Thursday 23 November 2017, Fitch downgraded South Africa’s long-term debt to junk status.

S&P

On Friday 24 November 2017, S&P Global Ratings downgraded South Africa’s long-term foreign currency credit rating from BB+ to BB. S&P also affirmed the short-term foreign currency of the B rating. In other words, South Africa moved down the non-investment grade. Furthermore, pushing South Africa even further into junk status.

Moody’s Investors Service

On 25 November 2017, Moody’s placed their long-term Baa3 issuer and senior unsecured bond ratings on review for downgrade. This review period allows the rating agency time to assess South Africa’s ability to respond with adjustments to raise revenue. Additionally, if South Africa could also limit spending, this could work in our favour too. Improvements to SOE (State Owned Enterprises such as SABC and Eskom) governance also influenced their decision to downgrade. The review period may last until after the 2018 budget speech, which is set to take place in February.

What does these global credit ratings mean for South Africans?

This means that the country faces major ongoing uncertainties. Exposure to adverse business, financial and/or economic conditions could lead to the inadequacy to fulfill their financial commitments.

• Borrowing will be more expensive

For those who are unable to borrow money from banks, loan companies and loan sharks often seem like their best bet. But even this comes at a price. These companies understand that defaulting loans means that they make their profit by charging high interest rates.

With the junk status, the country as a whole will experience this as international bankers work in a similar manner. South Africa is seen as a risky investment, and as a result, will be paying the price for it. Furthermore, this will result in a larger cost of debt to Treasury. As a result, the more Treasury pays in interest payments the less money will be left for social services. This includes services for children and families, homeless people, pensioners, those stricken by poverty and more.

• Social Grants

If Treasury no longer has enough money to service its debt, which now comes at a higher cost, the next step would be to cut social grants. This will free up some money to finance their international debts. As per usual, this will trickle down to the poor, who will feel it the most. Moreover, hunger and poverty will increase, medical facilities catering to the underprivileged might also have their budgets cut. In turn, this means a lower standard of service delivery.

• More expensive goods

As a risk country, sourcing goods will be higher. This will force companies to raise prices and cut salary increases, causing working individuals to be paid less. People will have less disposable money at hand, causing them to spend less, which will increase the pressure on businesses.

• Increased taxes

If less people are employed, that means that Treasury will receive less tax money. This could lead to increased tax rates, in order for Treasury to bring in more money. Generally, tax hikes cause the highly skilled population to reconsider the potential for their financial future elsewhere. The loss of skilled workers within the country causes inefficient industries as unskilled workers have to take over, lowering profit margins and threatening jobs.

• International funds divest

As a rule of thumb, international bond funds usually move away from junk status countries. This means that if countries choose to take their money out of South Africa, the country’s challenges will increase and get even harder. As a nett importer, South Africa spends more money on imports than on exports, and in junk status, we are forced to borrow money in order to finance importing, at a higher cost.

If you find yourself bearing the brunt of these downgrades and are unable to keep up with your debt repayments, contact Quick Consolidation Loans today and we will help you with a consolidation loan. With our debt consolidation plan, we will help you break the bad debt cycle. We will protect your home and car from repossession, as well as protecting your credit providers from taking legal action against you.