SOUTH AFRICA: NEWEST MEMBER OF THE JUNK CREDIT RATING CLUB?

Moody's has placed South Africa on review with a downgrade in its credit rating lurking around the corner. Expect the blame game to begin and over time to intensify. The government will blame the poorly performing global economy for the downgrade. The business sector will blame the government. Truth be told they are both to blame - the government for its destructive economic and fiscal policies, and the private sector for not holding the government accountable for its reckless mismanagement of the economy. Not to be forgotten are the trade unions for contributing to the economic calamity through crippling strikes and unrealistic wage demands which the country can ill afford. The economic perfect storm approaching the country is no surprise. The government has for years ignored repeated warnings, and will now have to face the consequences for its deeds done in the past. International investors have concluded that South Africa is a credit risk no matter assurances from Pravin Gordhan to the contrary. Remedial measures announced to soothe investors is way too little and far too late. It will not prevent the deteriorating ratio between government debt and gross domestic product adversely impacting on all-important growth. South Africa is on the cusp of becoming a poorer country, and no one in their right mind will invest in a poor, let alone a poorer country. It is about return on investment, stupid! The list of countries joining the junk credit rating club is growing. Will South Africa be joining the club? The answer does not require an understanding of esoteric economic principles.