[1]A shanty town in Cape Town. Some South Africans argue that investment benefits selected blacks and privileged whites. Creative Photo via Wikipedia by Chell Hill. Creative Commons Attribution ShareAlike 3.0
South Africa's sovereign credit rating [2] has been downgraded [3] to junk status [4] by two rating agencies, S&P Global Ratings and Fitch. The agencies have cited the sacking [5]of respected Finance Minister Pravin Gordhan by President Jacob Zuma as one of the reasons for the downgrade.
The rating is likely to impact the country's ability to borrow as well as discourage investors. According [6]to Chris Malikane, an associate professor of economics at Wits University, the rating will not affect the average South African in the short-term. However, it will lead to higher interest rates in the longer-term.
Malikane pointed out [6] that the main thing the downgrade would bring is:
[…] an increase in the risk premium‚ meaning lenders increase interest rates because of a perceived greater risk in default. The result is households with capital in investments and assets are going to be mostly affected.
South Africans have responded to the news, blaming President Zuma for the downgrade, questioning the credibility of the rating agencies and pointing out the inequality that exists in the country.
Twitter user Dabesa summarised the potential effects of the downgrade:
Consequences of #junkstatus [7]
1.Inflation will increase
2.Assets will lose value.
3.The rand will weaken more.
4.SA. will lose investors ??— Dabesa??? (@Ps_Mthimkulu) April 3, 2017 [8]
Another user, chloé, mocked President Zuma for the rating:
President Zuma finally accomplished something #junkstatus [7]
— chloé (@heyitsmechloe) April 3, 2017 [9]
Former editor at South Africa's Financial Mail, Barney Mthombothi, remarked:
#junkstatus [7] Nothing short of Zuma's immediate recall can save SA
— Barney Mthombothi (@mthombothi) April 3, 2017 [10]
Nandi joked:
We're renaming South Africa to Southern Zimbabwe #junkstatus [7]
— Nandi?Cakes (@nandicakes) April 3, 2017 [11]
Zimbabwe is currently experiencing [12]severe financial crisis.
“African Snake Doctor” shared a graph showing credit ratings under different post-Apartheid South Africa's presidents:
zuma as you can see our credit was built by your predecessors. It is not a white thing. It's pride u destroy. #ZumaMustFall [13] #junkstatus [7] pic.twitter.com/BZy2R1WImG [14]
— africansnakedoctor (@africansnakedoc) April 8, 2017 [15]
Moses Mothebe directed his tweet to Zuma supporters:
Watch Zuma supporters blame whites for #junkstatus [7]
— Moses Mothebe (@moses_mothebe) April 3, 2017 [16]
Zuma and the ruling African National Congress supporters are mostly black South Africans. Zuma has on several occasions [17] blamed [18] white South Africans for poverty and inequality in the country.
However, Duncan Wa Muvenda noted:
Blacks had lived a #junkstatus [7] life since 1652! Investment is benefited the selected blacks and privileged whites! Stop this nonsense!
— Duncan Wa Muvenda (@TheeVintage) April 3, 2017 [19]
1652 is the year the first European settlement was established by the Dutch in South Africa.
Another user shared a photo of a shanty town with the following observation:
The people living under these conditions can't tell the difference between a AAA economy and #junkstatus [7] – Facts Only ???? pic.twitter.com/z3rDMLYFjM [20]
— African (@ali_naka) April 3, 2017 [21]
AAA [22] is the highest possible rating to be assigned to a country by credit rating agencies.
While Phelelani Mpanza doubted the rating agencies:
We must question the credibility of these rating agencies #Junkstatus [23]
— Phelelani Mpanza (@PhelelaniMpanza) April 3, 2017 [24]
Another user wondered:
How did Apartheid regime survive for more than 40yrs without these criminal “ratings agencies”
— M||o (@MxolisiBob) April 3, 2017 [25]
Mpumelelo Mbatha speculated that the downgrade is an attack on emerging BRICS economies:
The downgrade of RSA to junk status may be a attack on BRICS. Last February Brazil was downgraded to junk status… #junkstatus [7] #downgrade [26]
— Mpumelelo Mbatha (@SkhuluM) April 4, 2017 [27]
BRICS [28] is an association of five major emerging national economies (Brazil, Russia, India, China and South Africa).
Vuyo Ro echoed Mbatha's sentiments:
Brazil was downgraded so that people can impeach their president with force. South Africans are not stupid. #junkstatus [7]
— Vuyo Ro (@sleam19) April 4, 2017 [29]
Last year, BRICS announced [30] that it would set up credit rating agency to rival Fitch and others.