S. Africa facing junk status downgrade: economists

Economists in South Africa have warned that the country's economic performance is under so much strain that rating agencies could downgrade it to a junk status before the end of the year.

Economists have warned that a worse storm could be brewing on the economic front as the rating agency, Moody's recently visited South Africa to assess the economic environment and decide whether to further downgrade the country's sovereign status.

High unemployment, slow economic growth and the public spate between finance minister and the treasury, are some of the things economists say are swiftly driving South Africa's economy towards a junk status downgrade.

Zuma's unpredictable decisions on cabinet appointments, has not helped to ease the problems.

"The bad news is that in our estimation this downgrade is likely. We think it is going to happen this year," said Francois Conradie, Head of Research at NKC African Economics.

"Prices are going up, interest is going up, taxes have gone up for some of us and unemployment again is going up. The Consumer Confidence Index is the lowest now than it has been in fifteen years." he said.

A junk status would mean South Africa is below B rating, which simply means it is not investable. Such a status will have dire consequences for an economy so much in need of foreign direct investment.

However, George Nicholls, Managing Director at Control Risks, a global risk consultancy company, told Xinhua that it is still not too late for the government to act.

"There are tools that the government has at hand. One of them is maintaining the pro-business message given out by Finance Minister Pravin Gordhan.

"The Presidency and the government also need to pursue a clear political message that does not scare away investors," said Nicholls.

In February the World Bank downgraded South Africa's 2016 growth forecast to 0.8 percent from an earlier forecast of 1.4 percent. It further revised the 2017 forecast from 1.6 percent to 1.1 percent. A recent survey by the South African North West University School of Business and Governance recorded a high policy uncertainty index for the fourth quarter of 2015.

This, analysts say, is already fertile ground for a downgrade and the ball is now in the government's court to avert it or at least lessen its impact. Enditem