The effects of the Cabinet Reshuffle resulted in the recent local and foreign currency downgrade by Moody’s, to BAA3. But economists are not giving up, believing that South Africa can restore the investment grade.
A crucial factor which has affected investment in South Africa is the political instability within the country. According to fin24, an economist mentions that “A new president is among the first steps South Africa has to take to become investment grade again.” But the nation realizes what a daunting task this has been after recently taking to the streets to demand that Jacob Zuma steps down as president.
Reuters confirms this, mentioning that South Africa heavily relies on its foreign income to maintain a large budget. However, if economic growth does not return and political tensions persist, attracting investment will become a greater hurdle than it is currently.
Fin24 further cites: “Although Moody’s rating is still one notch above junk status, the country is still at risk of being downgraded further if the economy does not recover from a recession, said Thabi Leoka, Argon Asset Management economist.”
New political leadership and faster growth are therefore two central issues that needs to be addressed for the economy to become fruitful again.