Qaanitah Hunter – Cii News| October 4, 2012
While South Africa is not yet in a state of complete chaos, it is treading
a very precarious path, a senior economist has noted.
Economic analyst for Nedbank, Muhammed Yaseen Nalla, said that since the
Marikana wildcat strikes and the Marikana massacre, global investors now
doubt the purported stability of the country.
“It (the strikes) has the potential of becoming very destabilizing because
it is increasingly symbolic around the needs of the workers,” Nalla said.
Commenting on the recent developments regarding credit rating agency Moody’s
downgrade of the sovereign debt, several municipalities and most recently five
major South African banks, Nalla said the concern is that the trajectory is in
the wrong direction.
The agency announced on Thursday that it has downgraded SA’s five biggest
banks’ foreign deposit ratings due to the revision of the country’s foreign
currency deposit ceiling to Baa1 from A3 previously.
“There are concerns about the sustainability of South Africa to continue
funding our twin deficits- we have a trade deficit which means we are
importing more than we are exporting. We also have a fiscal deficit which
means as government, they are spending a lot more than they are receiving in
revenue,” the Johannesburg-based analyst said.
He said that the complete cost of running South Africa will be too much for
the government to handle.
“Over a period of time this is likely to filter through in terms of higher
rates of taxes for the consumer on the ground,” he added.
He explained that developments and incidents of global concern
undoubtedly influence the decisions of investors.
“South Africa has benefited from very strong investor flow over the last ten
years or so, and that has the potential, like I said, to slow down or if it
starts potentially reversing South Africa ill not be able to fund their
current account and fiscal deficit and that will leave us increasingly
He observed that South Africa is almost entirely dependant on the foreign investor
inflow into our equity market and bond market to keep the country afloat.
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