President Jacob Zuma indirectly used his State of the Nation Address yesterday night to show his listeners what his government will do so that SA’s debt won’t become junk i.e ‘financial jargon for bonds below a certain rating that have a higher risk of not being repaid.’ The summary of what he plans to do includes;
- An end to policy uncertainty especially in mining sector and creation of correct investment support infrastructure.
- Change of mind on the potentially hugely expensive nuclear procurement programme. According to him ”We will only procure nuclear on a scale and pace that our country can afford.”
- Rationalisation and closure of nonperforming state-owned companies.
One can only hope that the investment or business community is convinced because South Africa cannot afford to become junk status. The status has dire consequences. “It will significantly affect the cost of borrowing, reordering of corporates on the investor’s horizon within his or her rules or within certain indices like the MSCI”
MSCI is an Emerging Market Index created by Morgan Stanley Capital International (MSCI). It is designed to measure equity market performance in global emerging markets
Credit: Businesstech.co.za, timeslive.co.za