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How will SA’s “junk status” affect you?


“Breaking News: South Africa has been downgraded to Junk Status.” A few months ago, this news blew up on every news channel. Standard and Poor’s (S&P’s) downgraded South Africa’s credit rating to junk status. This devastating downgrade, however, was not an abrupt downfall, but rather a slow slide, mainly as a result of the country’s failure to recover from the 2008 financial crisis.

By 2000, South Africa had secured its investment grading, which it maintained for 17 years. But the slow decay into junk status has threatened our standard of living.

The question most South Africans are asking is, how will junk status affect our economy? In practical terms, when an individual has a bad credit record, it’s more difficult for them to get a loan and, when they do get credit, they have to pay higher interest rates. Now, the same thing happens when the South African government tries to borrow money: less money is available for them to borrow and the interest rate on any money they borrow is higher. So while the government scratches for money to meet debt repayments, healthcare, housing and education funding will be taking the backseat.

Investors are quick to jump ship in troubling waters. Fearing that South African’s economic growth rate would take a hit, investors sold out of  government bonds and the JSE, resulting in the fall of value of shares and bonds, affecting how much pension funds are worth.

Obviously, following the weakening of the rand, the price of imports, like food and petrol, have already started rising, putting major pressure on household finances. In future, higher inflation rates will lead to mortgages, car payments and other such debt increasing.

Then, most South Africans are also wondering, how will junk status affect businesses and employees? With fewer job opportunities, fewer salary increases and less consumer spending, the cycle of business in South Africa will definitely take a huge hit; however, with hard work and dedication, you can still thrive during the difficult times to come.

So, although things seem pretty bleak for South Africans, there are ways that can help you survive the crisis:

  1. Pay off your debt as quickly as possible, starting with the debt that has the highest interest rate.
  2. As soon as you’ve finished paying off your debt, save as much money as you can.
  3. Stop wasting money and only spend money when necessary.
  4. Supplement your salary with a passive income, whether it be a small home business or offering freelancing services to others.
  5. If you’re renting, don’t live in a house that’s bigger than what you need.

If you are battling to deal with debt, contact Debt Rescue, SA’s best debt counselling and debt review company.

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