The poor would be hit the hardest by further downgrade

THE head of research and information at the Industrial Development Corporation (IDC) painted a bleak picture of what lies in store should the country be faced with another credit-rating downgrade.

Jorge Maia, of the IDC, speaking at the Clothing, Textile, Leather & Footwear Conference in Durban last week, focused on what could happen should the country be further downgraded.

Moody’s and Standard & Poor’s, are expected to announce their latest assessments in November.

Standard & Poor’s and Fitch downgraded South Africa’s foreign currency rating to junk status earlier this year, while Moody’s has South Africa’s long-term foreign and local currency debt ratings at Baa3, with a negative outlook. It has, however, kept South Africa’s foreign-currency and rand-denominated debt at investment grade.

Maia said if another downgrade occurred, workers and the poor would be hardest hit.

He said the cost of living would rise as prices of imported materials and petrol would increase.

“The economy would perform more poorly and that impact on employment creation could lead to retrenchments.”

He said: “We are going through a difficult time in the South African economy at present. It was quite welcomed to see that we have exited the technical recession but we are not out of the woods. The economy will turn out a relatively weak performance this year.”

He said the possibility of further downgrades to sovereign credit rating was still there.

“We will have to see how the credit-rating agencies interpret events going forward both economically and institutionally.”

He said businesses people would need to run their businesses more efficiently in order to survive.