Is S.Africa nearing junk status?


A hiking interest rate cycle is not going to be a big problem though it is a concern to some economies, Erwin Rode, chief executive of Rode & Associates told CNBC Africa.

“What would worry me more is the storm that is developing around South Africa’s exports which are being affected negatively because of the commodity cycle,” he said.

He added that the country had also shot itself in the foot due to fiscus issues warning that due to the ballooning fiscus, the country was facing a possible downgrade.


“The fiscus of this country is in a corner, we have a huge problem facing us, and unless the minister of finance does a very unpopular job over the next two years we might be downgraded by rating agencies to junk status.”

He also warned that any prudent investor regardless of the sector should be cognisant of the environment.

Rode said a number of investors were exploring offshore investments.

“There are many South African investors looking beyond our border, it is certainly prudent for any investor to consider hedging by investing outside the rand area,” added Rode.

He also said that unpopular decisions were the only way the country could retain investment.

“The problem the finance minister is facing is convincing his fellow cabinet ministers to make tougher decisions which are politically unpopular,” he said.

“Unpopular decisions need to be taken in the next few months,” he added.

Rode also decried the compound salary growth of big municipalities (Cape Town, Pretoria, and Durban) for the decade ending 2013 saying the salary bill had grown by between 13 to 14 per cent.