A tricky time in any economy, recession is for careful spending and patience in decision making. Impacting everything from petrol to clothing, we feel a knock-on effect when our money loses value. An area hit hard, labour is also hurt by the junk status, increasing costs all round makes it less affordable to hire staff and fulfill full-time contracts.
In the wake of the junk status reveal, hitting hard after the recent government debacles, our finance minister made the great revelation that this status would have little effect on South Africa. Now, as much as you can love the positivity, this statement comes from either ignorance or pure falsehood. In what must be a blatant lie, the idea that this status will not affect us would be like saying a gun fired repeatedly in your direction has zero chance of hitting you – while it’s a nice idea, it’s just purely illogical.
With unemployment statistics on the rise, showing there has already been a knock-on effect of the junk status, and CEOs of major companies taking home obscene amounts per month, it would seem that the wealthier members of society are in need of taking responsibility, or so one would think. What does our new finance minister have to say? Well in Minister Malusi Gigaba’s mind it is not the rich, overpaid that have to own up and realise their obscene incomes, but rather it is the fault of the poor, working class population for not standing together with the government. It is this mentality that has fueled the corruption in South Africa, throwing us into a deeper hole that needed, keeping the cycle of power that has seen our country dwindle over the years.
It is to be understood that at a basic level, junk status means that new loans and the servicing of existing loans will be more expensive. And, in what has sadly become common routine, government and business will pass on this cost to the consumers, to workers and the unemployed, all of whom make a contribution through VAT, tax and government costs, As it stands, South Africa’s current annual interest payment on loans stands at R144bn. Even a 1% rate hike would cost the country an additional sum in the ball park of R1.5bn a year. However, one thing that can be said for Gigaba, his views on the rating agencies were not far off – the likes of Fitch, Standard & Poor’s and Moody’s do not represent anything more than a rumour mill, albeit an important an influential rumour mill. Rumours on which economies are made or broken and investors either put in or pull out.
With our investment rating shot and our coffers running dry, perhaps it is time to take note of where our money goes. With an over indebted population, struggling to make ends meet, the majority of our money no longer lies with the previously advantaged…but now is hidden, quietly, by our great leaders who seek to enrich themselves at the cost of the country. If nothing else, the recent political turmoil and shuffle should be all the evidence you need.