As many of you are aware, the announcement by the President of the Republic of South Africa, Jacob Zuma, on Thursday, 30 March 2017, regarding cabinet reshuffling, caused a great uproar in communities all over South Africa.
One community in particular created the “#BlackMonday” movement, captioning on their website “our souls are not for sale”. The movement called on all South Africans to wear black on Monday, 3 April 2017, in an attempt to raise awareness of the citizens’ dissatisfaction with the cabinet reshuffle, not merely due to the manner in which this decision was made, but the effect that it will have on all businesses and individuals throughout the marketplace.
It should be noted that Black Monday originally refers to Monday, 19 October 1987 on which day many, if not all, stock markets around the world crashed and left wide-spread disaster for many a stockholder, business, etc. In this light, it should be considered that the #BlackMonday movement is a renewed cry from concerned citizens who realise the negative impact the reshuffling may have on our economy. This has been evidenced by South Africa being downgraded to “junk status” by Standard & Poor’s (S&P) and Fitch Ratings.
For now, it is safe to say that South Africa, despite the downgrade by S&P and Fitch, will still be able to be competitive in the market place and remains within the global bond benchmarks and the credit quality is still rated in investment grade per Moody’s rating.
Increased trading volumes and any further downgrades could have a material impact on South Africa’s ability to raise funds as well as the flow of capital into South African bonds.
This is a situation which shall be continuously monitored by the South African Reserve Bank with the result that any further slumps may end in increased interest rates and inflation, which could have serious negative impacts on individuals and businesses in the future.
This may lead to a decline in start-up business ventures and an incline in major businesses having to close their doors due to the economic constraints which could possible emanate from this. In order to try and avoid this we have recommended that all clients embark on a risk analysis. So we may address these and alleviate some of the potential repercussions.
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