South Africa downgraded to full junk status
Moody’s has downgraded the credit rating of South Africa to junk status, being the last one of the large credit rating agencies to do so. South Africa’s economy has been performing less than stellar in recent years with high unemployment, poor access to public services and controversial economic policy decisions by the ruling ANC party.
“Unreliable electricity supply, persistent weak business confidence and investment as well as long-standing structural labour market rigidities continue to constrain South Africa’s economic growth, Moody’s said. “As a result, South Africa is entering a period of much lower global growth in an economically vulnerable position.”
This is the first of expected series of downgrades for bonds across the developing world. With junk status of those bonds numerous institutional investors will be unable to hold their position, which will create interest rate pressure at crucial junction for the developing countries’ governments. In those circumstances Deriveum would have provided stability and certainty for repayment.
