On Friday 13 June 2014, South Africa’s credit rating was dropped by Standard & Poor.  Our credit rating is now BBB and that is the lowest investment grade rating that you can get – the next grade down is the so-called Junk Status which many investors will not invest in.  These credit ratings are very important because they ultimately decide at what interest rates other countries lend money to us and also assist overseas investors as to whether or not they want to invest in a country.  They rely on the credit ratings of the various credit agencies and they have basically all lowered their views of South Africa.  For example, Fitch Ratings already have a BBB rating for South Africa but they have changed their outlook for South Africa, which used to be stable, to negative.  

S&P said that they don’t believe South Africa will manage to undertake the major labour laws or economic reforms that are needed to boost growth in South Africa.  I realise that every time I write about labour laws, there are a lot of people who always write about how our laws are perfect and wonderful, but you need to see it from an international perspective.  International investors are not interested in the labour laws of South Africa and we will continue to chase away investment and will continue to have our credit ratings lowered until such time as the government stands up against the Unions and changes the law.  I am not optimistic about them doing it soon and nor are the credit agencies.  On the plus side, Brazil, India and Russia all have the same bad rating, but we used to be ahead of them.  Fitch said that amongst the problems with South Africa are strike activities, high pay demands as well as problems with electricity supply.