Maintaining price stability will not be easy for the SA Reserve Bank

JOHANNESBURG – The rand’s slide in afternoon trade on Friday came with shocking fluctuations with the domestic unit breaching R19.05 to the US dollar for the first time.

The 2020 financial markets volatility, uncertainty, complexity, ambiguity are the scenarios of emerging markets and the global economy.

We can, therefore, affirm that we are officially in a global recession pending the Q1/2020 economic results. The Covid-19 pandemic and economic fallout, Fitch downgrading of the five South African commercial banks and the with last week’s credit rating downgrade of South Africa to “junk” status by Moody’s, is weighing heavily on the currency.

This junk status is so bad for South African investments and this will be a lesson to analysts who thought a junk status can be mitigated and cost to the markets. Funds invested in local bonds and equities will be flowing out as overseas pension funds according to the rules, are not allowed to invest in markets downgraded to junk status.

Less investment leads to fewer jobs and reduced economic growth. South Africa is expected to pay higher interest rates on foreign loans due to junk status. The impact of this complexity can make South Africa finishes this remaining four years of the sixth five-year term without recovering from this economic crisis.