Should you be worried about the downgrade to junk status? What does it all mean and how does it affect your wallet?
Well, in plain English, when you’re considered junk, you’re considered not invest-able. Investors become fearful and avoid economies with this status. They start selling off their investments and the longer we can’t get money from the markets the longer we have to rely on bailouts.
Let me explain further…
How the downgrade status affects South Africa
South Africa borrows R 2.2. trillion from investors which at the moment is more than 50% of our GDP. With a downgraded status, the country becomes a defaulting risk because it can’t pay back what it has borrowed. When government can’t borrow from capital markets, it has to borrow from other institutions such as the IMF which can affect national policy.
However, South Africa has already been grappling with a severe drought, a weaker rand and the investment markets severely from 2016. So, investors have already factored in the negative effects. And, while the impact of the downgrade might not be significant for South African investors, it’s consumer who will pay the ultimate price in the long run.
How the downgrade status affects you
The price of imported goods like food and oil eventually become more expensive. This means that inflation increases and the South African Reserve Bank pushes up interest rates in attempt to curb inflation.
This, then adds even more pressure on South Africans because the monthly repayments on personal loans and property mortgages also go up. Therefore, you won’t just have to deal with higher petrol and food costs, you’ll also have to make do with increased repayments. So what can you do?
Start a business
Financial security isn’t something to take for granted. And, if you’re striving for business success and to build wealth, but don’t know where to start, here are tips to starting a new business.
1. First, look at your knowledge, particularly if you are employed. What part of your job you could perform as a business rather than employee?
2. Look at your personality. If you have people skills, you might be just the person to go into retail.
3. If you have the resources, you could knit, sew or even make toys. You could also offer services such as freelance writing, book-keeping and translation.
4. Look around your local neighbourhood to see what goods or services you could supply. When thinking of a business idea, try to think beyond consumers. But, also look at what other businesses need. There might just be goods or services that local businesses have difficulty in obtaining that you could supply.