The economy in South Africa has been bleak in 2017 with two credit downgrades to junk status and a recession. Moody believes that the economy could get worse for a few reasons.
A Divide in the ANC
It is thought that between 30 and 40 ANC MPs voted against Zuma in the recent vote of no confidence. This shows that there are rising political tensions within the ruling party leading up to the elections in December. With political instability, investments will remain low.
The economy is being undermined by the unemployment rate in the country, which os over a quarter of South Africans.
Changes to the Mining Charter
New investments in this sector will be delayed due to the continued uncertainty in regards to the legal aspects and regulations. The value of the rand took a hit when Minister Zwane’s made his proposal that 30% of companies should have black ownership.
Failing State Owned Enterprises
SAA is a prime example of this as the airline company has been taking constant bailouts and loans. SAA received R2.3 billion from the National Treasury in early July so that it was able to pay back a loan to Standard Chartered Bank.