The Financial Engineer

This happened to South Korea – It made them stronger!!! Read below…
I don’t mean to make this sound like it’s not very, very serious, however, you can’t get constipated about this…we’ve been through revolutions before…its just another revolution, so chill!
This brazen cabinet reshuffle by a dude called Jacob has left most of us in the financial industry shaken and feeling uncertain about the country’s economic outlook and stability.
Adding salt to the wound, Standard & Poor’s (S&P) Global downgraded South Africa’s sovereign credit rating to BB+ on Monday past. The rating agency says this junk status designation has been taken on the back of political and institutional uncertainty.

Moody’s ratings agency has placed South Africa’s sovereign credit rating on review for downgrade too but looks like they will hold off for a further 30 – 90 days before they too say we’re crap. They are all saying that the decision was prompted by an abrupt change in leadership of key government institutions.
The review will allow Moody’s to assess these risks and if the changes in leadership signals a weakening in the country’s institutional, economic and fiscal strength.

Chris Malikane‚ an associate professor of Economics at Wits University‚ said while “there is a lot of hype with the ratings agencies‚ the fact of the matter is that even if they cut the investment rate in South Africa‚ the average South African will not be much affected in the short-term.”
The main thing a downgrade would bring‚ said Malikane‚ was is an increase in the risk premium‚ meaning lenders increase interest rates because of a perceived greater risk in default.


Besides this unnerving news of the downgrade, South Africa has recorded a trade surplus in six of the last ten months. Higher international commodity prices have provided welcome relief to South Africa’s balance of payments in 2016 and early 2017.
On Friday, 31 March 2017, the Department of Energy announced that the petrol price for 95 ULP & LRP will decrease by 24c/l with effect from Wednesday, 5 April 2017, while the price of petrol 93 ULP & LRP will fall by 22c/l. This will in turn reduce the monthly consumer inflation rate by only 0.1 percentage points.
In conclusion we say ‘Keep calm and carry on investing’.


In South Korea, after being downgraded to non-investment grade, It took them only 12 months for S&P to restore South Korea to investment grade after authorities in Seoul worked very hard to patch all the loose ends and do the necessary reforms. The South Korean experience has demonstrated that being pushed to non-investment grade is not the end of the world. In a short time (a year), the country rose above junk status as authorities responded to the crisis with the utmost determination and clarity in policy formulation. Crises often breed opportunities to reform and improve economies. SA should not miss this opportunity to introduce structural economic reforms that could unlock the country’s potential to achieve its National Development Plan goals.
But there is a great concern of how to feasibly lift economic growth and attract foreign investment.


Most good fund managers have anticipated this and will diversify your risks accordingly. The idea is to sit tight and let them do their jobs. Radical swops and panicking is going to only get your blood pressure up and nothing else. South Africa may be Junk Status with regarding to Stds & Poor but they do not ipitomize the might of our people. Yes, when the doctor says you have high cholestrol, you need to address the problem…and let’s face it folks, its one that we WILL fix! This downgrade was simply part of the revolution process that we all knew had to happen. Continue to be a great South African and help change what is within your control. I cannot and will not predict investment growth but one thing that I really am feeling really positive about and am prepared to predict is, THIS TOO SHALL PASS and this great country is at the start of a 7-year growth cycle that we haven’t seen in many many years…Our Political turmoil is at its inevitable end and with that end/change always comes discomfort. Buckle up, the sun is about to shine…


However, this has nothing to do with how you drink your brandy or what your spice your braai meat with – for now!
SO, lets get back to my real life – continue to pray for rain here in Cape Town, love eachother, Get Cape Town City FC to win the PSL, Stormers for the Super 15 and hope Liverpool makes top 4 in the EPL…BUT MOSTLY, KEEP SAVING 10% OF EVERYTHING YOU EARN AFTER TAX – YES, Jacob, even that skelm stash you’re hiding underneath your bathroom floor…

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