Financial worry grips some South Africans as junk status worsens
Uncertainty spreads amongst South Africans as Moody’s and Fitch announced downgrade.
Moody’s and Fitch, two of the world’s main credit agencies have downgraded SA credit rating further into junk status. Moody’s has lowered SA credit rating 1 notch to BB2. Fitch have downgraded the country’s credit rating from BB to BB-. Both rating agencies are concerned over the monetary position of the South African government following the lock down implemented due the coronavirus pandemic. Whist government have a strategy to improve the countries fiscal position Moody’s is concerned about the actual implementation. Ultimately the downgrade will increase the interest of monies the country borrows. Concern has grown amongst some citizens.
Prem Naidoo who has recently retired from a leading financial institution is deeply concerned about the most recent downgrades.
“I am worried that the value of my pension could drop dramatically due to the downgrade. I rely heavily on the monthly income I receive and have already notice a reduction in my capital due to the financial crisis brought on by the COVID-19 pandemic,” said Naidoo.
Murray Raw who is an investment specialist and qualified financial planner at Old Mutual believes that individuals should now more than ever manage their pensions much more responsibly.
“We have already seen losses across all our investment funds due to the initial downgrade last year coupled with the negative economic effects of the lockdown. Pensioners should make sure that their monthly income never exceeds the growth on their capital they have invested. For example, if your fund returns are at 6%, a pensioner should consider a monthly pension of less than 5%. By doing so you will grow your capital by at least 1% rather than reducing it. It is important to know how the various funds are performing and it’s also essential that you communicate with your financial planner as often as possible,” said Raw.
Annerley Dulloo has just completed her degree at the Durban University of Technology and is concerned that the country’s current financial situation may affect her short-term plans.
“I have just completed my studies and I’m confident that I will find work very soon. Planning to get married and purchasing a property are part of my short-term goals. However, with the current turmoil of an additional downgrade in the economy as well as the high unemployment rate coupled with the coronavirus pandemic I am deeply concerned that I may not achieve my goals and aspirations,” said Annerley.
According to Raw it is important that any individual no matter how old they are have a sound financial plan. This includes a combination of savings and risk cover. It is also very important for young people to be disciplined and not be financially irresponsible.
“Keeping expenses low is difficult but discipline is a key to financial peace of mind. During these uncertain times, many South Africans have lost their jobs. Prior savings can help pay bills in the interim of finding another job or starting a business,” said Raw.
Raw believes that setting realistic financial goals is important. However, having the right financial products to achieve these goals is even more important.
“It is important for us to learn from these financially tough times and make sure that we make adequate provisions in the event of difficult times such as this,” concluded Raw.