South Africa is a developing economy, trying to create jobs, encourage broad-based economic empowerment, attract foreign direct investment, fund new infrastructure, stimulate growth and keep inflation in check. Almost an impossible task. It requires ongoing funding, not only to service its current debt, but to finance any future infrastructure projects. As long as funding can be sourced from abroad, South Africa will not run out of money. However, the rising cost of servicing this debt will leave little to spend internally.
External debt commitments can severely limit the spending capabilities of a global power, particularly in times of total war. South Africa is ranked 41st at $129 700 000 000 according to the CIA world fact book. The total public and private debt owed to nonresidents repayable in foreign currency, goods, or services. These figures are calculated on an exchange rate basis. typically better developed countries have higher external debt for comparison Botswana has $2 386 000 000 outstanding external debt and the USA has $17 910 000 000 000 outstanding external debt.
The rating agencies will be taking a close look at SA’s growth rate, rise in debt, monetary policy and political turbulence. The rise in debt is the one factor that can be influenced. It is therefore imperative that some of the worst-performing SOEs should be auctioned off, starting with SAA, Alexkor and Denel. None of these are crucial to the economy, are debt ridden, and require further injections of cash to survive.
Yes Denel as previously mentioned the Defense industry is tanking and we should be concerned about loss in local manufacturing but we should not be carrying companies that are unable to provide for themselves.