Cape Town - The downgrade of South Africa’s sovereign credit rating by global ratings agency Standard and Poor’s on Friday, is likely to result in spending cuts being made to the country's already stressed budget, according to Bernard Sacks, partner at Mazars.
“The 2017 budget has been drawn up based on a particular scenario. That scenario has now changed significantly after the S&P downgrade. The proportion of the budget devoted to debt servicing is already a cause for concern. In order to afford the higher interest rate, based on the presently projected income, government will simply have to borrow less,” said Sacks.
One implication is that there will have to be cuts on the expenditure side, which has the potential to severely impact service delivery, according to Sacks.