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He said the fact that the government had decided to go ahead with legal action against Gordhan might lead to downgrades by all three ratings agencies long before the end of the year and a significant weakening of the rand.
This would force the Reserve Bank to increase the interest rate which in turn would have devastating consequences for South Africa’s millions of deeply-indebted consumers.
Roets said the major price hikes which had resulted from the prolonged drought would see further hikes when the economy had to cope with the impending downgrades by the ratings agencies and the interest rate increase that was almost certain to follow hot on their heels.
“There is no doubt in my mind that we are going to see a substantial rise in consumers who default on their repayments which in turn will lead to legal action against them by lenders to recoup their losses.”
Independent economist Dawie Roodt‚ said the decision by government to formally charge Gordhan was clearly an effort by President Jacob Zuma to get rid of the finance minister because he made it difficult for the president and his cronies to get their hands on the country’s purse strings.