Photo: Celso_Flores via Flickr
Jim O’Neill, Chairman of Goldman Sachs Asset Management, coined the term BRIC to represent the major emerging economies: Brazil, Russia, India, and China.Some have argued that the term should be revised to BRICS to include South Africa.
However, O’Neill wasn’t on board with that idea. “South Africa is not of the same economic magnitude of the other BRICs,” he said according to Dow Jones. “There are lots of other growth economies that have more justification to be added to the BRIC club than South Africa.”
Well, Moody’s just changed South Africa’s A3 credit rating outlook from stable to negative. This is from Moody’s press release:
The main drivers for the negative outlook include:
1. The growing risk that the political commitment to low budget deficits and the ability to keep within current debt targets could be undermined by popular pressures and rising internal strains within the African National Congress (ANC) party, and between the ANC and its partners in the Tripartite Alliance (the Congress of South Africa Trade Unions (Cosatu) and the Communist Party).
2. Expectations that growth will be somewhat slower than previously expected and limited to roughly 3%-3.5% over the medium term, which is insufficient to prevent already high unemployment rates from increasing further, thereby exacerbating social tensions.
3. The continued negative impact on private investment deriving from calls for interventionist actions aimed at “quick fixes” for black economic opportunities.