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Failing and mismanaged state-owned enterprises such as SAA and Eskom pose the biggest risk to the South African economy, according to Nedbank CEO Mike Brown.
Brown, in an interview with Bloomberg, said that if South Africa’s local currency debt is downgraded because of further bailouts to SOEs, the economy will then really take a sour turn.
SAA, which has been loss-making since 2011, is already on R19.1bn of state-backed guarantees and now wants R10bn more from government for its recapitalisation plan. Meanwhile, corruption-dogged Eskom almost triggered an acceleration on its R350bn debt amid a qualified opinion on its latest annual financial statements.
Local banks, in turn, are bracing for hard times. Nedbank yesterday recorded a 3.7 percent first-half profit decline while Absa recently reported its first fall in interim income since 2009.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.