By now, you should know that South Africa has been downgraded to junk status after an emergency S&P (Standard & Poor’s) meeting over the weekend, thanks to President Jacob Zuma’s cabinet reshuffle.

You know it’s not a good thing. But what exactly does it mean? And does it only affect rich people? Should you really not care?

Wrote Musa Manza on the Daily Vox: “The effects of this self-serving idiocy – replacing a competent and trusted finance minister with a pliant and inexperienced henchman – harmed us all, not just the rich white people who still own most of the economy and like to complain about the black government.”

South Africa’s junk status means it’s not attractive to foreign investors, which means less job opportunities for South Africans. In the long run it will lead to higher interest rates making car and house instalments higher, which is where you come in. The price of everything will essentially be higher.

“#JunkStatus effectively means a country becomes a defaulting risk because it can’t pay back what it has borrowed,” tweeted the Mail & Guardian last night in a thread explaining in layman terms.

The following thread will make it clear.

#JunkStatus effectively means a country becomes a defaulting risk because it can’t pay back what it has borrowed.

— Mail & Guardian (@mailandguardian) 3 April 2017

And the interest it has pledged to pay the holders of its debt.

— Mail & Guardian (@mailandguardian) 3 April 2017

The better a country’s credit-rating the cheaper it can borrow funds in the global capital markets.

— Mail & Guardian (@mailandguardian) 3 April 2017

The two biggest consequences of a credit junk-grading are political and financial. When gov can’t borrow from capital markets, it has to

— Mail & Guardian (@mailandguardian) 3 April 2017

Borrow from other governments (look East?) or institutions like the IMF. This is the kicker because this leads to a loss in sovereignty

— Mail & Guardian (@mailandguardian) 3 April 2017

Typically there are strings attached, mashonisa-style. The structural adjustments imposed by the IMF & World Bank can affect national policy

— Mail & Guardian (@mailandguardian) 3 April 2017

Everyone is affected but some more so than others. The poor will bear the brunt of the downgrade as will young people.

— Mail & Guardian (@mailandguardian) 3 April 2017

So! If SA was a person earning a salary, they’d be spending more than they earn and so they’d start pawning their stuff (JSE) at low prices

— Mail & Guardian (@mailandguardian) 3 April 2017

A buyer (investor) would be less interested in pawned goods (little demand) so the pawned goods (the rand) would devalue further.

— Mail & Guardian (@mailandguardian) 3 April 2017

And thus SA slides further into debt.

— Mail & Guardian (@mailandguardian) 3 April 2017

Below, are some articles from experts that will make you understand more wha junk status means and what its further implications are.

Why we are now junk: Read the full S&P statement on SA’s credit rating | EWN

What junk status means for South Africa | Business Tech

Downgrade to junk status | TimesLIVE

South Africa is on a cliff edge – just like it was in 1985 | Mail & Guardian

From cabinet reshuffle to junk status in just 90 hours | Mail & Guardian

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