Land Bank downgrade to junk status possibly only the beginning: Economist
"It will become more expensive for the Land Bank to do business.," concludes Roodt.
The downgrade of the Land Bank by ratings agency Moody's could only be the start of more bad investment news, according to economist Davie Roodt.
On Tuesday, Moody's downgraded the Bank to junk status.
"The state, financially, has been devasted the last couple of years, and the Land Bank is part of the broader state,' says Roodt.
"The downgrade of the land bank, I believe, is only one of those downgrades that can be expected over the next couple of months and years and eventually we are probably going to see a downgrade fo the sate itself," he says.
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He adds: "I believe most of the ratings agencies are only waiting for the Minister of Finances' budget next month before they make a decision on the downgrade and thereafter, I'm afraid, that we will probably see a further downgrade of the state itself in South Africa.
Roodt explains what the implications of the downgrade for the Land Bank are.
"Because the Land Banks is a bank, they are dependent on funds, Typically, what they would do is they would go borrow money somewhere and they will lend this money on to their clients. Because of the downgrade, they will have to pay more for these funds...and that also means that the interest rate they charge their clients will go up as well," says Roodt.
"It will become more expensive for the Land Bank to do business.," concludes Roodt.