HOW A FITCH/MOODY’S DOWNGRADE AFFECTS MEALIE MEAL PRICES!
i. Investors reduce their investment due to poor economic returns; jobs & productivity fall.
ii. At the same time, donors lose confidence in Government and stop bringing aid.
iii. Reduced economic activity leads to poor tax revenue returns.
iv. Being unable to tame its spending appetite, Government resorts to borrowing commercially, but lenders (international creditors, banks and others) factor in a risk premium based on the Fitch announcement and increase their interest rates.
v. The more Government borrows to buy fire tenders, Gulfstream jets and ghost houses – instead of supporting FISP, the deeper it gets into the debt hole, having to pay MORE and MORE!
vi. With reduced revenue, poor spending priorities and a huge debt, Government fails to support farmers with FISP and also fails to buy enough strategic food reserves, even in times of draught, looming food shortages and hunger.
vii. Next FOOD SHORTAGES arise and then mealie meal prices skyrocket, hitting K170/ 25 kg bag!
Next time you hear a credit rate DOWNGRADE by Fitch/Moody’s, remember this!