When ratings agency Standard and Poor rocked up and declared our junk status, many South Africans didn’t really know what the on-the-ground effects would be.

As details of how the decision would affect us all slowly spread (HERE), the reality that this is a serious knock to the country hit home.

Of course we’re not the first country to take this hit, and we sure as hell won’t be the last, but what does history say about the road to recovery?

Over the past three decades 15 countries who have taken the knock have fought back, but it’s a slow and steady process.

BusinessTech took a closer look at just how long it usually takes to turn things around:

These [15] countries include Colombia, Croatia, Hungary, Iceland, India (twice), Indonesia, Ireland, Korea Republic, Latvia, Romania, Slovakia, Slovenia, Thailand, Turkey and Uruguay…

“These countries’ diverse experiences show that it takes, on average, seven years to again graduate to the investment-grade club”, [said Lullu Krugel and Christie Viljoen, economists at KPMG].

The economists said that countries like Croatia, Iceland, Ireland, Korea Republic, Latvia and Slovenia were able to do so in three years or less. At the opposite end of the spectrum, and depending on which rating agency was involved, there were instances where it took Colombia, India, Indonesia, Turkey and Uruguay more than a decade.

Basically, we are in this for the long haul.

If we look at South Africa in particular, what steps are needed from those at the top to head in the right direction?

South Africa is most closely associated with the countries experiencing economic deterioration and, possibly, those having unsustainable macroeconomic imbalances, said Krugel and Viljoen.

“On the issue of how South Africa will be able to return to its former investment-grade rating, the key element in a recovery process is that admission that a problem exists and that work is needed to rectify this,” Krugel and Viljoen said.

However the economists noted that following the downgrade announcement by S&P, the National Treasury appeared far from concerned with the development

“The commitment to fiscal consolidation was reiterated, coupled with a rebuttal that South Africa is committed to a predictable and consistent policy framework and that open debate on policy matters should not be a cause for concern.”

It’s the classic head in the sand ostrich approach, Zuma’s lackeys denying the full extent of the problem in the hopes that, for some reason, the public will take their word for it.

Make no mistake, this downgrade is the kind of hole that takes some getting out of.

Another reason to make a little noise today…

[source:businesstech]