The consequences of this growing financial crisis are dire, and several can’t be avoided. One such threat – relegating SA’s credit status to junk – has already occurred. The rand has also already taken a knock to some of its worst historical levels.

South Africa’s reputation as a preferred investment destination will worsen, and it is very likely that several SOEs will default on their debt obligations. This will negatively affect their investment ratings, forcing the state to act as debt guarantor. The downgrades will add pressure to the fiscus, and the state will be forced to both consider selling off SOEs and reduce its public wage bill.

Mass retrenchments in the state are very likely and will hurt an already struggling sector. These will aggravate relationships with unions and dissent among political stakeholders.

Private sector companies will also face rating downgrades. These actions will affect their liquidity and viability, leading to additional unemployment. South Africa’s Gini coefficient will rise as social inequality grows.

Despite the prospect of -10% growth, the state will have to accrue debt to soften these impacts. In particular, it will need funds to avoid the collapse of the financial sector. Bailout and stimulus packages for long-term viability will be required. Short-term interventions are also necessary, but the only way out of this crisis is to play the long game. Whatever the cost, South Africa cannot afford the collapse of its financial sector. Overall, South Africa must anticipate its current debt-to-GDP level to grow from 70% to 90%.