Economics success

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LOUISE KNOWLES

A PRODIGY of Alexandria Christian Academy and stellar student, Adriaan Slabbert is achieving great things studying business sciences and doing his honours in economics at Rhodes University.

Slabbert decided to study economics because “the economy is always there” and it affects our lives immensely every day in more ways than we can understand.

It’s a fairly new field; one of the best-known early economic works The Wealth of Nations by Adam Smith was published in 1776. People have been studying mathematics for thousands of years, but economics is relatively new as a formalised science.

BRIGHT PROSPECTS: Adriaan Slabbert at the Investec Rhodes Top 100 Awards last year, where he received an award for academic excellence as one of the top four students in the commerce faculty
BRIGHT PROSPECTS: Adriaan Slabbert at the Investec Rhodes Top 100 Awards last year, where he received an award for academic excellence as one of the top four students in the commerce faculty

Slabbert enjoys the economic way of thinking and the subject also ties to mathematics, which is his other passion.

As far as South Africa’s economy is concerned, Slabbert does not believe our economy is a lost cause.

“It is held back by a variety of structural problems that make will make it difficult for us to enjoy sustained progress if they are not addressed.  But, these problems are not likely to be fixed overnight or to be taken care of by any “quick fixes’,” he said.

Next year he hopes to pursue his Masters in financial markets, which will keep him busy for at least one more year, perhaps two.  “After that, I don’t have any concrete plans.  I’m still enjoying learning more about economics and that’s still what gets me out of bed in the morning.

“When I began my studies I was convinced that I would work in the private sector, preferably in the financial sector.  I’m still open to that idea, but as time has passed I’ve grown to enjoy many other aspects of economics, too.  I hope to do a variety of different things during my career as an economist,” Slabbert said.

However, wherever he ends up as an economist, if he can contribute in any way to the economic success of South Africa or her people, he said he would do his best.

Forecasting is a risky business, but Slabbert said those who are concerned about interest rates might be happy to hear that the South African Reserve Bank is unlikely to raise the repo rate any higher than its current level of 7% within the short-term future.

Also, the Rand is unlikely to climb back to its catastrophic highs of over R16 to the Dollar within the foreseeable future.  Markets responded well to the recent election results, which has helped push the Rand below R14/Dollar for the moment.

But the aspiring young economic said it was important to remember that a part of this gain has been as a result of global factors, such as the anticipation that the United States Federal Reserve will also keep interest rates unchanged for the rest of the year.

These things are largely out of our hands, so the bad news is that the gains we make today on the back of global factors could be reversed again tomorrow.

Slabbert is doing his Honours project on sovereign credit ratings.  “These are assigned by credit ratings agencies such as Moody’s Investor Services and Standard and Poor’s and basically give investors an indication of how likely a nation is to repay its debt to these investors,” he said.

“You may have read about our narrow escape concerning being downgraded to “junk status” or in plain terms, being labelled a substantial credit risk.  My research deals with what the likely effects would be if a downgrade to “junk status” should come to pass for South Africa.”

A downgrade could lead to an increase in the interest rates on government bonds.  Then the government (which borrows money by issuing bonds and paying a given rate of interest on these bonds) would have to pay lenders more to finance its debt.  Also, there are some investors who are obligated by their agreements with their clients to only invest their clients’ money in countries that carry an investment-grade sovereign credit rating (eg, pension funds).  If South Africa were downgraded, such investors would be forced to withdraw their funds from South Africa.

“This is particularly relevant at the moment because even though we were not downgraded last time around, the option is still firmly on the table towards the end of 2016 and start of 2017,” Slabbert said.

 

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