Editorial: Pioneer deal a harbinger of the pain junk will bring

Commentators have been spelling out the cost of South Africa's downgrade to junk for a number of weeks, predicting all manner of outcomes since the country's descent to sub-investment grade.

Most of their extrapolations require sober introspection from the government, business and society as a whole.

The parlous state of the country's politics is central to the decline of the country's stature, and so an immature and populist faction in the ANC has been trying to brush aside the consequences.

The rand's strengthening over the past couple of weeks may embolden "thinkers" such as the ANC Youth League and some ministers in President Jacob Zuma's cabinet to claim that all is not as dire as the so-called experts say.

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After all, from being one of the weakest emerging-market currencies after the president's surprise mass cabinet reshuffle, the rand has rallied quite significantly and once again looks set to strengthen to below R13/$.

But let this not fool anyone; the rand's strength is simply a question of global portfolio inflows in search of higher yields. Compared to the developed world and in particular the US, we offer a better deal at the moment.

This could change swiftly - literally, given that we are talking about hot money, overnight.

But when it comes to the real fallout from junk status, one need look no further than the collapse of the Pioneer Foods negotiations with a large multinational to create what could have been Africa's largest consumer goods group.

Had the deal, seven months in the making, been completed, it would have brought much-needed foreign direct investment with the potential to create jobs.

If the political mismanagement of the economy continues, South Africa will fail to attract real investment. It will attract only hot money inflows - a dangerous course for any country seeking a long-term fix for its economy.