This paper examines the consequences of the widening deficit and debt problem and challenges that South Africa faces. It argues that spending cuts are a prerequisite for attaining fiscal stability, reducing debt and meeting the challenges that confront the country in respect to deficit, because South Africa faces the reality of another downgrade if debt levels rise. It further examines emerging markets’ prospects which may start to split as investors grow more discerning, especially within the BRICS countries (Brazil, Russia, India, China and South Africa). It further argues that much more differentiation will take place, in order to distinguish between one emerging market and another. On the other hand the paper will very briefly enunciate and discuss that the Johannesburg Stock Exchange (JSE) highs is no cause for any euphoria because, it has very little to do with real economy.

This paper examines the consequences of the widening deficit and debt problem and challenges that South Africa faces. It argues that spending cuts are a prerequisite for attaining fiscal stability, reducing debt and meeting the challenges that confront the country in respect to deficit, because S...