IT IS almost a foregone conclusion that SA will be downgraded by rating agencies to subinvestment grade, or what is commonly known as "junk status". It will take a special effort to avoid this eventuality.

This is not because of any immediate inability of the country to meet its obligations, but due to the multitude of factors that make it hard to coherently read and assess the risks that exist in this economy, and therefore its direction.

Junk status is by and large an indication and warning to investors that the risks on the instruments of investment, here mainly South African government bonds, are too high as an investment. Junk status is also referred to as "speculative grade", which implies that one is no longer applying prudent risk analysis but gambling.

It is worth saying at the outset that many of the risks present in SA, and especially in government and governance, exist as a result of the nature of society and the stage of SA’s development. Our political, governance and democratic institutions are just two decades old, and are assessed and compete with much older ones.

The case involving the powers of the public protector, a constitutional institution, which was heard by the Constitutional Court last week, was an important marker of development. It was the sort of spectacle that, while based on and surrounded by worrying developments, also marked a positive trend towards strong public institutions and the defence of proper governance and the rule of law.

That said, it took place amid myriad of other social challenges. These include student protests for better access or even free higher education. Indeed, the challenges lying ahead for young people who face social and economic exclusion have the potential to cause more social unrest.

In this regard, according to insights from Statistics SA, a person is most likely to have an income when they are under the age of 18 and over 60. Both these ages are marked by one thing: access to a government grant. Such are the limitations to access and constraints in the economy. This situation presents the kind of social volatility that can be exploited by unscrupulous politicians and other social players. Add to this that as a new democracy and society, political parties are still maturing in the ways in which leadership is passed on.

Political contestation is still marred by the possibility of political machinations beyond what is healthy for good government and peaceful transitions.

There have been worrying signs across the country where transfer of power between elections has not been entirely smooth or peaceful, especially at local government by-elections.

These political contests have also had a dramatic effect on the labour environment, which remains volatile for more than just one reason. The understanding of the tones and state of the labour formation and development remain treacherous, even for the most astute and sophisticated analysts.

The forces are many and the contests unsettling. Perhaps the most unsettling of these risks is where power lies and how it is transmitted within the party of government, the African National Congress, and ultimately the government itself. Separation has not always been clear. Recent developments have left many unable to understand how power and decision-making works, and thus unable to predict critical decisions of government and governance.

What this tells us is that, while researchers and analysts may pay attention to SA as a developing nation and many consider it as a grand opportunity for growth, the country is facing developments that also have the potential to result in major catastrophe.

Country risk, which is measured by rating agencies, considers not just a government’s ability to meet its obligations but also its willingness to do so. Implied in these notions is that those who are assessing the risks arising from the answers to these two questions are at all times able to collect information and analyse it in a systematic manner to come to a clear conclusion they can communicate to their stakeholders.

SA, as a still young democracy, has many moving parts. There are mixed signals on the rule of law, less-than-predictable and understandable political manoeuvring, and even shortages in administrative capacity within the state given the country’s history and denial of opportunity to the majority. Worst of all, all these happen within an extremely volatile, changing and challenging global environment.

Rating agencies have been wrong in the recent past. They are surely not too keen to be tripped again by the fluid nature of a developing nation such as SA.

• Payi is an economist and head of research at Nascence Advisory and Research