Budget 2023
Share

WATCH: SA confident it can avoid junk downgrade

Cape Town – Treasury is confident that its mini budget statement will hold off any threat of a ratings downgrade, even after the rand weakened 2% against the dollar on Wednesday.

On Thursday the rand was even more on the back foot, trading at R13.58/$ after Finance Minister Nhlanhla Nene's medium-term budget pointed at lower economic growth and lower revenue. Nene reiterated throughout his budget speech that without economic growth, revenue cannot increase and without revenue growth, expenditure cannot increase.

The rand was trading at R13.27/$ before the mini budget was tabled in Parliament on Wednesday.

WATCH: How SA can save junk downgrade

While protesting students turned Cape Town’s parliament precinct into a cacophony of chants demanding affordable tertiary education on Wednesday, Deputy Finance Minister Mcebisi Jonas sat confidently in his office, measured in his outlook for the country’s economy.

“The fiscal framework in the mini budget is consistent with what is being said all over the world,” he told Fin24. “The threat of a ratings downgrade is very low.”

Jonas said the many conversations Treasury has had with stakeholders and analysts back this belief.

Ratings agencies have tipped South Africa on the verge of junk status, a move that would have negative implications for investor confidence, but there is no sign that it would happen this year.

Jonas warned that Treasury cannot solve the rating downgrade threat through fiscal policy alone.

“You do need other measures across the board,” he said. “In South Africa, electricity supply must be made more consistent. We must actually broaden our capacity in that regard.

“We must ensure that there is greater coordination in government around policy and (ensure that) policies talk to each other,” said Jonas. “We must ensure that state institutions function very well so that they have impact on development. We must enhance training and skills development, aligning it with the economy.”

Finance Minister Nhlanhla Nene, who tabled the mini budget statement in parliament on Wednesday, believed the consistency of his tight grip on spending would benefit the country’s ratings outlook.

“We are in a position of stabilising our debt, which is one of our risks, and staying the course on fiscal consolidation,” he told media ahead of his dramatic day in parliament. “There is no reason for a downgrade, but I can’t speak on behalf of ratings agencies.

“It would be unfair for anybody to think that government is not taking the matter seriously of addressing the challenges brought about by the economic environment at home and globally,” Nene told Bloomberg after his mini budget speech.

WATCH: Wage bill is a reflection of a broader problem

In his reaction to the mini budget, emerging markets economist Peter Attard Montalto said there was enough to avoid a downgrade by Moody’s right now. "However, with such a strong set of downside risks to next year’s growth, a downgrade still looks likely. The fiscal-related hurdle to an S&P downgrade to junk is still too great."

He said there was no new policy to support growth.

"This (the mini budget) is National Treasury doing what it does best: keeping the macroeconomic ship in order but unable to pull the wider economic policy levers," said Montalto.

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
18.92
+0.1%
Rand - Pound
23.87
+0.2%
Rand - Euro
20.39
+0.2%
Rand - Aus dollar
12.32
+0.1%
Rand - Yen
0.13
+0.1%
Platinum
908.05
0.0%
Palladium
1,014.94
0.0%
Gold
2,232.75
-0.0%
Silver
24.95
-0.1%
Brent Crude
87.00
+1.8%
Top 40
68,346
0.0%
All Share
74,536
0.0%
Resource 10
57,251
0.0%
Industrial 25
103,936
0.0%
Financial 15
16,502
0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders