Cape Town - While there is a chance that South Africa may be downgraded to the non-investment grade at a upcoming ratings review in November, rating agencies may wait to see the outcome of December’s ANC elective conference, according to Standard Bank economist Kim Silberman.
Silberman was talking to Fin24 in the wake of Finance Minister Malusi Gigaba’s maiden mini budget, which he presented to Parliament on Wednesday afternoon.
She said the market would likely react negatively to Gigaba’s budget, due to SA breaching its expenditure ceiling by R3.9bn, and Gigaba’s acknowledgement that SA tax authorities face a R50.8bn budget hole.
Silberman said the risk of SA being downgraded to non-investment grade had risen. Rating agencies will review South Africa on November 24, about three weeks before the ANC elective conference.
The ANC will be electing new leadership at its 54th National Conference, which will take place in Gauteng between December 16 to 20.
“I personally don’t think the rating agencies will downgrade us in November, I think they will wait to see what happens in December.”
Silberman added that National Treasury had assured rating agencies that, if the government were to recapitalise state-owned enterprises, the expenditure would be deficit neutral.
“It hasn’t been deficit neutral, and it also means that Treasury has breached the ceiling, which they also promised rating agencies they wouldn’t do,” she said.
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