Budget debate will go on without Gordhan

Gordhan and the CEOs of top companies arrived in the United Kingdom (UK) on Tuesday and will travel to the US later this week with the aim to put investors at ease that South Africa's economy is flexible and open for business.

As Gordhan seeks to assure investors that the country is doing its utmost to avoid a rating agency drop to junk status, Moody's Investor Service late on Tuesday placed South Africa’s Baa2 bond and issuer ratings on review for downgrade.

“The decision to place the ratings on review was prompted by the continuing rise in risks to the country's medium-term economic prospects and to its fiscal strength, notwithstanding the tighter fiscal stance undertaken in the 2016/17 budget,” Moody’s said in a statement.

If Moody’s does indeed downgrade South Africa, it will become a junk country, which has a considerable impact on investment. Professional investors, such as hedge fund, pension fund and asset managers, have a policy that prevents them from investing in countries carrying a junk status.

READ: Moody's places SA on downgrade review

The ratings downgrade watch will allow Moody's to assess to what extent South African government policies can stabilise the economy and restore fiscal strength in the face of heightened domestic and international market volatility.

David Maynier, the DA’s shadow minister of finance said in a statement that it’s simply not acceptable for the Minister to skip the debate on the fiscal framework in Parliament.  He recogised it’s important for Gordhan to reassure the international investor community, but “with better coordination and planning the Minister could have been present,” he said.

Mike Waters, the DA’s deputy chief whip in the National Assembly, said it’s highly irregular for the budget debate to continue while Gordhan is not present.

“We’ve asked parliament to delay the budget with another week, but our request was declined,” he told Fin24.

Waters said there’s still enough time to discuss the fiscal framework a week later and that there is “more than enough time” to pass the Division of Revenue Amendment Bill.

The debate in the National Assembly is scheduled to start this afternoon after questions to government’s economic cluster.