Budget speech could shield SA from downgrades

South Africa is likely to get some sympathy from ratings agencies over its attempts to get Eskom out of its financial morass, and to ensure the nation’s economic growth and for the country to continue to have a reliable power supply, an economist has said.

According to Sam Rolland, an economist and econometrician at Econometrix, Finance Minister Tito Mboweni’s recent budget speech was balanced and took cognisance of the need to support the power utility with the goal of economic stability.

This, he adds, will attract the investment that President Cyril Ramaphosa is aiming for, while also taking a harder stance against controlling the fiscus and reining in the public sector wage bill.

Amid load shedding and criticism of poor governance and crippling corruption emanating from state capture at Eskom, the government was forced to intervene. In his maiden budget, Mboweni announced a R69 billion bailout to be divided over the three-year period until March 2022.

Commenting on the overall budget at the AfriSam Budget Breakfast on Thursday, Econometrix chief economist Azar Jammine highlighted the challenges South Africa faced.

Jammine said reduced corruption and improved governance at the SA Revenue Service could unleash enormous resources for development, while poor governance at municipalities along with debt delinquency on rates and electricity payments need to be nipped in the bud.

Since the government talked about the need to trim the public service, there has been a challenge posed by trade unions.

While downgrading because of Eskom would be understood, Jammine maintained that there was still the risk of downgrade of South Africa’s local government bond rating by Moody’s which could drive debt servicing costs up further.

Rolland said the budget speech took great steps towards encouraging growth by ensuring that policy certainty is a top priority.

Through this, “it will assist in raising confidence and attracting investment that will create jobs”.

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