Rating agencies have given SA’s budget a preliminary thumbs-up, says Treasury
The three major credit ratings agencies appear to have given their preliminary approval to the 2018-19 budget tabled in Parliament by Finance Minister Malusi Gigaba on Wednesday.
This is according to Treasury director-general Dondo Mogajane, who said in Thursday’s meeting with members of Parliament’s select and standing committees on appropriations and finance that he had engaged with Fitch Ratings, S&P Global Ratings and Moody’s Investors Service after the budget speech
The agencies’ views of the government’s fiscal plans are critical as they assign a rating to SA’s foreign and domestic debt.
Moody’s is the only ratings agency that does not have the country on junk status, although it has its current rating on review for a downgrade.
If it were to downgrade SA, then the country would be excluded from world bond indices and this would compel some global institutional investors to withdraw funds.
Moody’s was awaiting the outcome of the ANC’s elective conference and of the budget before deciding on its rating.
Mogajane said the preliminary view of the agencies “is that we did well and that there are no big things where they are questioning our views”.
“There are things on the margin but they understand that in a tough environment we did better than in October [when Treasury tabled the medium-term budget policy statement].”
The preliminary view was that government finances were in a much better place than they were in October, Mogajane said. The major focus of the budget was to stabilise debt and to reduce the budget deficit over the next three years.
Replying to questions by MPs, Mogajane said the private sector needed to be crowded into state-owned entities to make them viable. The private sector, he said, had to share in the risks, the debt burden and responsibility to capitalise state-owned companies.
By crowding in private sector investment and expertise, the state-owned companies could become financially viable.
He said this was especially needed in those heavily involved in infrastructure investment, such as Eskom, Transnet, the South African National Road Agency and even South African Airways (SAA).
A “massive restructuring” of state-owned companies was required that would bring on board the private sector, the minister said. He referred to the statement by President Cyril Ramaphosa in his reply to the state of the nation address that the state-owned companies co-ordinating council would be reestablished with Ramaphosa as its chairman. The council would focus on clarifying the shareholder governance management of state-owned enterprises, streamline their architecture and establish a centralised governance model.
Gigaba has asked Parliament’s approval for a further delay in the submission by SAA of its 2017-18 statements.