_thumbnail_id: Array
author: Array
_author: Array
article_modules: Array
_article_modules: Array
modules: Array
_modules: Array
modules_2_download_box_download_box_title: Array
_modules_2_download_box_download_box_title: Array
modules_2_download_box_download_box_button_text: Array
_modules_2_download_box_download_box_button_text: Array
modules_2_download_box_download_box_button_url: Array
_modules_2_download_box_download_box_button_url: Array
modules_1_title: Array
_modules_1_title: Array
modules_1_content: Array
_modules_1_content: Array
modules_1_download_box_download_box_title: Array
_modules_1_download_box_download_box_title: Array
modules_1_download_box_download_box_button_text: Array
_modules_1_download_box_download_box_button_text: Array
modules_1_download_box_download_box_button_type: Array
_modules_1_download_box_download_box_button_type: Array
modules_1_download_box_download_box_button_url: Array
_modules_1_download_box_download_box_button_url: Array
modules_1_download_box: Array
_modules_1_download_box: Array
modules_2_quote_author: Array
_modules_2_quote_author: Array
modules_2_enable_tweet: Array
_modules_2_enable_tweet: Array
modules_2_quote: Array
_modules_2_quote: Array
modules_3_title: Array
_modules_3_title: Array
modules_3_content: Array
_modules_3_content: Array
modules_4_title: Array
_modules_4_title: Array
modules_4_content: Array
_modules_4_content: Array
modules_5_background_image: Array
_modules_5_background_image: Array
modules_5_video_title: Array
_modules_5_video_title: Array
modules_5_video_thumbnail_url: Array
_modules_5_video_thumbnail_url: Array
modules_5_video_url: Array
_modules_5_video_url: Array
modules_5_video_duration: Array
_modules_5_video_duration: Array
modules_5_video_description: Array
_modules_5_video_description: Array
modules_5_video_embed_code: Array
_modules_5_video_embed_code: Array
modules_6_title: Array
_modules_6_title: Array
modules_6_content: Array
_modules_6_content: Array
modules_5_image_caption: Array
_modules_5_image_caption: Array
_yoast_wpseo_content_score: Array
article_modules_0_title: Array
_article_modules_0_title: Array
article_modules_0_content: Array
_article_modules_0_content: Array
article_modules_1_download_box_download_box_title: Array
_article_modules_1_download_box_download_box_title: Array
article_modules_1_download_box_download_box_button_text: Array
_article_modules_1_download_box_download_box_button_text: Array
article_modules_1_download_box_download_box_button_type: Array
_article_modules_1_download_box_download_box_button_type: Array
article_modules_1_download_box_download_box_button_url: Array
_article_modules_1_download_box_download_box_button_url: Array
_yoast_wpseo_primary_category: Array
_wp_old_slug: Array
_yoast_wpseo_title: Array
page_summary: Array
_page_summary: Array
article_modules_2_title: Array
_article_modules_2_title: Array
article_modules_2_content: Array
_article_modules_2_content: Array
article_modules_1_quote_author: Array
_article_modules_1_quote_author: Array
article_modules_1_enable_tweet: Array
_article_modules_1_enable_tweet: Array
article_modules_1_quote: Array
_article_modules_1_quote: Array
article_modules_3_title: Array
_article_modules_3_title: Array
article_modules_3_content: Array
_article_modules_3_content: Array
modules_0_module_title: Array
_modules_0_module_title: Array
modules_0_background_color: Array
_modules_0_background_color: Array
modules_0_module_type: Array
_modules_0_module_type: Array
modules_0_filter_posts_by_taxonomy: Array
_modules_0_filter_posts_by_taxonomy: Array
modules_0_filter_posts_by_tags: Array
_modules_0_filter_posts_by_tags: Array
modules_0_link_text: Array
_modules_0_link_text: Array
modules_0_link_url: Array
_modules_0_link_url: Array
modules_1_text: Array
_modules_1_text: Array
modules_2_module_title: Array
_modules_2_module_title: Array
modules_2_background_color: Array
_modules_2_background_color: Array
modules_2_column_ratio: Array
_modules_2_column_ratio: Array
modules_2_editor_content_left: Array
_modules_2_editor_content_left: Array
modules_2_button_text_right: Array
_modules_2_button_text_right: Array
modules_2_button_type_right: Array
_modules_2_button_type_right: Array
modules_2_button_url_local_right: Array
_modules_2_button_url_local_right: Array
_yoast_wpseo_focuskw_text_input: Array
_yoast_wpseo_focuskw: Array
_yoast_wpseo_metadesc: Array
_yoast_wpseo_linkdex: Array
article_modules_4_title: Array
_article_modules_4_title: Array
article_modules_4_content: Array
_article_modules_4_content: Array
_dp_original: Array
_edit_lock: Array
_edit_last: Array
article_primary_tag: Array
_article_primary_tag: Array
South African Rating Relief

South African Rating Relief

South Africa heaved a collective sigh of relief on Friday as international ratings agency Moody’s decided to postpone its review of the country’s sovereign ratings. Moody’s is the only agency rating South African sovereign debt at investment grade. The current rating is Baa3 with a stable outlook.
Tito Mboweni’s strategy

However, this is not an all clear signal as Moody’s can revise its rating at any stage. The agency will pay close attention to the medium term budget policy statement (MTBPS), which will be announced on October 24th by incoming Minister of Finance Tito Mboweni. Most analysts are taking the view that Moody’s is unlikely to react after the MTBPS, unless the budget contains major changes that are likely to impact projections over the next three years. Moody’s is likely to give the incumbent Minister time to settle in and make his mark on National Treasury. Tito Mboweni is regarded as a safe pair of hands and is well respected by the market.

Mboweni is likely to stick to his predecessor’s (Nhlanhla Nene) strategy and will use the February 2019 budget instead, to exert his influence. He is expected to stick to the path of fiscal consolidation. With Moody’s watching closely he doesn’t have much room to manoeuvre. South Africa now finds itself in the difficult position of inflation rising due to a weaker currency and high oil prices, flat economic growth, government debt at dangerously high levels, consumers under enormous financial pressure and almost no room to stimulate growth through either increased spending or tax breaks.

Fiscal Stimulus

President Ramaphosa’s efforts to stimulate the economy through the announcement of a R43 billion stimulus package has failed to excite markets that have heard it all before, and was already part of the government’s existing medium-term strategy. The announcement is viewed as a step in the right direction but fails to address the deeper reasons for the country’s poor economic performance, as well as declining competitiveness against its emerging market peers.

Other emerging markets have enjoyed strong economic growth, allowing them to make the necessary policy responses and stabilise their economies. Whereas South Africa has little ammunition, either to defend the currency through rate hikes or stimulate the economy through infrastructure investment.

Markets and businesses prefer certainty and the highly emotive land reform issue undermines business confidence, which continues to prevent any significant deployment of the substantial cash pool that corporate South Africa has accumulated on its balance sheets.

The bigger picture

The local currency currently benefits from an improving outlook for emerging markets, which after two quarters of decline is expected to stabilise over the coming months.

Strong policy responses from both Argentina and Turkey have restored some confidence in the sector, but trade war actions by Donald Trump and possible further USD strength remain a key threat to the Rand. The US Federal Open Market Committee meeting minutes due this Wednesday, could provide further pressure for the Rand if the rhetoric is more hawkish. The Fed hiking cycle continues to undermine emerging market currencies and has particularly impacted the Rand. Last week’s lower-than-expected CPI figures out of the US helped support a recovery in the local currency, but we can expect a fairly tight trading range for the Rand this week, between 14.35 and 14.55 against the USD.


Recent Insights

The UK productivity puzzle
Sohail Singal Weekly bulletin February 2020
Key financing trends for Australian renewables
Rishin Patel Project Finance & Infrastructure February 2020

Contact us

If you need hedging or debt advice or would like to speak to the team, please get in touch.