South Africa: Dialling down fiscal enthusiasm – TDS

Cristian Maggio, head of emerging markets strategy at TD Securities, suggests that South Africa’s Finance Minister Tito Mboweni presents mini-budget on Wednesday and TD expects a deterioration of the fiscal targets to be the result of slower growth and additional financial assistance for Eskom and other SOEs.

Key Quotes

“Eskom continues to weigh negatively on the government budget. Implementation of the restructuring plan is too slow. We think the market will react negatively to the absence of details against a possible increase of the government disbursements.”

“Moody's is due to review South Africa's ratings on 1 November. We exclude a downgrade until end 2020 or even 2021. However, we assign a 55% chance to a negative change in outlook. Moody's may also decide to skip this review, which would likely be taken positively by the market for now.”