Government focused on restoring confidence ahead of Moody’s rating

Wednesday, February 20, 2019

Finance Minister Tito Mboweni says there are a lot of positives that can be considered by ratings agency Moody’s, as he announced on Wednesday measures that government is taking to address concerns over Eskom and the public sector wage bill. 

Mboweni said this when he briefed journalists at the Imbizo Centre ahead of tabling his Budget Speech in the National Assembly on Wednesday afternoon. 

“The staff at Treasury has been in touch with the ratings agencies and had a very difficult conversation. 

“During the course of next week, [National Treasury Director-General] Dondo Mogajane is on a roadshow and they will be able to assess in detail what is happening. 

“If we are doing practical things to fix Eskom and the electricity sector, that should be viewed as positive,” he said. 

Mboweni said government acting on the wage bill should also be seen as positive. 

“If we are saying that inflation remains within the targeted inflation rate, that should be seen as positive. 

“So there are many positive things that should be considered but it is a very difficult conversation,” he said. 

In his speech in the National Assembly, Mboweni said government is taking tough steps to fix the fiscal position and State-owned enterprises. 

Most of the spending goes to education, and government will strengthen early childhood development and support higher education for the most deserving.

On land, Mboweni said money has been set aside money to help the people buy their own houses, support land reform and transfer title deeds.

Meanwhile, National Treasury said as a percentage of GDP, the gross borrowing requirement is projected to decline from 6.2% in 2019/20 to 5.3% in 2021/22.

“During 2018, all four credit rating agencies affirmed South Africa’s ratings, with the outlook now held at stable.

“Favourable ratings support government’s continued access to funding at reasonable rates.

“However, the agencies’ concerns about South Africa’s tepid growth, rising debt burden and contingent liabilities are reflected in two sub-investment grade ratings. A downgrade would have negative consequences for the economy and public finances.

“Government remains focused on restoring investor confidence by narrowing the budget deficit, stabilising debt, enacting structural reforms to boost growth, and improving the financial position of State-owned companies,” Treasury said. –