Business Maverick

Business Maverick

South African Finances Could Worsen Even More, Reserve Bank Says

Reserve Bank Governor Lesetja Kganyago during the monetary policy committee media briefing on Janaury 17, 2019 in Pretoria, South Africa. (Photo by Gallo Images / Business Day / Freddy Mavunda)
By Bloomberg
29 Nov 2019
0

There is a high likelihood that the South African government’s finances will deteriorate further, posing risks to the stability of the country’s financial system, the central bank said.

The worsening fiscal position — caused by higher government debt, weak economic growth and the collection of less tax revenue than expected — has been exacerbated by the struggling state-owned companies, the Reserve Bank said in its Financial Stability Review report, released in Johannesburg on Thursday. The government has also had to set aside more money to help its debt-laden firms, pushing up contingent liabilities.The result will be tax increases, lower corporate and household income and investment as well as a protracted period of low economic growth, the central bank said. The financial sector’s profitability will also come under pressure, while also causing credit-rating downgrades that trigger capital outflows and debt that’s more expensive and difficult to issue because of negative investor sentiment.Finance Minister Tito Mboweni painted a bleak picture of the nation’s finances in his medium-term budget policy statement last month, with government debt set to soar to 80.9% of gross domestic product by fiscal 2028 unless urgent action is taken. The trajectory is almost 20 percentage points higher than that projected in the February budget and shows no sign of stabilizing. The budget deficit will peak at an 11-year high in 2020-21.Moody’s Investors Service cut its outlook on the country’s credit rating from stable to negative on Nov. 1. With the country already holding Moody’s lowest investment grade rating, that moved it one step closer to being rated junk by all three major ratings companies.

Other Financial Stability Risks:

  • Rising cyber dependency
    • Likelihood: Medium
    • Impact: Corporate security breaches, disruption of business operating systems, work stoppages, large ransoms, crash of crucial financial infrastructure, high replacement costs
  • Weaker global economic growth and spillover to South Africa
    • Likelihood: Medium
    • Impact: Lower demand for South Africa exports, lower domestic growth, higher unemployment, deteriorating household balance sheets, decline in fixed investment, lower profitability in banking and non-financial corporate sector
  • Abrupt, unanticipated changes to global conditions affecting emerging markets
    • Likelihood: Low
    • Impact: Rapid repricing of risks, volatile capital flows, currency depreciation, lower investment, slower economic growth, slowdown in credit growth, rising unemployment, rising debt and deteriorating asset quality of bank
Gallery

Top Reads This Hour

Pretoria outraged by UK’s travel terror warning, but Britain says advisory posted in 2022
Maverick News

Pretoria outraged by UK’s travel terror warning, but Britain says advisory posted in 2022
Life begins after 55 — tenacious SA seniors redefine what it means to age
Business Maverick

Life begins after 55 — tenacious SA seniors redefine what it means to age
Fact Check — Is Markus Jooste really dead?
Maverick News

Fact Check — Is Markus Jooste really dead?
Taste was everything to Peter Veldsman, icon of South African food
TGIFood

Taste was everything to Peter Veldsman, icon of South African food
The ups and occasional downs of learning how to socialise well in a small town
Maverick Life

The ups and occasional downs of learning how to socialise well in a small town

TOP READS IN SECTION

What do the Guptas have to do with load shedding? It turns out to be a big deal, actually
Maverick News

What do the Guptas have to do with load shedding? It turns out to be a big deal, actually
The ups and occasional downs of learning how to socialise well in a small town
Maverick Life

The ups and occasional downs of learning how to socialise well in a small town
Pretoria outraged by UK’s travel terror warning, but Britain says advisory posted in 2022
Maverick News

Pretoria outraged by UK’s travel terror warning, but Britain says advisory posted in 2022
Morning of murders — eight people shot dead in Khayelitsha
Maverick News

Morning of murders — eight people shot dead in Khayelitsha
Five parties join forces with Gayton McKenzie’s PA to take on DA in Western Cape
Maverick News

Five parties join forces with Gayton McKenzie’s PA to take on DA in Western Cape

Investigations

News & Analysis

Features

Newsletters

Community

DM168

Daily Maverick © All rights reserved

Please peer review 3 community comments before your comment can be posted

X

This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.


FAQ | Contact Us

Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

South Africa needs good journalism — and we need your help to keep delivering it

The market failure of journalism has caused a 70% loss of jobs in our industry. The result is entire regions of South Africa with little to no editorial coverage - and no independent accountability measures because of it. Daily Maverick has proven that we can deliver impact on South Africa.

There's a misconception that Daily Maverick, because it's a national news publisher, is in every corner of the country.

We're not.  But we need to be.  Help us get there.

Become a Maverick Insider

We would like our readers to start paying for Daily Maverick...

…but we are not going to force you to. Over 10 million users come to us each month for the news. We have not put it behind a paywall because the truth should not be a luxury.

Instead we ask our readers who can afford to contribute, even a small amount each month, to do so.

If you appreciate it and want to see us keep going then please consider contributing whatever you can.

Support Daily Maverick→
Payment options
Daily Maverick Elections Toolbox

Feeling powerless in politics?

Equip yourself with the tools you need for an informed decision this election. Get the Elections Toolbox with shareable party manifesto guide.