{"id":290146,"date":"2018-12-10T09:03:20","date_gmt":"2018-12-10T07:03:20","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=290146"},"modified":"2019-01-07T16:03:55","modified_gmt":"2019-01-07T14:03:55","slug":"6-major-events-that-pose-a-big-risk-to-south-africa-in-2019","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/290146\/6-major-events-that-pose-a-big-risk-to-south-africa-in-2019\/","title":{"rendered":"6 major events that pose a big risk to South Africa in 2019"},"content":{"rendered":"
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In 2018, South Africa got a new president, two new finance ministers and slumped into a recession. Next year may be even more bumpy.<\/p>\n

Here\u2019s a look at the key economic and political risk factors to watch out for in 2019:<\/p>\n

1. The Budget<\/strong><\/p>\n

After Finance Minister Tito Mboweni painted a bleak picture for finances in October, attention will turn to his plans to boost growth and prevent debt from spiraling out of control at the budget presentation in February. The national budget is a \u201ckey pressure point,\u201d Intellidex\u2019s head of capital markets research, Peter Attard Montalto, said in a note.<\/p>\n

The absence of concrete plans to boost economic growth could trigger a change to negative in the outlook on South Africa\u2019s credit ratings.<\/p>\n

2. Credit Rating<\/strong><\/p>\n

A downgrade to junk by Moody\u2019s Investors Service would trigger forced selling of bonds by investors tracking investment-grade indexes, including Citigroup Inc\u2019s World Government Bond Index. That\u2019s \u201cvery likely,” according to David Hauner, Bank of America Merrill Lynch\u2019s head of cross-asset strategy for Eastern Europe, the Middle East and Africa.<\/p>\n

Moody\u2019s didn\u2019t publish a review as scheduled in October, while S&P Global Ratings and Fitch Ratings Ltd have kept their sub-investment grade assessments. Ratings companies may be waiting for the budget data before making another call.<\/p>\n

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3. State Companies\u2019 Debts<\/strong><\/p>\n

Troubled state-owned companies will continue to weigh on the country\u2019s finances, with their combined debt of R1.6 trillion ($113.4 billion). Almost half that is guaranteed by the government, the Treasury said in October.<\/p>\n

Power utility Eskom Holdings SOC Ltd needs R20.1 billion to meet its obligations in 2019, national carrier South African Airways needs to repay R14.2 billion by March and the state broadcaster has warned it won\u2019t be able to pay staff unless it gets R3 billion from the government by February.<\/p>\n

George Herman, chief investment officer at Citadel Investment Services, predicts a \u201cworst-case scenario\u201d for the companies: the state will have to step in to bail them out, he says.<\/p>\n

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4. Expropriation<\/strong><\/p>\n

Lawmakers will report to parliament on March 31 on changes to the constitution to make it easier to expropriate land without compensation.<\/p>\n

While these steps form part of the ruling African National Congress\u2019s plan to accelerate wealth redistribution, commercial banks that hold farm debt could be hit. Lobby groups are gearing up to fight the process in court and the possible protracted legal wrangling could lead to a period of prolonged uncertainty.<\/p>\n

5. May Elections<\/strong><\/p>\n

South African elections have been mostly peaceful and accepted as free and fair since the first all-race ballot in 1994, but the run-up to next year\u2019s vote may see an increase in populist rhetoric and constrain the ANC\u2019s room for manoeuvre.<\/p>\n

Polls show the ANC maintaining its majority, but the party needs 55% to 60% of the vote to put President Cyril Ramaphosa in a position to implement reforms aimed at reviving economic growth, said Old Mutual Investment Group economist Johann Els. Ramaphosa could overhaul — and shrink — his cabinet after the election.<\/p>\n

6. Reserve Bank<\/strong><\/p>\n

The current terms of two of the Reserve Bank\u2019s most senior officials run out next year. While both could be reappointed, the possibility of changes in leadership will add to uncertainty amid a drive by the ANC to make the central bank state-owned.<\/p>\n

Deputy Governor Daniel Mminele\u2019s second term ends in June and Governor Lesetja Kganyago\u2019s first five years at the helm ends in November. The governor and his three deputies are appointed by the president: Kganyago has said he\u2019d be available to serve another term if asked; Mminele hasn\u2019t commented.<\/p>\n

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What Our Economist Says<\/strong><\/p>\n

The increase in foreign participation in the domestic government bond market to 40% from 23% in 2011 is a key risk for South Africa. It makes the rand highly vulnerable to negative domestic events as well as changes in sentiment to emerging markets.<\/p>\n

With interest payments to foreign bondholders accounting for most of the current-account deficit, South Africa is essentially borrowing more from abroad to service its higher debt load.\u00a0– Mark Bohlund, Bloomberg Economics<\/p>\n<\/div>\n<\/div>\n

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Read: Leaked document shows the 5 ways land expropriation without compensation could apply: report<\/a><\/strong><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

In 2018, South Africa got a new president, two new finance ministers and slumped into a recession. Next year may be even more bumpy. Here\u2019s a look at the key economic and political risk factors to watch out for in 2019:<\/p>\n","protected":false},"author":59,"featured_media":281403,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9872],"tags":[12705,11335,1164,26,4080],"class_list":["post-290146","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-bank-of-america-merrill-lynch","tag-citadel-investment-services","tag-eskom","tag-headline","tag-intellidex"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/290146","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=290146"}],"version-history":[{"count":4,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/290146\/revisions"}],"predecessor-version":[{"id":290158,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/290146\/revisions\/290158"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/281403"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=290146"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=290146"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=290146"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}