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<\/a><\/p>\nUnless Ramaphosa Can Fix Eskom<\/strong><\/p>\n Slow growth has led South Africa to repeatedly miss its revenue-collection targets, and that forced the National Treasury last year to resort to the first increase in value-added taxes since 1993 to generate funds. Despite that, the Treasury in October cut its estimate for collection in the year to end-March by 2% to 1.35 trillion rand.<\/p>\n South Africa\u2019s budget deficit will probably be 4.1% of GDP in the fiscal year through March 2020, according to the median estimate of 13 economists surveyed by Bloomberg. That\u2019s slightly better than the National Treasury\u2019s October forecast of 4.2%.<\/p>\n \u201cThe bad news is that the situation is likely to get worse,\u201d PwC said in an emailed note. Revenue will be 10 billion rand lower than the October estimate because of weaker VAT, corporate and personal income-tax collections, the company said.<\/p>\n Any fiscal slippage beyond that may test past tolerance from Moody\u2019s to negative budget developments.<\/p>\n Moody\u2019s has \u201cshown an appetite to accommodate near-term worsening in public finances\u201d if accompanied by growth-enhancing political and economic policies, Standard Bank\u2019s Ballim said.<\/p>\n Still, of 11 economists who took part in a Bloomberg survey, eight say the ratings company probably won\u2019t downgrade South Africa to non-investment grade this year.<\/p>\n So even as investors look for a support package for Eskom, Mboweni will probably to just \u201ckick the can down the road,\u201d said Jeffrey Schultz, an economist at BNP Paribas South Africa.<\/p>\n State funds are unlikely to be committed to the utility until the energy regulator sets its electricity tariffs and the government finalizes its restructuring plan, which may be opposed by labor unions and difficult to implement before elections on May 8, he said.<\/p>\n What Our Economist Says…<\/strong><\/p>\n Mboweni is under pressure to reduce both the projected fiscal deficits as well as reining in contingency risks, most notably from Eskom.<\/p>\n The deficit-cutting measures are likely to be weighted towards the spending side this year after last year\u2019s increase in value-added tax and a fuel-levy increase. Bringing the projected budget deficit below 4% of GDP would be welcomed by rating agencies although questions of whether it will be followed through on will abound.<\/p>\n On Eskom, it seems unlikely that the presented measures will be sufficient to prevent Moody\u2019s from change its ratings outlook to negative.<\/p>\n<\/a><\/p>\n