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<\/a><\/p>\nMoody\u2019s said last month its stable outlook for South Africa\u2019s debt meant the credit rating was probably safe for another 12 to 18 months, and that President Cyril Ramaphosa\u2019s government needed time to implement economic reforms, including fixing the loss-making power utility Eskom Holdings SOC Ltd.<\/p>\n
Still, the company could lose patience if the mid-term budget statement later this month doesn\u2019t convince it the government has a handle on debt and the fiscal deficit.<\/p>\n
“The upcoming Eskom unbundling white paper is the main yardstick to watch,\u201d said Daniel Tenengauzer, the New-York based head of markets strategy at BNY Mellon, in a note to clients.<\/p>\n
“Failure to produce a credible turn-around plan for Eskom would put the government on the hook for much of its R450 billion ($29 billion) of debt, putting pressure on the fiscal shortfall, estimated at 4.9% of gross domestic product in the February budget.<\/p>\n
“If the deficit widens to more than 5.5% of GDP, that would \u201clikely change Moody\u2019s optimistic take on fiscal accounts,” Tenengauzer said.<\/p>\n
A downgrade to junk would lead to bond outflows of at much as $15 billion, according to BNY Mellon.<\/p>\n
The yield on South Africa\u2019s benchmark bonds due December 2026 had risen six basis points by 13h24\u00a0 in Johannesburg in the week to date, trading at 8.36%, the highest level since 21 August.<\/p>\n
Foreign investors have sold a net R2.7 billion of South African bonds last month through September 27, according to JSE Ltd. data, bringing outflows this year to R8.8 billion.<\/p>\n
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