South African downgrades will raise regional risks

2017 ◽  
Keyword(s):  
South African ◽  
Government Spending ◽  
Credit Rating ◽  
Customs Union ◽  
Government Revenue ◽  
Short Term ◽  
Content Type ◽  
Finance Minister ◽  
African Development Bank ◽  
Sovereign Credit Rating

Subject Regional impact of South Africa's downgrades. Significance In April 2017, Standard & Poor's and later Fitch downgraded South Africa's sovereign credit rating to junk status. This has raised regional risks for members of the Southern African Customs Union (SACU), who rely on the union for government revenues. South Africa's ratings downgrades will reduce revenues for other members, who received 46.0 billion rand (3.56 billion dollars) of the 84.0-billion-rand revenue pool in 2015-16, and force cutbacks in government spending across the region. Impacts Botswana's government revenue will only be moderately constrained by the downgrades. Namibia will be resilient to reduced SACU revenue in the short term, supported by a loan from the African Development Bank. South Africa will struggle to reassure investors that a new finance minister does not signal a change in fiscal policy.

Economic crisis will sustain unrest in Zimbabwe

2016 ◽  
Keyword(s):  
South African ◽  
Economic Crisis ◽  
Credit Rating ◽  
Civil Servants ◽  
Content Type ◽  
High Unemployment ◽  
Finance Minister ◽  
Fund Development ◽  
The Government ◽  
Sovereign Credit Rating

Significance Discontent over President Robert Mugabe's mismanagement of the economy is deepening, particularly over high unemployment and severe cash shortages, which have caused the government to delay paying civil servants' salaries. Impacts Pretoria's demands that Harare drop its restrictions on South African imports will likely increase bilateral tensions. Smugglers will take advantage of the region's porous borders to circumvent these rules, eg by routing goods via Mozambique. The mines and minerals amendment bill, which requires mining firms to list on the local bourse, will likely deter investment. Tensions between Finance Minister Patrick Chinamasa and leftist ministers could result in further policy reversals. Plans to gain a sovereign credit rating and issue Eurobonds to fund development will remain unrealised, at least for several years.

South Africa's budget framework will not allay market

2017 ◽  
Keyword(s):  
South African ◽  
Budget Deficit ◽  
Fiscal Year ◽  
Tax Revenue ◽  
Policy Statement ◽  
Customs Union ◽  
Government Revenue ◽  
Short Term ◽  
Content Type ◽  
Institutional Instability

Significance The policy statement gives the government's projection of economic growth and government spending. Gigaba announced that growth for the 2017/18 fiscal year is projected at 0.7%, revised downwards from 1.3%, while both the budget deficit and overall government debt are set to rise. Additionally, Pretoria is grappling with a tax revenue shortfall of 50.2 billion rand (3.5 billion dollars). Impacts Forthcoming public sector wage talks and union demands may add further pressure on the treasury and increase revenue shortfalls. Institutional instability at the South African Revenue Service (SARS) means lagging tax collection could persist in the short term. Southern African Customs Union (SACU) members will suffer further declines in government revenue, impacting Lesotho and Swaziland most.

Immigration to linger as South African flashpoint

2015 ◽  
Keyword(s):  
Economic Growth ◽  
South Africa ◽  
South African ◽  
Rapid Response ◽  
Customs Union ◽  
Short Term ◽  
Content Type ◽  
International Firms ◽  
Gateway Cities

Significance President Jacob Zuma cancelled a state visit to Indonesia to lead government efforts against the violence. However, popular perceptions of uncontrollable inflows linked state incapacity, a porous asylum system and continued weak economic growth mean that anti-immigrant sentiment will persist. Impacts In the short term, South Africa is likely to refrain from reforming the regional customs union out of fear of antagonising its neighbours. Reputational damage from the attacks is likely to undermine Zuma's efforts to create a 'rapid response' regional peace-keeping force. This reputational damage may encourage international firms to base their SSA headquarters in non-South African 'gateway' cities.

South Africa's Mboweni will aid Ramaphosa reform push

2018 ◽  
Keyword(s):  
South African ◽  
Credit Rating ◽  
Short Term ◽  
Content Type ◽  
Rating Agencies ◽  
Reserve Bank ◽  
Freedom Fighters ◽  
Left And Right ◽  
The Government

Significance A former South African Reserve Bank (SARB) governor and minister of labour, Mboweni faces a crucial first few weeks in his new post as the government attempts to placate rating agencies and engineer an economic turnaround. Mboweni’s initial moves may be determined by Moody’s credit rating review expected today. Impacts In the short term, Mboweni’s appointment will be a boost for Ramaphosa’s bid for fiscal consolidation and growth. In the medium-to-long term, Mboweni will likely prove a more polarising figure inside the ANC than Nene. Allegations linking the Economic Freedom Fighters with a major banking scandal could give Mboweni and the ANC an early political 'win'. Mboweni's previous social media utterances could be further exploited by opponents, both left and right, in the months ahead.

Finance minister poses hurdles for South Africa's Zuma

2016 ◽  
Keyword(s):  
Credit Rating ◽  
Content Type ◽  
Sovereign Credit ◽  
Finance Minister ◽  
Sovereign Credit Rating ◽  
Ruling Party

Significance The case could provide a pretext for President Jacob Zuma to dismiss Gordhan -- a move that would send markets into tailspin and likely result in a junk sovereign credit rating by end-2016. Impacts Interpersonal tensions will undermine Zuma and Gordhan's ability to coordinate South Africa's input at the current G20 meeting. The new anti-graft ombudsman, who takes office next month, will face pressure not to irk the ruling party, particularly Zuma's faction. Zuma may stall on signing new legislation requiring greater scrutiny of accounts belonging to politically connected individuals. The ANC's loss of support in recent municipal polls could push it to adopt more populist expenditure priorities.

The South African public service wage bill deadlock in 2021: living on the edge

2021 ◽  
Vol 11 (4) ◽  
pp. 1-15
Author(s):  
Marianne Matthee ◽  
Albert Wöcke
Keyword(s):  
Fiscal Policy ◽  
Learning Outcomes ◽  
South African ◽  
Public Service ◽  
Subject Area ◽  
The South ◽  
Content Type ◽  
Academic Level ◽  
Finance Minister ◽  
The Government

Subject area Macro-Economics. Study level/applicability Undergraduate and MBA. Case overview The COVID 19 pandemic-related restrictions devastated South Africa’s economy in 2020 and although the restrictions were generally less damaging than in 2020, the government had to budget for vaccinations and rebuild the economy. Public service unions had just announced that they were demanding an increase of 4% above inflation for their members and that they were preparing for a strike. They were bitter about the fact that the South African Government had withdrawn from the last year of a three-year wage agreement in February 2020 and their members had not received an increase for the two years. These demands and Finance Minister Mboweni’s response to them had to consider the structural and cyclical impact on the fiscus and economy. Expected learning outcomes The learning outcomes are as follows: understand the general objectives of fiscal policy and stakeholders’ interests; understand the tradeoffs in fiscal policy and the implications of taking a position; and make recommendations based on reasoned judgements about those recommendations. Complexity academic level Undergraduate and MBA level courses on Macro Economics. Supplementary materials Teaching notes are available for educators only. Subject code CSS 10: Public Sector Management.

Russia's central bank will anticipate sanction risks

2021 ◽  
Keyword(s):  
Exchange Rate ◽  
Credit Rating ◽  
Bond Market ◽  
Secondary Market ◽  
Foreseeable Future ◽  
Foreign Reserves ◽  
Foreign Investors ◽  
Content Type ◽  
Economic Fundamentals ◽  
Sovereign Credit Rating

Significance Because the risk of sanctions was priced into Russian bond prices and the ruble exchange rate, the market reaction to the measures announced on April 15 was muted. US investors can still buy and hold OFZs and Eurobonds on the secondary market, but the prospect of further restrictions are possible. Impacts Sanctions risks will weigh down Russia's sovereign credit rating for the foreseeable future. Diminished liquidity in the bond market will make it difficult to price new Russian corporate debt, particularly for new issuers. Strong economic fundamentals and high foreign reserves will encourage foreign investors to return once uncertainty subsides.

scholarly journals On the Asymmetries of Sovereign Credit Rating Announcements and Financial Market Development in the European Region

2019 ◽  
Vol 11 (23) ◽  
pp. 6636 ◽  
Author(s):  
Chunling Li ◽  
Khansa Pervaiz ◽  
Muhammad Asif Khan ◽  
Faheem Ur Rehman ◽  
Judit Oláh
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Credit Rating ◽  
Market Development ◽  
European Region ◽  
Short Term ◽  
Sovereign Credit ◽  
Financial Market Development ◽  
The Impact ◽  
Sovereign Credit Rating

In modeling the impact of sovereign credit rating (CR) on financial markets, a considerable amount of the literature to date has been devoted to examining the short-term impact of CR on financial markets via an event-study methodology. The argument has been established that financial markets are sensitive to CR announcements, and market reactions to such announcements (both upgrading and degrading) are not the same. Using the framework of an autoregressive distributed lag setting, the present study attempted to empirically test the linear and non-linear impacts of CR on financial market development (FMD) in the European region. Nonlinear specification is capable to capture asymmetries (upgrades and downgrades) in the estimation process, which have not been considered to date in financial market literature. Overall findings identified long-term asymmetries, while there was little evidence supporting the existence of short-term asymmetries. Thus, the present study has extended the financial market literature on the subject of the asymmetrical impact of a sovereign CR on European FMD and provides useful input for policy formation taking into account these nonlinearities. Policies solely based upon linear models may be misleading and detrimental.

Brazil faces stagnation risk in 2017

2017 ◽  
Keyword(s):  
Government Spending ◽  
Pension Reform ◽  
Investment Decisions ◽  
Fiscal Crisis ◽  
New Wave ◽  
Short Term ◽  
Business Investment ◽  
Content Type ◽  
The Government

Subject The risk that the Brazilian economy will stagnate, rather than recover, this year. Significance The recent passage of legislation freezing government spending and the ambitious pension reform currently under discussion in Congress are the flagship policies of the government of President Michel Temer. Both seek to defuse Brazil’s fiscal time bomb in the long term. However, they offer little support to immediate expansion in an economy that not only has been in recession since the second quarter of 2014 but is also locked in a low-growth trap will few apparent short-term escape routes. Impacts Popular dissatisfaction may trigger a new wave of demonstrations, further weakening the government. As long as the fiscal crisis persists, the government’s ability to stimulate the economy will be limited. Political risk will be a crucial factor in business investment decisions in Brazil.

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