The budget
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 spiralling out of control at the budget presentation in February. The national budget is a "key pressure point," Intellidex's head of capital markets research, Peter Attard Montalto, said in a note. The absence of concrete plans to boost economic growth could trigger a change to negative in the outlook on South Africa's credit ratings.
Credit rating
A downgrade to junk by Moody's Investors Service would trigger forced selling of bonds by investors tracking investment-grade indexes, including Citigroup Inc.'s World Government Bond Index. That's "very likely," according to David Hauner, Bank of America Merrill Lynch's head of cross-asset strategy for Eastern Europe, the Middle East and Africa. Moody's didn't 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.
State companies' debts
Troubled state-owned companies will continue to weigh on the country's finances, with their combined debt of R1.6trn ($113.4bn). Almost half that is guaranteed by the government, the Treasury said in October. Power utility Eskom Holdings SOC Ltd. needs R20.1bn to meet its obligations in 2019, national carrier South African Airways needs to repay R14.2bn by March and the state broadcaster has warned it won't be able to pay staff unless it gets R3bn from the government by February. George Herman, chief investment officer at Citadel Investment Services, predicts a "worst-case scenario" for the companies: the state will have to step in to bail them out, he says.