The finance minister yesterday revealed that S&P Global had been persuaded to hold off on downgrading Transnet, which has rather been placed on CreditWatch.
This does, however, signal a possible downgrade, says Lisette IJssel de Schepper of the Bureau for Economic Research (BER).
National Treasury has made it clear that it will not grant further bailouts to SOEs and this will make it even more difficult for the entity to raise capital in private markets. “While we share the sentiment of not throwing good money after bad, Transnet’s performance suffers as a result of being cash-strapped, which hurts the entire economy - an economy that is still under significant pressure,” says IJssel de Schepper.
Moody’s has affirmed SA’s rating at the current two levels below investment grade (as expected), but unlike S&P Global, which revised its outlook from stable to positive about two weeks ago, Moody’s has kept it unchanged.
The huge drop in the agricultural component of GDP announced this week has seen the economy contracting on a quarterly basis and setting the entire 2024 back.
It means that the economy will be lucky to see a marginal acceleration from the 0.7% growth recorded in 2023, says IJssel de Schepper, with the Bureau’s full-year forecast of 1% now revised downwards on the back of a downward revision to Q2 and the disappointing Q3 outcome.
“We do expect revisions to the agricultural GDP component for Q3, but still, growth of around 0.8% seems like a more likely outcome than the 1% we had before. That does mean that growth needs to accelerate quite meaningfully in Q4 (and/or a relatively large revision to Q3 GDP needs to be made). For now, 2.2% for next year still seems possible.”
