Tito Mboweni delivered his budget speech this week, presenting a bleak but frank assessment of what South Africa will have to do to fix our economy. As South African eyes continue to widen over just how much work there is to be done, it is good to reflect on how much worse things could have been, for instance, if Nkosazana Dlamini-Zuma had won the presidency of the ANC in December 2017. The “elephant in the room” remains Eskom, in that the extent of infrastructural neglect still needs to be quantified. We are concerned that the R69bn set aside by the government for Eskom over the next three years may be underestimated, and that this could place further strain on the state’s balance sheet or on the fiscus.
Global News
- Negotiations between the US and China continued this week as they attempt to bring an end to the Sino-US trade war. It is now one week before a US-imposed ceasefire for a deal expires and potentially triggers higher US tariffs.
- President Trump declared a state-of-emergency in order to get funding for his wall. There has been massive backlash regarding this: US House Democrats will file a resolution today to stop the declaration, thousands have protested, and 18 states have launched lawsuits against the President.
- According to former FBI Director Andrew McCabe, Trump said, “I don’t care. I believe Putin,” when presented with US intelligence on North Korea’s nuclear program.
- Talks were held between British and EU negotiators, this week, with the lone result being that they agreed to have more talks.
- Fitch Ratings announced on Wednesday that it might consider downgrading the UK’s AA debt rating based on growing uncertainty around the Brexit negotiations.
- Honda Motor Co joined several other major companies in shutting down their UK plants. This comes as a “hard-Brexit” is looking more likely. The plant in Swindon will be closing down, it employs 3 500 people.
Local News
- Tito Mboweni gave his first budget speech this week – commenters have been largely underwhelmed saying that there were no commitments to how South Africa was going to stimulate growth in the economy. For an executive summary of the budget, follow this link, for the full text of the speech, follow this link.
- Moody’s said that the 2019 budget shows the continued erosion of South Africa’s fiscal strength and requested further information on the plan of action for Eskom. Follow this link for more of what Moody’s had to say.
- The most anticipated topic of the budget was what was going to happen with Eskom – Eskom will receive R23bn from Treasury every year for the next three years, with support amounting to a total bailout of R150bn in present value terms over ten years.
- On Thursday, Eskom hosted a financial market’s stakeholder conference call where they announced that there would be a three-part subdivision of Eskom, as per the SONA and Tito Mboweni’s budget speech.
Source: Dynasty, Stanlib, Prescient, Daily Maverick, Moneyweb, Reuters, RMB, Aljazeera, and Bloomberg Markets, etc