Public Management

S. Africa: Plans to rescue public companies could significantly worsen 2020 budget deficit

S. Africa: Plans to rescue public companies could significantly worsen 2020 budget deficit
Monday, 21 October 2019 18:20

Plans elaborated by the South African government to rescue drowning public companies could significantly worsen the budget deficit forecasted for the FY 2020. According to a Bloomberg survey, budget deficit is expected to reach 6.1% next year, up the 4.5% the Treasury announced in February and more than the budget deficits recorded by the country since 2010.

Indeed the South African government made several cash injections into the power utility Eskom and the national airline South African Airways ; two struggling public companies which capture the lion’s share of budget resources at the expense of development projects. Over the next three years, for example, the government is expected to pump a total of 128 billion Rand ($8.6 billion) into the electricity company, which is facing a debt of more than $30 billion.

A worsening of the deficit could lead to an increase in public debt, threatening the country's finances. A few weeks earlier, the Institute of International Finance (IIF) reported that South Africa's public debt could rise to 95% of gross domestic product (GDP) within the next five years. This, while Finance Minister Tito Mboweni announced that the country would probably miss its 1.5% growth target in 2019 due to “changing conditions and many headwinds blowing through the national economy.”

As a reminder, the rating agencies Fitch and S&P Global Ratings classify the country's sovereign debt in the “junk” category (high risk), while Moody's keeps it in the investment grade category (low default risk). In the event of a deterioration in the public finance situation, the US agency could also lower its rating, worsening the investment prospects of Africa's most industrialized economy.

Moutiou Adjibi Nourou

Additional Info

  • communiques: Non
  • couleur: N/A
On the same topic
• QNB gets license to launch digital bank “ezbank” in Egypt• Move supports financial inclusion, targets Egypt’s unbanked population• Mobile-first platform...
• World Bank raises 2025 growth forecasts for Benin, Mali, Burkina, Côte d’Ivoire• Senegal and Niger see downgrades; Togo, Guinea-Bissau unchanged• WAEMU...
The Central African Republic became the 46th member of the Africa Finance Corporation (AFC). The partnership aims to boost investment in energy,...
IFC will provide up to $40 million to Banque Islamique du Sénégal (BIS) under a Mourabaha agreement, its first Islamic finance deal in Sub-Saharan...

Most Read
01

Senegal’s attempt to diversify its fuel supply by turning to Nigerian crude is bumping up against ha...

Senegal Turns on Nigerian Crude to Diversify its Fuel Supply — But Challenges Loom Ahead
02

• UAC of Nigeria acquired CHI Limited, known for Chivita juices and Hollandia dairy, from Coca-Cola ...

UAC of Nigeria Takes Control of CHI Limited, Former Coca-Cola Subsidiary
03

• AfDB chief Sidi Ould Tah met BOAD president Serge Ekué in Abidjan on Aug. 30.• Talks focused on jo...

AfDB, BOAD join forces to expand financing for West Africa projects
04

Financial professionals gathered in Dakar on September 25 for the Structured Finance Africa Forum (S...

Rating Agency Chief: West Africa Securitization Could Hit 20 Deals a Year
05

• Nestlé, NGOs urge against delay, propose grace period instead• EU cites technical hurdles, trading...

EU Weighs Delay to 2025 Anti-Deforestation Law Amid Industry Calls to Stay on Track
Enter your email to receive our newsletter

Ecofin Agency provides daily coverage of nine key African economic sectors: public management, finance, telecoms, agribusiness, mining, energy, transport, communication, and education.
It also designs and manages specialized media, both online and print, for African institutions and publishers.

SALES & ADVERTISING

regie@agenceecofin.com 
Tél: +41 22 301 96 11 
Mob: +41 78 699 13 72


EDITORIAL
redaction@agenceecofin.com

More information
Team
Publisher

ECOFIN AGENCY

Mediamania Sarl
Rue du Léman, 6
1201 Geneva
Switzerland

 

Ecofin Agency is a sector-focused economic news agency, founded in December 2010. Its web platform was launched in June 2011. ©Mediamania.

 
 

Please publish modules in offcanvas position.