JOHANNESBURG – The rand yesterday weakened further as investors stood on the sidelines and shifted their focus on today’s Budget and how the government will assist ailing state-owned entities (SOEs) without compromising the fiscal consolidation path.
The local unit depreciated to an intra-day low of R14.21 against the dollar as Finance Minister Tito Mboweni prepared to present his first Budget speech in the midst of a deteriorating fiscal outlook.
André Botha, a senior dealer at TreasuryONE, said: “Markets are waiting in anticipation of the Budget speech in order to ascertain how Mboweni will balance the books and how he will handle Eskom and the other SOEs.”
Ratings agency Moody’s, which is the last of the three big ratings agencies to leave South Africa’s credit rating at investment grade level, is expected to provide its rating review on the country next month after it had digested the contents of the Budget.
Steven Nathan, the chief executive of 10X Investments, said Mboweni would have to walk a tightrope between being right and being popular. “It appears Moody’s is reluctant to drop the sword on our investment grade rating, because condemning our local government debt to junk status could flatten the rand, ignite inflation and strangle our economy. But at some point, it may have no other choice.”