Picture: Brendan McDermid/Reuters

CAPE TOWN - Reports that the National Treasury has been captured will be a major concern for ratings agencies, according to a report on Fin24. 

Several senior officials at Treasury claim that Finance Minister, Malusi Gigaba has been establishing a parallel administration within the department.

In addition, added claims state that Gigaba allegedly brought nearly 20 new staff members with him when he joined National Treasury and failed to consult with the deputy director general on important decisions. 

Notably, cabinet also announced that the budget allocation process would shift to the presidency for the 2018/19 financial year. 

“We are really seeing the capture of National Treasury at different levels,” said Professor Jannie Rossouw, head of the School of Economics and Business Science at Wits University. 

“Effectively we see the capturing of Treasury which we have been worried about since Minister Pravin Gordhan left". 

Rossouw explained that it is troubling to find out that the Presidency will be will overtaking a major function of Treasury. 

This, especially as South Africa is facing a huge deficit and may also face a fiscal cliff by 2026. 

“The next generation must be extremely concerned about the future". 

The decisions made by the government directly affects the standing of the country. 

South Africa's fate will ultimately lie in the hands of the medium-term budget policy statement (MTBPS, also known as the mini-budget) which will be an “exceptionally important” document that will be dissected by South Africans and rating agencies, said Rossouw.  

“South Africans must brace themselves for massive tax increases.”

Similarly, Economic Strategist Thabi Leoka from Argon Asset Management expressed the importance of institution's independence. 

“If they (Treasury) do not stick to their mandate or stick to the estimates set out in the budget, we will have problems with rating agencies". 

However, in August this year, ratings agency, Moody's said it would consider changing South Africa's outlook from negative to stable, according to Business Report. 

Yet, this outlook depended on whether the government would safeguard South Africa's institutional, economic and fiscal strength. 

“Indications that the strength and independence of the country’s institutions have diminished to a greater extent than in Moody’s baseline scenario, or that the emerging policy framework has become even less predictable or has shifted in a way likely to undermine economic or fiscal strength, could lead to a further downgrade", said Moody's. 

This followed the much-anticipated rating review of South Africa which Moody's failed to publish, citing that South Africa has not had any real major events that would require a review.

Notably, Moody's said that downward pressure could develop if liquidity pressures emerge at state-owned enterprises. 

WATCH


READ ALSO: Moody’s consider changing South Africa’s rating outlook

- BUSINESS REPORT ONLINE