BMI Research, in its latest Africa Monitor, says that, in the absence of key structural reforms, the risk of a downgrade of SA’s foreign currency debt to junk status remains a threat.
BMI said:
"While the mini budget highlighted some progress toward economic reforms - including improving the visa process and reducing instances of rolling blackouts - we do not believe these will be sufficient to assuage investor concerns and bolster near-term growth."
BMI added that one of the most significant impediments to greater fiscal consolidation has been "the low-trend growth in the last few years", which it said is weighing on fiscal revenues. BMI further believes that, although SA will move towards fiscal consolidation, this will happen at a much slower pace than estimated by government.
BMI said: "While the Treasury has made some adjustments to their projections to take into account South Africa's weaker growth outlook and rising debt servicing costs, we believe their forecasts may still be overly optimistic."
