SOEs struggle to stay afloat ahead of credit ratings announcement
Some experts say Moody's , Fitch and S&P Global will take into account the performance of parastatals.
CAPE TOWN - The performance of South Africa's state-owned entities (SOEs) has been flagged as a possible concern which is expected to influence credit rating agency decisions on the country's finances.
Some of the country's SOE’s are struggling to steer themselves out of financial dire straits.
Among which are South African Airways (SAA), who posted a loss of R 1.4 billion in the 2015-16 financial year, as well as a R 14.5 billion loss by Petro SA in the previous year.
Market analyst George Glynos says “They are going to be hoping that the state owned enterprises stabilise themselves because anything short of that, remaining reliant on the public purse to bail them out, just lands up diverting capital away from areas where it might have been utilised to greater effect.”
Government's R46 billion in irregular expenditure will also weigh on credit rating agencies decisions in coming days.
Some economic experts say ratings agencies will be taking the recent Auditor-General's report on gross financial mismanagement by some government departments into consideration.
Agencies will also assess the performance of state-owned enterprises.
Western Cape Economic Opportunities MEC Alan Winde says South Africa needs to clean up its act.
“I think the SOEs and performance of government is probably one of the main reasons why we're in this predicament in the first place”.
Economist Kevin Lings says despite some SOEs making progress, there's still a long road ahead.
“And if we don't improve the state-owned enterprises and they remain a fiscal drag on government's finances then ultimately that would definitely contribute to further credit rating downgrade.”
Moody's who has South Africa two notches above junk with a negative outlook will make its announcement on Friday.
(Edited by Neo Koza)