‘3 biggest credit ratings agencies shocked at state of SA's economy’

Finance Minister Malusi Gigaba spoke to all three agencies Moody's, Fitch and S&P Global ratings over the phone after his maiden medium-term budget.

FILE: Malusi Gigaba. Picture: EWN.

JOHANNESBURG - The Finance Ministry says the big three credit ratings agencies are in "shock" at the state of South Africa’s economy.

Finance Minister Malusi Gigaba spoke to all three agencies Moody's, Fitch and S&P global ratings over the phone after his maiden medium-term budget.

His spokesman Mayihlome Tshwete said they asked specific questions about the wage bill, state-owned companies and low growth.

Gigaba’s painted a bleak picture of the situation the country is in on Thursday, giving what he called an honest assessment of the challenges it faces.

He’s also revealed the revenue shortfall is expected to come in at R50,8 billion this year, severely eroding South Africa’s financial position.

The government’s hand has been forced, because without selling off some assets the bailout for SAA and the Post Office of nearly R14 billion would have blown the budget, sending a disastrous signal to investors and ratings agencies.

Gigaba said: “Additional appropriations of R13.7 billion to recapitalise the SAA and the Post Office are being made. These have been partially offset by the use of the contingency reserve, a shortfall of R13.9 billion remains to ensure the expenditures ceiling is not breached. We have decided to expose a portion of government’s Telkom shares; we don’t take this decision lightly, but we’ve had to.”

The bailout and an expected tax revenue shortfall for this year of a whopping R50,8 billion means the budget deficit will widen to 4.3% of GDP this year, against a February budget target of 3.1%.