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Standard Bank Group
The SA Daily 17 August 2018

Still stable ratings this year

  • Moody’s ratings agency said this week said that they expect a slower pace of fiscal consolidation than that forecast in the 2018 Budget, due to the excess costs not budgeted for — such as the recent public wage settlements and lower than projected growth estimates which, ultimately, will lead to disappointing revenues.
  • According to our estimates, Q1 FY18/19 tax revenues have underperformed. Total gross tax receipts grew 9.1% y/y in June, a touch below the 9.74% y/y growth (for the fiscal) YTD, falling short of the 10.6% y/y required for full fiscal year growth to meet government forecasts.
  • Indeed, the risk of moderate tax revenue underperformance and disappointing growth spells a sizeable revenue shortfall. However, we expect this to be counteracted by ongoing underspending on infrastructure. And, if the savings and efficiency improvements identified recently by the Department of Public Works are any indication of the general trend across government, there might also be broader savings to counteract any revenue shortfall.
  • We therefore still see the SA sovereign credit ratings outlook as unchanged this year (see our report 1Q tax revenues weak of 30 July by Elna Moolman).

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