EDITORIAL: Mboweni needs to convince investors fiscal crisis not inevitable

Given recent history, it’s hard to say what the markets should expect from finance minister Tito Mboweni on Wednesday.

A look at the financial markets would indicate that they haven’t yet lost hope in SA and there might still be a way out. At R16.13/$ on Tuesday, the rand was still way off its lows in April, when hitting R20/$ seemed to be just a matter of time. Likewise, the bond market has shown some stability, with 10-year yields staying at just more than 9%, even as the Reserve Bank has reduced its purchases, indicating there is demand for SA assets, not least from local banks.

Observers have attributed the steepening of the yield curve to concerns about the sustainability of government borrowing. Economists at Investec see a 10% chance of SA defaulting on its debt in five years’ time, and that’s on the basis that Mboweni sticks to the debt path promised in the supplementary budget in June.

The problem for Mboweni is that very few in the market believe his “active scenario” is credible. There is a view pushed by some, including President Cyril Ramaphosa’s economic advisory committee, that he might be better off throwing in the towel on that target. They suggest a more achievable, and credible aim, would be to try to stabilise debt at 100%sovereign debt to GDP in advanced economies to reach about 125 % by the end of 2021.

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Lets see what impact of all Finance ministers did in the past 7 years

For all his great attributes, he is not a liar.

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