South African Market on Edge Before Budget Shut Down
South African markets were on edge on Wednesday as the finance minister prepared to present a revised annual budget. However, local media reports suggested that there was still no agreement between the two largest political parties. At 0830 GMT the rand traded at 18.3475 against the dollar, down more than 0.7% on Tuesday’s closing level.
The Johannesburg Stock Exchange’s Top-40 index (.JTOPI), opens new tab was down 0.1% and the benchmark 2030 government bond was marginally weaker. The budget had been the biggest test so far of South Africa’s fractious coalition politics.
It was due out three weeks ago but was postponed at the last minute because of disagreements in the coalition over a plan to hike value-added tax by 2 percentage points to 17 per cent.
Local media had reported that the amended budget was likely to propose a smaller VAT increase, in a concession the finance ministry hoped would help it pass. However, it was still not clear if that would work.
The biggest party in the coalition, the African National Congress, needs the support of at least one other big party in parliament to pass the fiscal framework.
All other big parties including the second-biggest in the coalition, the Democratic Alliance, have publicly opposed raising VAT. Finance Minister Enoch Godongwana’s budget speech is expected to start around 1200 GMT.
Andre Cilliers, currency strategist at TreasuryONE, said “Uncertainty reigns as reports indicate no final agreement between the ANC and DA within the (coalition), meaning the budget could still face opposition in parliament.
“While investors were hoping for a clear fiscal path, speculation suggests the ANC will push ahead regardless, setting up a potential political battle that could impact markets.’’#South African Market on Edge Before Budget Shut Down#
