Try our mobile app
JSE:SBK JSE:ABG JSE:SHP JSE:DSY
(Updates after budget speech)
JOHANNESBURG, Feb 26 (Reuters) - The South African rand gained on Wednesday after Finance Minister Tito Mboweni said in a budget speech that the government would cut the public sector wage bill to contain a rising budget deficit.
Analysts have long cited rising public sector wages as a big threat to the country’s stretched public finances.
At 1600 GMT, the rand traded at 15.1450 to the dollar, around 0.5% stronger on the day.
But despite Mboweni’s comments on wages, some economists expect Moody’s to strip South Africa of its last investment-grade credit rating at a review scheduled for March.
“The weakening fiscal position and rising debt burden have further increased the risk of another downgrade from Moody’s,” said John Ashbourne at Capital Economics.
“The situation is clearly even worse than it was in November, when Moody’s adopted a negative outlook.”
Domestic stocks closed higher, with the Johannesburg Stock Exchange’s Top-40 Index ending up 0.4% at 49,500 points and the All-Share Index rising 0.4% to 55,047 points.
Consumer-focused companies fared particularly well because Mboweni’s budget speech contained no major tax increases, contrary to the predictions of many analysts.
Retailer Shoprite rose almost 10%, followed by lenders Standard Bank and Absa, up 7.94% and 7.41% respectively, and insurer Discovery, which rose 7.2%.
