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The rand has run around R16.70/USD in the latest period of global financial market risk-off, weaker from near R15.90/USD in early September, as last week’s global bond sell-off continues to undermine global investor confidence.
Foreigners have sold off -R14.5bn in SA bonds net of purchases since early last week, as SA is affected by the rise in global risk aversion, even though its own government finances are seen to be improving, which has limited its sell-off
Globally worries over high inflation and borrowing costs in the US rose as longer dated treasury yields lifted sharply, with a bond rout across the G7, aided by higher energy costs with the WTI oil price near US90/bbl and Brent around US 100/bbl.
Domestically, SARS latest debt collection figures show around R42bn for the first five months of the tax year, near R8.4bn a month. With such a trajectory just over R100bn can be expected to be collected in the current tax year.
This is, below the target of R126bn but can be expected to ramp up towards the fiscal year end if SARs improves its revenue collection capacity. It has reached R9.8bn in July but needs to reach R12bn a month for the remaining months.
The figure of R126bn is drawn from a reported R280bn in identifiable debt owed to SARS, while the total debt book is estimated at R600bn, and SARS has reportedly deployed an additional 1 500 debt collectors to help bring in revenue.
The mini-Budget (MTBPS) is scheduled for 21st October this year and has been expected to show a revenue overrun, with mining companies in South Africa benefiting from higher gold and platinum prices versus last year.
The rating agencies already note improved fiscal metrics and reduced borrowing costs. However, much depends on government not increasing its expenditure projections as it did last year, reducing the revenue overrun benefits.
While the rand is afflicted by international events, it is not expected to continue weakening and has stabilised somewhat in the last few days. Although the losses in global bond markets have not been retraced, but risk-off is not worsening.
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About the author
Annabel Bishop, Chief Economist, Investec Bank Limited South Africa
Annabel Bishop joined Investec in 2001 and is the Chief Economist. She has worked in the macroeconomic, econometric, risk, financial markets, political risk, public finance and regulatory, among other, fields for around 25 years. Annabel is the holder of the Sake/Beeld Economist of the Year award for 2010 and has won numerous monthly Reuters Econometer awards, and various Focus Economics (Economic Forecasts from the World’s Leading Economists) categories for correctly forecasting a range of economic variables. She has authored a wide range of in-house and external articles, published both abroad and in South Africa. She has also guest lectured at Gibbs, the University of Pretoria, Wits, UJ and other academic institutions, and has presented at various national and international conferences. Author of the “Financial Services sector and its support to the economy“ section in the Better Choices Ensuring SA’s Future.
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