Rand steady before crucial budget speech

The South African rand was little changed early on Wednesday, before a budget speech that could decide the fate of the country’s last investment-grade credit rating.

At 09:47, the rand traded at 15.2350 versus the dollar, less than 0.1% weaker than its previous close.

Traders were cautious in case Finance Minister Tito Mboweni springs any big surprises in the budget speech, which will start around 14:00.

A Reuters poll last week predicted Mboweni would present an updated budget deficit forecast of 6.2% of gross domestic product for the current fiscal year, up from 5.9% in October.

Some analysts predict that a bleak budget could see Moody’s downgrade South Africa’s sovereign credit rating to “junk” status, which could prompt an outflow of cash from local assets.

But in a sign that Mboweni could take steps to contain spending, a large public sector trade union said on Wednesday that the government wanted to review the terms of a three-year public sector wage deal struck in 2018.

If the government manages to avoid paying public servants the agreed pay increase for the year starting April 2020, it could help narrow the deficit and placate Moody’s.

Domestic stocks opened sharply weaker, with the Johannesburg Stock Exchange’s Top-40 Index down 2% by 0747 GMT, as fears over coronavirus jolted global markets.

Government bonds also fell in early deals, with the yield on the 2026 bond up 4.5 basis points to 7.905%.