South Africa’s Finance Minister Malusi Gigaba faces a credibility test on Wednesday when he delivers his inaugural budget speech to outline spending plans and economic growth forecasts, which will provide an insight into his fiscal stance.

Gigaba’s medium-term budget policy statement (MTBPS) will be made amid sluggish economic growth and a politically charged environment following allegations of corruption and influence-peddling in government, which have unnerved investors.

Rating firms are concerned about political jostling ahead of the African National Congress (ANC) conference in December to elect a new party leader to succeed President Jacob Zuma, who has battled several scandals including corruption allegations.

Whoever the ANC picks is likely to take over from Zuma as South Africa’s leader in 2019 when a national election is held.

Gigaba, who has held other key ministerial posts including home affairs and seems to be favoured by Zuma, was appointed to lead the Treasury in March, replacing the fiscally-prudent Pravin Gordhan.

Economists expect him to address concerns over low revenues when he announces spending priorities for the next three years.

A Reuters poll found poor tax receipts could push the 2017/18 budget deficit forecast to 3.9 percent of GDP from an estimate of 3.1 percent in February.

“After the cabinet reshuffle in March, 25 October will be the first major outing for Finance Minister Gigaba and will remove much uncertainty surrounding his fiscal world view,” Nomura analyst Peter Attard Montalto said.

“We do not envisage a blow out in the budget, but credibility will likely be tested if ‘anonymous’ revenue hikes are leaned on too much and growth forecasts are over-egged.”

Following his appointment, Gigaba got a sceptical welcome on financial markets on fears that budget discipline would falter. Rating agencies downgraded South African debt.

BNP Paribas South Africa economist Jeff Schultz said Gigaba “will have his work cut out” to present a credible budget.

“Ratings agencies have already made clear their stance that the future of the investment-grade rating on the country’s local-currency sovereign debt rests on Mr Gigaba’s ability to stick broadly to the status quo set by his predecessor at the time of February’s budget,” Schultz said.

South Africa emerged from a recession in the second quarter but growth remains weak, with the central bank projecting 2017 GDP growth of 0.6 percent.

CONTINGENT LIABILITIES

Fitch and S&P Global Ratings rate South African foreign-currency debt in sub-investment, or “junk”, territory. But only Fitch has the country’s local-currency debt in junk.

Moody’s rates both the foreign and local currency debt a notch above speculative grade.

S&P and Moody’s are scheduled to review South Africa in November. Fitch has not published its review calendar for South Africa.

Focus will also be on how Gigaba plans to bolster financial support to struggling state-owned companies such as South African Airways (SAA), which have been highlighted by the rating agencies as one of the problems facing the economy.

Last month the Treasury provided SAA with a second bailout for the year, drawing criticism from the opposition parties. – Reuters