The market is over-estimating the room for optimism about Tito Mboweni's upcoming National Budget, according to analyst Peter Attard Montalto, head of capital markets research at Intellidex.
Apart from not expecting any major tax changes, he foresees the key to Budget 2019 will be the Eskom bailout.
In his view, having no policy white paper on Eskom laying out details of a turnaround strategy, makes for a huge credibility problem for National Treasury to deal with in Budget 2019.
Intellidex expects a Moody's update at the end of March to result in a negative outlook, but, according to Montalto, a risk remains that the ratings agency will continue to give SA "more benefit of the doubt".
According to Montalto, Mboweni's thinking has been marked by concerns for public wage bill restraint and conservatism on state-owned enterprises (SOEs).
Montalto pointed out that Mboweni has signalled that he does not desire to continue as minister of finance after the elections.
"The ANC and government have a serious succession and talent pipeline problem," said Montalto.
About Eskom, Intellidex believes market expectations are set moderately high for full details of a bailout to be forthcoming in the budget.
"We would caution, however, that Mboweni is not about to discuss load shedding or operational issues and will not, in our view, give any details on the split or how debt allocations under the new umbrella co-structure would work," said Montalto.
"We have very strongly highlighted the downside risks that only form - in other words policy - around a bailout will be announced and not the quantum. As such risks in our view are to the downside."
A whole host of other SOEs require support, but are unlikely to receive meaningful additional backing from National Treasury, in the view of Montalto.
"We see SAA not getting any further money than the R5bn allocated at the mini budget, which was less than asked for. Debt restructuring is ongoing with banks and we expect progress on this to be included in the budget," he said.
"Denel asked for money at the mini budget and did not receive it, and we do not expect any further money to be provided now. SANRAL received R5.8bn in this fiscal year at the mini budget and we think further money is unlikely, although we watch for additional discussion on restructuring of the GFIP guaranteed debt, which is the key drag due to e-tolls not collecting money efficiently."
As for the SABC, Montalto said government had effectively banned the board of the broadcaster from undertaking labour cuts, which Intellidex believes was a key condition of National Treasury for further support.