GCR expects performance across almost all corporate sectors to remain weak for the remainder of 2020 due to a collapse of consumer confidence. Expectations for a recovery are tempered by the rising number of business closures, removing critical productive capacity from the economy.
Although earnings will be severely impacted, many large South African corporates have been proactive in strengthening their balance sheets, which should provide the financial strength to survive the current headwinds.
Credit ratings for many large corporates remain stable, with the steps taken to strengthen the liquidity position having offset the downside pressure from the broader operating environment. That said, if the uncertainty persists into 2021 then credit pressure will increase.
More than three months have passed since President Ramaphosa implemented emergency measures to curb the spread of COVID-19. Compared to March when a hard lockdown unfolded rapidly, we can now take a more measured view to better understand the impact of the COVID-19 disruption over the short to medium term.