The undisputed headline grabber at the end of South Africa’s monetary policy committee meeting on Thursday was the surprise announcement that Gill Marcus would not be seeking to renew her five-year term as central bank governor when it expires on November.
There is little doubt she will be missed by the financial community and all eyes will be on the appointment of her successor, with the hope that the South African Reserve Bank’s credibility and integrity are maintained.
The backdrop to South Africa’s monetary policy committee’s (MPC) meeting this week seems all too familiar.
One protracted strike has ended, but another larger one has started. The bleak growth outlook appears only to be weaker, and Moody’s, the rating agency, has issued a grim warning about the impact of industrial unrest and the potential risks to the country’s credit rating.
Yet for the first time in a while there does not appear to be a clear consensus on whether the MPC will keep rates on hold or raise them.
If anybody had any lingering illusions about the worrying state of South Africa’s economy, Gill Marcus, the central bank governor, should have put them firmly to bed in a speech on Tuesday.
Candidly outlining the economic malaise engulfing Africa’s most developed nation, Marcus told a business breakfast that “the domestic economy is facing enormous headwinds, many of which are of our own making.”
After much speculation and hours of waiting Jacob Zuma, South Africa’s president, finally announced his new cabinet on Sunday evening with a raft of changes and a few surprises.
Some ministries were merged – for example, the National Planning Commission, previously led by the retiring Trevor Manuel, was joined with the Performance Monitoring and Evaluation ministry. New ones were born, including telecommunications and a separate communications ministry (watch for that to be dubbed the propaganda ministry by the South African press).
With South Africa’s May 7 election done and dusted and the African National Congress set to extend its 20-year dominance of the political landscape, all eyes are now on President Jacob Zuma’s appointments to his next cabinet.
All should be revealed a day or two after Zuma’s inauguration on Saturday, at the start of a second term at the helm of Africa’s most developed economy.
There were no shocks or surprises from Pretoria today. Rather, South Africa’s Monetary Policy Committee agreed with the consensus among economists and kept interests rates on hold.
Its reasoning was clear – even if the committee was split 5/2 on whether to raise the repurchase rate above 5.5 per cent. The volatile rand – which had slumped dramatically against the dollar at the beginning of the year – has appreciated and been holding firm in recent weeks. The central bank’s forecast for headline inflation has also dipped slightly to 6.2 per cent in 2014 compared to its previous forecast of 6.3 per cent.
As South Africa’s monetary policy committee debates whether to raise interest rates or keep them on hold this week, its members’ eyes would have been drawn to the latest inflation figures showing a slight uptick in prices.
Data released by Statistic SA on Wednesday revealed that the Consumer Purchase Index inflation rate in April hit 6.1 per cent – 0.1 per cent higher than in the previous month. It means inflation crept slightly above the 6 per cent ceiling the monetary authorities traditionally like to keep it.
South Africa’s three major platinum producers hit by a 17-week strike look set to resume talks with union leaders after a Labour Court said on Tuesday it would mediate between the parties.
The court’s surprise decision comes as tensions have been rising in South Africa’s platinum belt, with the Association of Mineworkers and Construction Union (Amcu) and the companies – Anglo American Platinum, Impala and Lonmin – poles apart in the wage dispute.
The African National Congress, like other political parties, has a penchant for numbers.
With South Africans preparing to vote tomorrow in the fifth general election since the dawn of democracy 20 years ago, the ruling party’s manifesto is full of them.
Since 1994 – the most historic of all South African numbers – 3.3m houses have been built; 7m households have been added to the electricity grid; nearly 5,000 (white) farms have been transferred to black farmers; 5m more people are working and GDP has grown to more than R3.5tn, the manifesto tells us.
South Africa kept interest rates unchanged on Thursday as Africa’s largest economy continues to grapple with the policy challenge of subdued growth set against inflationary pressures.
The decision by the central bank’s monetary policy committee to keep its repo rate at 5.5 per cent was expected as the volatile rand has recovered slightly from a disastrous beginning to the year when it tumbled to five year lows against the US dollar. Still, the MPC’s decision was a tight one, with a four-to-three split on the committee.
To hike or not to hike.
That will be the conundrum facing South Africa’s monetary policy committee as it began its first meeting of 2014 on Monday against a backdrop of emerging market turmoil and a tumbling currency.
With elections just months away, President Jacob Zuma and his ruling African National Congress party would have been wishing for some positive economic news as campaigning intensifies against a backdrop of stubbornly high unemployment and lacklustre growth.
But after a turbulent 12 months during which the pace of growth in Africa’s largest economy dipped to its slowest level since a 2009 recession, the first weeks of this year have offered little respite. Rather, more challenges lie ahead as domestic and external factors look set to combine to heap pressure on the country’s economic performance.
When members of South Africa’s National Union of Mineworkers agreed to a revised pay offer from the country’s main gold producers – bringing to a close a strike by tens of thousands of miners – struggling companies must have breathed a collective sigh of relief. Instead of the protracted strike many executives had feared, the industrial action lasted just a few days with virtually all workers returning to work by Sunday evening.
It has been a while since South African manufacturers have had much to cheer about as they have endured rising costs, increasing competition and the economic crisis in Europe, their main market. But as the rand has been trading at four-year lows against the dollar for much of the year, it seems they may finally be getting a lift.
When Jacob Zuma, South Africa’s president, got up to address parliament on Wednesday he did his bit to boost the spirits of a sombre nation, even if it was momentary uplift. He began by saying that Nelson Mandela was “responding better to treatment this morning” as the iconic former president spent his fifth day in hospital being treated for a recurring lung infection.
But then Zuma had to tackle other pressing problems facing Africa’s largest economy – the dire performance of its economy and the volatile nature of labour relations in the mining industry as companies prepare for crucial wage negotiations in coming weeks.