South Africans have endured a torrid few months. Drought, floods, a presidential expenses scandal, rolling blackouts and a prolonged strike at platinum mines have combined to shake investor confidence and put pressure on the rand. Over the weekend, Nigeria eclipsed South Africa as the continent’s biggest economy. But local consumers now face a threat from much further afield: Ukraine.
The fall-out from the Russian annexation of Crimea has threatened an important source of wheat and maize for the country. South Africa is a net exporter of maize and a severe drought in North West province, home to many maize farms, affected supplies of the staple crop acutely. Continue reading »
Two new exchange traded funds giving investors access to South Africa’s palladium market have hit the ground running.
Standard Bank’s AfricaPalladium ETF, launched on March 24, had grown to R300m ($28.4m), the equivalent of 33,000 ounces, by March 28, the bank said. Absa, a member of Barclays, unveiled its NewPalladium ETF on March 27; by Monday afternoon Absa said current listings being processed, to be concluded on April 2 and 3, showed the fund had grown to 24,847 ounces of palladium, valued at R200m.
Generally, commodity prices have come under pressure globally. So why would now be a good time to launch a palladium-backed product? Continue reading »
At first glance, it looks as if South Africa’s latest announcements on trade and manufacturing data suggest two different narratives – one of recovery and one of continued slowdown. In fact, however, a common thread between them points toward an overall slowing growth trend.
A surprise trade surplus of R1.7bn in February represented a swing from January’s deficit of R16.9bn, pushing the rand higher as investors grew more confident over South Africa’s export performance. However, the manufacturing Purchasing Managers Index, announced on Tuesday, slipped to 50.3 in February from 51.7 in January, suggesting a slowdown in manufacturing growth. Continue reading »
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. Continue reading »
South Africa and Nigeria are global mineral and oil suppliers, respectively, that have built up their specialist industries over decades. So they should also be well advanced in creating investor-friendly policies and attractive operating environments. Similarly, Kenya, as east Africa’s leading economy, could be expected to create an appealing framework as it looks to tap into its own natural resources. Continue reading »
South Africa’s current account deficit narrowed in the fourth quarter of last year to 5.1 per cent of GDP from 6.4 per cent in the third quarter. But the good news was tempered by the fact that the improvement came primarily from a slump in imports rather than an export recovery.
The current account deficit – along with the country’s budget deficit – is seen as a key forward indicator of South Africa’s vulnerability to further weakness in its currency, the rand, which has depreciated by around 19 per cent to R10.88 against the US dollar over the last year (see chart). Continue reading »
It’s rarely a quiet day in South African mining. Last week there was the Mining Indaba conference, where the mood among many miners was one of caution; the mines minister has indicated that the controversial Mineral and Petroleum Resources Development Amendment Bill will pass within months; and negotiations over the crippling mining strikes have apparently ground to halt. Then there was the tragic death of at least 10 workers in two separate incidents at Harmony Gold (pictured).
So where next for the industry? Continue reading »
South Africa’s banks, notably its “big four” of FNB, Nedbank, Standard Bank and Absa, are some of Africa’s strongest financial institutions. But they aren’t immune to the main problems hurting the economy.
So what effect will Wednesday’s surprise interest rate hike have? Continue reading »
Gill Marcus, governor of the SARB
The basic narrative to South Africa’s rate rise is simple: EM currencies are under pressure, the rand especially; inflation is on the way; so time to hike.
But looking through the South African Reserve Bank’s statement, another concern stands out. Continue reading »
South Africa’s hike in its policy rate on Wednesday failed to impress traders who sold off the rand within 15 minutes of the hike announcement, driving it down by more than 3 per cent to 11.33 to the US dollar.
Speaking after the hike was announced, Ishitaa Sharma, a FX and rates strategist at Citibank said: “The markets are telling central banks they have to be a lot more consistent in their hawkishness.”
In advance of the South African rate hike, the rand had already weakened to 11.17 to the US dollar, a slide of 1.8 per cent. After the announcement, though, the rand fell further. Continue reading »
Big surprise. Despite every economist polled by Bloomberg predicting a hold, the SARB has hiked rates by 50 basis points to 5.5 per cent.
Reserve Bank governor Gill Marcus said that “The primary responsibility of the Bank is to keep inflation under control and ensure that inflation expectations remain well anchored. The depreciation experienced so far could improve our international competitiveness, provided that it is not eroded through higher wage and other input prices.”
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. Continue reading »
Ah, the heady days of the rand at 10 to the dollar. Back only in June last year, that was the big psychological market barrier. Now 11 rand per dollar is the norm. Only a few weeks ago analysts had doubts that it would get that far – in November, Barclays suggested the rand could even strengthen back to 10.
Rip all that up. With the Argentine peso, Turkish lira and Russian rouble all posting big falls in recent days, the rand is just one of several emerging market currencies under pressure. So what are the implications of the rand at 11? Continue reading »
South Africa’s upstart miners’ trade union, Amcu, is starting 2014 with a bang.
Not content with becoming the recognised union over the older, more established National Union of Mineworkers (NUM), it is looking to pull off the impressive feat of organising strikes at South Africa’s three biggest platinum companies – Lonmin, Anglo American Platinum (Amplats), and Impala Platinum (Implats). That’s a combined 70,000 workers. And, more importantly, around two-thirds of the world’s platinum output. Continue reading »
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. Continue reading »