News in South Africa 20th March:
1. D-Day for national shutdown:
In just a few hours, Julius Malema and his political party, the Economic Freedom Fighters (EFF) will attempt to shut down the country.
He is urging party members to protest in full force and without fear.
Some government leaders have warned that this will be an attempt to bring about anarchy and regime change through unconstitutional means.
While the main opposition, the Democratic Alliance (DA) has attempted to get the march halted at both the national level and in Cape Town, the red berets are calling for an end to load shedding and for president Cyril Ramaphosa to step down.
The EFF in its 10 years of existence has held several marches, but Monday’s one is expected to be different.
This is evident in how police and the South African National Defence Force have responded to the looming national shutdown.
But the party is standing firm insisting it will bring the country to a standstill.
Malema, during an address to party members in Soweto on Friday, issued this instruction:
“All the main roads, M1, M2 all of those roads… when they wake up, every bridge must be having a white banner that says President Cyril Ramaphosa must go because those are our bridges.”
Arrests:
Eighty-seven protesters have been arrested in the past 15 hours for public-violence-related offences.
They are said to have been participating in the National Shutdown.
The arrests have been made by the National Joint Operational and Intelligence Structure.
Over 24,000 tires have been confiscated by law enforcement agencies nationwide.
They’re said to have been strategically placed for acts of criminality.
Law enforcement officers say they remain on high alert.
2. Reserve Bank expected to hike rates again:
Central banks in Africa’s biggest economies are poised to raise interest rates this month to contain sticky inflation and deter a selloff in their assets exacerbated by the collapse of US lender Silicon Valley Bank and stress at Credit Suisse Group AG.
Nigeria, South Africa, Egypt, Morocco and Kenya are projected to raise borrowing costs in the next two weeks.
Monetary authorities in nations such as Ghana and Angola, where inflation is on a downswing, are predicted to hold. Six smaller African economies will stake out different approaches to bring prices under control and deal with the contagion caused by the global banking crisis.
A gauge for government dollar bonds in Africa has dropped every day of the past seven, pushing the yield on the average security on the continent up 164 basis points to 14.36%. That’s the highest level since 3 November. All the bonds in the index are rated junk.
While investors have rushed to the safety of bonds in general amid the crisis, they have favoured quality credit and sold sub-investment grade securities.
South Africa, March 30
- Repurchase rate: 7.25%
- Inflation rate: 6.9% (Jan.)
- Inflation target: 3%-6%
The South African Reserve Bank’s fight against inflation is unlikely to be derailed by weakness in the global banking system.
Policymakers nearing the end of the interest-rate hiking cycle, will probably raise the benchmark by 25 basis points to address potential risks to the inflation outlook, said Sanisha Packirisamy, an economist at Momentum Investments. They include the knock-on effects of a weaker currency, with the rand having weakened about 7% against the dollar this year.
Average inflation expectations for the year stand at 6.3%, well above the central bank’s 4.5% target.
3. New laws to address greylisting:
South Africa has put new laws in place to address the Financial Action Task Force’s (FATF) concerns, and those relating to beneficial ownership will have a significant impact on financial institutions and companies.
In February 2023, the FATF placed South Africa on the ‘grey list’ of countries which are under increased monitoring. South Africa was placed on the grey list as the FATF identified serious deficiencies in its regulatory systems and the effectiveness of its anti-money laundering and counter-terrorism regime. Countries on the grey list are committed to working with the FATF to put the necessary measures in place to address their deficiencies.
On average, it takes countries three to five years to get off the grey list, but a couple of countries, specifically Mauritius and Morocco, satisfied the FATF requirements faster and were removed in less than two years.
The FATF considers both ‘technical compliance’ and ‘effectiveness’. While South Africa has made some progress on technical compliance, it has fallen short on effectiveness. One of the key areas where South Africa will have to satisfy the FATF is in delivering successful prosecutions of those implicated in State Capture by the Zondo Commission report.
Technical compliance
The FATF listed eight deficiencies, seven of which are largely dependent on state action, including investigations, sanctions, and other matters.
The eighth deficiency relates to beneficial ownership of entities and legal arrangements. While some of the responsibility of addressing this deficiency rests with the State, South African businesses and financial institutions also have an important role to play.
The FATF wants South Africa to have laws and practices that provide for transparent ownership and control structures of legal structures and entities.
Beneficial ownership amendments
Two FATF recommendations on beneficial ownership are relevant: Recommendations 24 and 25. Recommendation 24 stipulates that countries should have adequate, accurate and up-to-date information on beneficial ownership that can be obtained rapidly by the authorities, either through a register or an alternative mechanism.
South Africa enacted various laws and amendments in December 2022 to try to stave off greylisting. Provisions relating to beneficial ownership affect a number of acts: the Companies Act, Financial Sector Regulation Act, Non-Profit Organisations Act and Trust Property Control Act.
Enforcement
Although the National Treasury has said that South Africa’s financial sector on the whole is compliant with the FATF requirements, there are compliance concerns in the non-financial space (for example, estate agents, law firms).
It is anticipated that further enforcement and supervision, particularly of high-risk financial institutions, will occur in the foreseeable future and financial institutions should be prepared for it.
4. Oil posts worst weekly loss since April 2020:
Oil posted the worst weekly loss since the early months of the coronavirus pandemic as banking turmoil poisoned investor sentiment. West Texas Intermediate lost nearly 13%, the largest drop in almost three years.
The failure of Silicon Valley Bank and troubles at Credit Suisse Group AG drove investors from risk assets, with oil-options covering accelerating the selloff.
“Crude action this week reminded many of how quickly the commodity can be decimated by macroeconomic events,” said Rebecca Babin, senior energy trader at CIBC Private Wealth. “The commodity broke a significant level of support as the market tries to quantify the economic ramifications of banking turmoil.”
Prices:
- WTI for April delivery dropped $1.61 to settle at $66.74 a barrel
- Brent for May fell $1.73 to settle at $72.97
Oil’s next leg may depend on decisions by the US Federal Reserve and the Organization of Petroleum Exporting Countries.
5. Bitcoin soars amid banking turmoil:
Turmoil in the banking sector, hotter-than expected inflation data, and renewed hopes for a dovish Federal Reserve has Bitcoin reaching levels not seen in about nine months.
The largest digital asset topped $28,000 (R515,000) for the first time since June 2022, trading for as much as $28,258 on Sunday.
Since the start of the year, Bitcoin’s price has risen almost 70%. Other digital assets rallied as well — with Ethereum up about 17% since the start of last week and so-called altcoins like Solana and Cardano advancing, too.
Traders waded high levels of uncertainty last week in markets. US two-year yields fluctuated wildly, and the Cboe Volatility Index, the so-called fear gauge also known as the VIX, spiked above 30.
But Bitcoin kept steadfast — and straight up.
“Bitcoin is correlated with liquidity conditions and real rates. Real rates have declined, liquidity conditions have expanded, and it looks as if we’re entering a new regime,” said Ilan Solot, co-head of digital assets at Marex.
Broader markets fluctuated in the past week after a handful of US lenders failed, and fresh concerns arose around Credit Suisse Group AG before UBS Group AG agreed to buy its fellow Swiss bank on Sunday.
In the fallout, some investors have called on the Fed to pause interest rate hikes. But midweek data showed that core CPI advanced more than expected, a reminder that the fight against inflation is far from done.
It’s unclear how the central bank will respond to the conflicting signals at this week’s Fed meeting.
That uncertainty troubled many corners of the financial world but emboldened Bitcoin bulls who see the digital asset as a hedge against inflation, despite last year’s evidence to the contrary.
All information sourced from articles posted by: EWN, ENCA, BusinessTech, Moneyweb, Fin24, and DailyInvestor.
