News in South Africa 20th November:
1. SARB interest rate announcement:
The South African Reserve Bank’s (SARB’s) Monetary Policy Committee (MPC) will be meeting this week for the last time in 2023, with the bank’s next decision on interest rates in the country expected on Thursday (23 November).
For the last two meetings, the MPC has voted to hold South Africa’s repo rate at 8.25%, following a protracted hiking cycle which started two years ago in November 2021.
Since then, interest rates have been hiked by a cumulative 425 basis points, leaving the country in restrictive territory. The rate hike path has broadly followed the global cycle, though has ultimately not been as aggressive rate hikes in the US or Europe.
This month will be a marathon month for interest-rate decisions in Africa, as its biggest economies are set to keep interest rates higher for longer.
Those with acute currency weakness and brisk inflation, such as Nigeria and Angola, are poised to raise rates. Egypt may do so at its upcoming meeting or early next year.
That contrasts with major advanced economies, where traders are betting the most aggressive tightening cycle in a generation is now over.
Other countries, including South Africa, Morocco, Kenya and Ghana, are seen maintaining rates at current levels to assess risks to inflation.
South Africa, 23 November:
- Repurchase rate: 8.25%
- Inflation rate: 5.4% (Sept.)
- Inflation target: 3%-6%
Inflation is anticipated to start easing toward the midpoint of the South African Reserve Bank’s 3% to 6% target range, which is where it prefers to anchor expectations.
Against that outlook, economists are in consensus that the MPC will close off the year, leaving the benchmark rate unchanged for a third straight meeting while delivering a hawkish message. Most only anticipate rate cuts from the second quarter of next year.
Supporting its decision to hold are fresh developments, including oil prices erasing their sharp rise from late August and the Federal Reserve appearing to be done with rate hikes. That bodes well for the rand, Tatonga Rusike, an economist at Bank of America, said in a note to clients.
Other African country rates and decision dates:
Nigeria, 21 November:
Policy rate: 18.75%
Inflation rate: 27.3% (Oct.)
Inflation target: 6%-9%
Angola, 21 November:
BNA rate: 17%
Inflation rate: 16.6% (Oct.)
Ghana, 27 November:
Policy rate: 30%
Inflation rate: 35.2% (Oct.)
Inflation target: 8% +/- 2 ppts
Kenya, 5 December:
Central bank rate: 10.5%
Inflation rate: 6.9% (Oct.)
Inflation target: 5% +/- 2.5 ppts
Morocco, 19 December:
Benchmark rate: 3%
Inflation rate: 4.9% (Sept.)
Egypt, 21 December:
Deposit rate: 19.25%
Inflation rate: 35.8% (Oct.)
Inflation target: 7% +/- 2 ppt
2. Eskom grid stability shaky:
While politicians and government officials assure that Eskom’s performance is improving and spread hope for a more energy-filled future – the reality of the situation is far more tenuous.
Analysis of the latest available energy data from Eskom shows that the group’s plant performance has remained fairly weak and that grid stability is currently hinging on demand patterns.
According to independent energy analyst Pieter Jordaan, the group’s unplanned outages (breakdowns, or UCLF) have entrenched above 30% of total capacity – far higher than the 20% limit placed on the utility by the national energy regulator Nersa.
“At those levels, a small increase in demand will make life pretty miserable for all of us,” he said.
Over the past few weeks, it has become apparent that lower demand has been the main driver behind Eskom’s apparent improved performance, with UCLF and its energy availability factor (EAF) not showing significant signs of improvement.
Electricity minister Kgosientsho Ramokgopa said on Sunday that Eskom was ramping up power cuts to replenish its emergency reserves.
This is because Eskom lost a “cluster” of units from different power stations across the country, amounting to over 2,700 megawatts (MW), shy of three stages of load shedding.
“And if we had not experienced that, of course, you would not be seeing the kind of intensity of load shedding that we are experiencing,” he said.
EAF continues to trend lower, deviating from Nersa’s 65% target, and UCLF is following a trend path higher. More worryingly, the utility is lagging in its data reporting, which Jordaan noted is also a distressing sign.
Ekom announced it was implementing stage 2 and stage 3 load shedding on rotation for Monday, moving to stage 1 and stage 3 for the rest of the week.
The shaky performance of the last two weeks has also arrested the slight improvements in trend data from October, when load shedding suspensions were more frequent and lasted longer.
Both the 91-day (quarterly) and 364 (annual) blackout trend lines have flattened out, meaning that whatever improvements were experienced in the last few weeks have stopped – and if improved performance isn’t realised soon, the country’s energy situation will head back in the wrong direction.
3. Foreigners forced to dump investments:
Foreign investors are being forced to sell down their holdings in two more ‘SA Inc’ blue chips, following the announcement last week by index provider MSCI that the two equities would be deleted from its South Africa Index at the end of the month.
African Rainbow Minerals (ARM), with a market capitalisation of R37.5 billion, and Growthpoint (GRT), valued at R35 billion, have already seen a jump in trading volumes – and share price weakness – as foreign investors rush to dispose of their holdings.
The exclusion from the SA Index means these shares will also no longer feature in the MSCI Emerging Markets Index. Any exchange-traded funds (ETFs) or index funds that track these indices will need to sell down their holdings in these shares by the end of November.
The largest impact will come from mega fund, Vanguard Emerging Markets Stock Index Fund, with net assets of $92 billion, equivalent to R1.7 trillion. This is the more than the market capitalisations of FirstRand, Standard Bank, Capitec, Vodacom, MTN, Absa and Nedbank combined!
The far smaller iShares MSCI Emerging Markets ETF, with net assets of over $16 billion, or R300 billion, is still large in rand terms. It is more than twice as large as all domestic ETFs, exchange-traded notes and actively managed certificates together.
The deletion of Growthpoint and ARM this month follows the removal of MultiChoice Group, Mr Price Group and TFG Limited in August.
This will bring the total number of deletions of South African shares this year to five and illustrates the fading significance of the JSE globally.
The country’s weighting in the MSCI Emerging Markets Index will be further reduced from 1 December. India sees nine additions from the end of the month and Brazil one. Mexico has two additions and one deletion. China has a net zero additions (19 adds, 19 removals).
It says the “three largest additions to the MSCI Emerging Markets Index measured by full company market capitalization will be Tata Motors A (India), Amman Mineral International Tbk PT (Indonesia) and CGN Power Co A (Hk-C) (China).
So far this year, non-South African investors have been net sellers of R110.7 billion in shares on the JSE. At the same point in 2022, this figure was R65.6 billion.
4. Massive power expansion:
The government is making progress on its plans to urgently upgrade SA’s energy infrastructure, with Cabinet having signed off on plans to use part of the $12.5 billion (R225 billion) in financing commitments from the Just Energy Transition Investment (JET-IP), Electricity Minister Kgosientsho Ramokgopa said on Sunday.
He noted priority areas have been identified as both transmission and distribution.
5. Kidnapping for ransom surges:
Kidnapping for ransom in South Africa has surged by over 76% between July and September 2023 alone.
Experts say criminals are treating abduction and extortion as a business transaction as there has been a noticeable increase in the number of wealthy individuals insuring against it.
All information sourced from articles posted by: DailyInvestor, BusinessTech, Moneyweb, Fin24, and Mail & Guardian.
