News in South Africa 22nd May:
1. Repo rate cut:
The Reserve Bank’s monetary policy committee has voted to reduce the repo rate for the fourth time this year, from 4.25% to 3.75%.
As a result of the cut, the prime lending rate will fall from 7.75% to 7.25%.
The repo rate is the benchmark interest rate at which the Reserve Bank lends money to other banks.
Reserve Bank governor Lesetja Kganyago said at a briefing on Thursday afternoon that the central bank now expects SA’s GDP to shrink by 7% this year. In April, the bank had predicted a 6.1% fall in GDP.
The decrease in the repo rate was widely predicted by analysts as the Reserve Bank seeks to bolster SA’s fragile economy by lowering interest rates and upping its bond purchases.
Three members of the MPC were in favour of a 50 bps rate cut, while two were in favour of a 25 bps cut.
The rate cut would likely provide some relief to indebted consumers, Reserve Bank Deputy Governor Rashad Cassim explained. “Reducing interest rates by 50 bps now and 100bps (previously), we are contributing to helping consumers who have debt, with their cashflow,” said Cassim.
2. Rand standing strong:
The rand is trading at R17.69/$ this morning as global market sentiment – and risk appetite – improved.
3. Hospitals under strain in Western Cape:
As the country rushes towards an anticipated spike in Covid-19 cases, the Western Cape’s largest hospital is already under pressure, with a need for more nurses and many of its ICU beds occupied, according to staff who spoke to News24.
As the province continues to account for well over half of the national number of coronavirus infections, Tygerberg Hospital is already under pressure.
Doctors and medical staff at the state facility earlier this week reported that over 200 nurses had been off ill, as the infection rate in the Western Cape increased by hundreds daily.
What this means, one staff member explained, was that those in need of ICU beds “won’t be able to get one until someone dies”.
The number of Covid-19 patients at Groote Schuur Hospital in Cape Town is doubling every five days and the hospital will not be able to cope unless something is done, GroundUp reported.
“I expect there will be an excess of patients needing care even if all existing beds are opened,” said a doctor who did not want to be named.
The hospital was currently running seven wards with more than 120 Covid-19 patients, and four intensive care units with 19 patients, one of several doctors at the hospital told GroundUp.
Three of these wards are for confirmed Covid-19 cases, others are for suspected cases – in other words people with respiratory illnesses. A doctor said the proportion of these patients testing positive was increasing rapidly.
4. 3 days of load shedding:
Eskom said there is an 80% chance that South Africans will experience only three days of load shedding this winter.
This projection is a dramatic decrease from the over thirty days predicted earlier in the year – with COVID-19 among some of the factors contributing to the improvement.
The COVID-19 pandemic and subsequent national lockdown appear to have provided Eskom with a bitter-sweet outcome.
While some of its operations had to be halted due to the crisis – the state-owned company said it also got an opportunity to deal with its short-term maintenance.
This could only have been implemented due to the reduced energy demand during loadshedding as some of Eskom’s major electricity consumers shut their doors.
Eskom’s chief operating officer Jan Oberholzer said, “The system remains unpredictable and unreliable so we still have trips and breakdowns, and although we have predicted three days of load shedding – I need to say that the risk of load shedding remains.”
5. Spar profits drop:
South Africa’s SPAR Group expects its Polish business to break even in the next 24 months and deliver 160 million euros ($175.1 million) of full-year turnover, after losses there weighed on half-year earnings.
The grocery chain and wholesaler has been expanding in Europe to offset weaker consumer spending at home. It completed the acquisition of a controlling stake in Polish deli and supermarket chain Piotr i Pawel group in October.
Group Chief Executive Graham O’Connor told analysts during a results presentation that he expected that business to deliver turnover growth of 280 million euros in the 2021 financial year, 350 million in 2022 and 400 million euros in 2023.
In the four weeks ended April, SPAR’s southern African business saw sales fall as much as 14% due to the closure of its liquor and Build It stores because of coronavirus restrictions. Those businesses contribute 20%-25% to Southern Africa sales.
Overall in the six-months ended March 30, normalised headline earnings fell to 452.7 cents from 522.5 cents last year, hit by losses at the Polish business.
SPAR declared an interim dividend of 200 cents per share, 29.6% lower than the previous year.