News in South Africa 22nd September:
1. Global central banks high inflation credo:
Central banks for the world’s biggest economies have served notice that they will keep interest rates as high as needed to tame inflation, even as two years of unprecedented global policy tightening reaches a peak.
The so-called “higher for longer” mantra is now the official stance of the U.S. Federal Reserve, European Central Bank and the Bank of England, as well as being echoed by monetary policy-makers from Oslo to Tapei.
For central bankers first chastised for being late to spot the post-pandemic surge in inflation and then cautioned for overdoing their response, the prize of returning the global economy to stable prices without recession is now within sight.
Their task is to convince financial markets not to undo their work with bets on early rate cuts, and to watch for new risks such as rising oil prices – while hoping governments help with budgets that do not further fuel inflation.
“We will need to keep interest rates high enough for long enough to ensure that we get the job done,” Bank of England Governor Andrew Bailey said on Thursday after policymakers narrowly decided to hold its main interest rate at 5.25%.
US Federal Reserve policymakers had a similar message on Wednesday. They held the Fed’s benchmark rate at 5.25%-5.50% but stressed they would remain tough in an inflation fight they now see lasting into 2026.
In Europe, ECB President Christine Lagarde was adamant last week that further hikes for the 20-country euro zone could not be ruled out. The central banks of Norway and Sweden both signalled on Thursday they could hike again, with even the Swiss National Bank holding out the prospect of further interest rate hikes despite inflation at a comfortable 1.6%.
Turkey’s central bank confirmed its hawkish turn while in Asia, Taiwan’s central bank flagged continued tight policy. The South African Reserve Bank held its key rate steady, but policymakers cited continued risks to the inflation outlook.
Significant outliers include the Bank of Japan, widely expected to stick to negative rates at a meeting ending Friday, and the People’s Bank of China, where recent better economic prospects allowed it to keep rates on hold on Thursday.
2. Load shedding update for Friday:
After announcing all-day load shedding for Friday, Eskom says it will now suspend load shedding during the day thanks to reduced demand and fewer breakdowns.
Load shedding will now be suspended at 10h00 until 16h00 on Friday. Thereafter, stage 2 load shedding will resume at 16h00 until 05h00 on Saturday, as previously communicated.
Eskom will communicate the outlook for the long weekend in the afternoon.
Eskom has taken a very different approach to load shedding this week, moving away from set schedules and instead giving daily updates and changes on the fly, depending on the status of the grid.
This has allowed the group to suspend load shedding for most of the week – a major change from indefinite stage 6 load shedding that hit most of last week.
Tuesday is the worst day for load shedding
Independent energy analyst Pieter Jordaan has been compiling in-depth data on Eskom’s power supplies and load shedding – and he’s found a trend among the chaos: load shedding always seems to get worse on Tuesdays.
Following the trends in the data, it’s apparent that a week typically starts on stronger footing – but when Tuesday rolls around, the grid comes under strain and load shedding is usually intensified.
The graphs below show the trend in action over the past few months:
While not the case every single time, it’s clear that if load shedding is going to get worse, chances are that it will be on a Tuesday.
According to Jordaan, the reason for this trend isn’t that mysterious.
He said that this happens because the national grid System Operator “defends” the network against peaks on Mondays by using maximum peaking capacity.
“However, the peaking capacity is drastically reduced by this action and the System Operator must call on load reduction (load shedding and -curtailment) to lessen or attenuate the peak in the following days. This buys time to replenish diesel and water stocks,” he said.
Schedules
For people living in the major metros, load shedding schedules are available here:
- City of Johannesburg
- City of Ekurhuleni
- City of Tshwane
- City of Cape Town (PDF)
- Nelson Mandela Bay
- eThekwini
- Manguang
- Buffalo City
For access to other load shedding schedules, Eskom has made them available on loadshedding.eskom.co.za.
3. SARB repo rate unchanged:
South African Reserve Bank Governor Lesetja Kganyago said, “The job of tackling inflation is not yet done”, and more interest rate hikes could be on the cards.
This comes after the Monetary Policy Committee (MPC) opted to keep South Africa’s repo rate stable at 8.25% for the second meeting in a row.
This decision was made on the back of better monthly outcomes, which have led to a downward revision in the MPC’s forecast for core inflation to 4.9% in 2023 (previously 5.2%).
The Reserve Bank has been attempting to bring inflation down and within its target range of 3% to 6% since the hiking cycle started in November 2021.
Its efforts started to yield results in recent months, with inflation cooling since April and reaching an almost two-year low in June.
South Africa’s annual consumer price inflation (CPI) reached a low of 5.4% in June – the lowest it has been since October 2021. This was also the first time it had been within the SARB’s target range since April 2022.
Inflation continued to cool in July, reaching a two-year low of 4.7%. However, inflation rose for the first time in months in August, when CPI marginally increased to 4.8%.
This slight rise was mainly due to higher fuel prices and municipal tariff increases.
Despite this moderate increase, August’s CPI is still within the SARB’s target range of 3% to 6% and close to the midpoint of this range (4.5%), around which the MPC wants to anchor inflation.
While this likely factored into the MPC’s final decision, it was not unanimous, as three members preferred to keep the rate on hold, while the other two preferred a 25 basis point hike.
In his MPC Statement today, the Governor said risks to the inflation outlook are assessed to the upside.
4. Another electricity crisis:
Ramokgopa says the government can’t afford what’s needed to expand the grid on its own, and without private finances, it will create another problem for generation capacity.
Eskom will have to build 14,000km of new transmission lines over the next eight to 10 years to avoid another electricity crisis in the near future.
This exceeds its current capacity for such infrastructure projects.
Over the past 10 years, it has built a mere 4,300km of transmission lines.
For this to happen, the country will have to achieve an infrastructure upgrade at a scale SA has never seen before, at a cost of at least R235 billion.
5. Popular Plan B destinations:
While there has been a huge outflow of wealthy South Africans to countries like Canada, Australia, the UK and the US, many are opting to stay in South Africa – but have a Plan B as insurance.
Destinations increasingly popular for residence or dual citizenship include Malta, Mauritius, the Caribbean and Portugal. Namibia has become a viable and affordable option in recent times, but its residence-by-investment programme does not lead to citizenship.
The top emigration destinations for South Africans became a talking point during this year’s Tax Indaba, hosted by the South African Institute of Taxation in Sandton.
According to Amanda Smit, managing partner of Henley & Partners in South Africa, the top two residence programmes the firm assists South Africans with are those offered by Malta and Portugal.
Or invest offshore …
People have also contemplated their investment plans while considering emigration or their ‘Plan B’. The debate about offshore versus local investments has been raging in SA, with some advisors advocating taking all investments offshore. Others have been more optimistic about investment opportunities in SA.
Piet Viljoen, executive director and portfolio manager at Merchant West Investments, warns that there is no “clear-cut” answer to whether to only invest offshore. There are lower-risk opportunities for fairly good returns in SA.
“You need to examine why you want to take money offshore. There are diversification benefits, and there are risk mitigation benefits, but it [is] not as straightforward as taking everything out because everything is going to hell [in SA],” he said during the Tax Indaba.
Sean Peche, portfolio manager at Ranmore Fund Management, also warns that markets move on fear and greed. Investors should guard against “knee-jerk decisions at the wrong time”.
All information sourced from articles posted by: Fin24, BusinessTech, DailyInvestor, BusinessDay, and Moneyweb.
