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Market Commentary | The week that was

SA inflation numbers: Annual Consumer Price Inflation (CPI) was measured at 7.2% in December 2022; down from 7.4% in November 2022. The average annual CPI figure for the whole of 2022 stood at 6.9%. The surprise was that core inflation was lower than anticipated as a result of rental and owner’s equivalent rent, which increased much slower than predicted. The South African Reserve Bank (SARB) might hike rates by 25bps later this week.

Pause the hike: Eskom has been urged by President Cyril Ramaphosa to postpone or cancel the18.65% energy price increase that has been approved by NERSA. Ramaphosa argued that raising prices when load shedding was at its worst would be unjust to the public. The president requested Eskom to consider postponing the electricity hike because South Africans were experiencing severe financial strain and load shedding was hurting businesses and earnings.

Possibility of the first workers’ strike in the history of UCT: The University of Cape Town claims it would do everything in its power to prevent an upcoming protest by academic staff. The institution's offer of a 3% raise has been labelled as offensive by the UCT Academics' Union (AU). Members are demanding salary increases of at least 6%, in line with inflation.

Markets: On Friday the South African rand strengthened as the country’s power utility Eskom announced it would decrease the length of rolling power cuts over the weekend. The power cuts have a negative impact on business activities and are a major source of frustration for the governing African National Congress in the wake of the 2024 elections when the party could lose its majority in Parliament for the first time since the end of apartheid. On Monday (23 January), the rand was trading at R17.11/$, R18.63/€, and R21.25/£. Brent crude is trading at $87.31 a barrel.

Looking at the week ahead: On Thursday the US Gross Domestic Product (GDP) data will be released; and the SARB will announce the latest interest rate, that has the potential to be a major market-mover.

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