Market Commentary | The week that was
South Africa's strategic integration into BRICS (Opportunities and Challenges ahead): South Africa is poised for economic growth as it integrates further into the BRICS group, potentially including countries like Saudi Arabia and the UAE. Expert TK Pooe notes that while South Africa has benefited from BRICS-funded infrastructure projects, the challenge is turning these investments into real jobs. President Cyril Ramaphosa's skilled diplomacy with nations like Russia and China is significant, but the key is ensuring these relationships benefit South Africa directly. Despite BRICS's seemingly different stance from the West, collaborations continue, and how South Africa utilizes these opportunities will define its future economic path.
South Africa Reserve Bank's cautious stance amid Rand depreciation: South Africa's central bank governor, Lesetja Kganyago, has warned of persistent inflation risks despite recent declines. Although inflation reached a two-year low of 4.7% in July, the central bank remains cautious. The bank aims for a 4.5% inflation midpoint, but currency fluctuations, particularly the Rand's 9% depreciation against the Dollar, could challenge this goal. Kganyago notes the currency's potential impact on future inflation rates.
Cape Town's electricity tariff tensions rise: The City of Cape Town has enforced a 17.6% increase in electricity tariffs, surpassing the 15.1% guideline from energy regulator NERSA, leading to significant public backlash. Over 500 residents protested at the Civic Centre, demanding the city adhere to NERSA's guidelines and remove extra surcharges. Although the City of Cape Town claims compliance with the Municipal Finance Management Act and references two court rulings against NERSA's methods, the rulings do not allow municipalities to ignore NERSA's recommendations. eThekwini and Tshwane have followed NERSA's suggested rates. Cape Town's recent R4.5 billion surplus has intensified the controversy.
Markets: Despite Powell's indications of potential rate hikes that once pushed the Rand to nearly R18.89, the Rand remains stable, now trading at R18.60. Announcements of additional economic support from China have somewhat strengthened Asian and Emerging Market currencies. The Rand has also seen a modest increase against the Euro, Pound, and Yen.
Looking ahead: The upcoming week promises important economic revelations. On Tuesday, the US will elucidate its job scenario with the JOLTS job opening report and the non-farm payrolls on Friday. Europe will focus on the Euro Zone's headline CPI Inflation data available on Thursday.
Local: Financial insights will deepen with the announcement of the Budget Balance on Wednesday.
