Politics & Property News Blog

This year’s national budget, tabled in Parliament on 21 February, will probably be best remembered for the wide-ranging differences of opinion on National Treasury’s decision to tap into the country’s foreign exchange reserves. 

Spokespersons for several political parties were quick to criticise this move, but these views were largely without substance.

Most countries have foreign exchange reserves, held by their central banks, which can be used for purposes of maintaining macro-economic stability. This is exactly what has been implemented by National Treasury in the wake of the tax revenue shortfall experienced during the 2023/24 fiscal year, which was caused by lacklustre economic growth and weak prices for several key export commodities.

For anyone that is concerned over this practice, it is interesting to note that the origin of the hefty R885 billion in foreign exchange reserves currently held by the SA Reserve Bank (SARB) was a fiscal transfer to the SARB of (merely) R28 billion made by then finance minister Trevor Manual in 2003.

The fact that South Africa’s forex reserves swelled from less than R500 billion a decade ago to close to R900 billion has proven to be an enormous windfall in the current macroeconomic climate of subdued growth and below-par tax revenue collections. 

Finance minister Godongwana plans to draw down R150 billion of these reserves over three fiscal years, which will play a key role in maintaining fiscal stability over the medium term, with the country’s net debt/GDP ratio likely to remain at a level of just above 70%.

Tourism – “2nd Division” shines

January 2024 was characterised by huge year-on-year increases in the number of overseas tourists from countries that traditionally provide more than 1,000 tourists in the first month of the year. During the summer months, many sun-lovers from overseas traditionally boost South Africa’s tourism industry, especially from countries in the Northern Hemisphere, where temperatures are still cold, and the days are still short.

The top-five source countries for tourist arrivals remain intact (the UK, Germany, the US, Netherlands & France), but due to the high base from which any increases are recorded, it is very difficult to match the growth performance of the “second division”. It is nevertheless most encouraging that citizens of the countries listed in the graph have developed a significantly stronger appetite to visit our shores.

Absa PMI back above the neutral 50 level

During February, a sharp rebound occurred in the Absa Purchasing Managers’ Index (PMI), compiled by the Bureau for Economic Research (BER). This barometer of business conditions in the manufacturing sector is based on the widely used and authoritative methodology developed by the Institute for Supply Management (ISM) in the US, with a score of above 50 indicating an expansion of activity and vice versa.

Following a dismal reading of only 43.6 in January, the Absa PMI came in at a seasonally adjusted level of 51.7 in February, suggesting that manufacturing activity could well rise to new record levels in the course of 2024. The survey by the BER also asks respondents to indicate their views on expected future business conditions (not part of the PMI calculation) and it is especially encouraging that a score of just below 60 was recorded, the highest since January 2023.

Other positive features of the latest PMI survey results include the uptick in new sales orders and employment, both of which are now at a 14-month high.