Politics & Property News Blog

The further decline in the consumer price index (CPI) to just above the mid-point of the Reserve Bank’s target range is exceptionally good news for debt-laden households. The CPI has now been comfortably within the target range of 3% to 6% for 14 successive months, signalling the strong likelihood of an interest rate cut in September. 

 
In fact, the debate is now shifting from whether the repo rate will be cut to what the scope of the reduction will be. A cut of 50 basis points has become realistic - especially against the background of low economic growth, rising unemployment and households being faced by the highest ratio of debt costs to disposable income in 15 years (9.2%).

Underpinning the optimism over sizeable rate cuts over the next 12 months is the sharp decline in South Africa’s 10-year bond yield. Since the end of April, the country’s benchmark long-term interest rate has dropped by almost 200 basis points – suggesting that the MPC has been caught napping, due to the positive long-term correlation between lending rates and bond yields. Currency strength, which has already led to several declines in fuel prices, is bound to assist in a further lowering of inflation during the rest of the year.

Gold price rally continues

For the first time ever, a bar of gold is worth more than one million US dollars. This milestone was reached on 20 August, when the spot price of the precious metal broke through the level of $2,500 per troy ounce, an all-time high (the standardised weight of a gold bar is 400 ounces).

One of the reasons for the surge in the gold price is the renewed appetite for diversified reserve asset holdings by central banks around the globe, which has gained some traction due to the conflicts in Ukraine and Gaza. During the first two quarters of 2022, total central bank purchases of gold amounted to 121 tons. Two years on, and this demand has shot up by exactly 100% to a level of 242 tons, confirming, once again, gold’s status as a long-term safe haven. 

Retail trade sales recover

A welcome recovery in the value of retail trade sales occurred at the end of the second quarter, with a real year-on-year growth rate of 4.1% taking the figure to a new record for the month of June (R117 billion at current prices). Except for hardware, paint & glass retailers, all the other key types or retailers managed to record real year-on-year growth rates during the second quarter, with general dealers leading the pack at a sales value of just below R170 billion, followed by textiles, clothing and footwear at R56.7 billion for the quarter.

End of loadshedding in sight 

Ever since the second quarter of the year, a remarkable turnaround has been achieved in the stability of electricity supply, with an absence of rotational loadshedding. Having achieved this feat during the winter months, when demand is high, deserves praise. Eskom’s CEO, Dan Marokane, has expressed optimism that the utility was in a good position to avoid loadshedding during the high-maintenance summer months. An end to loadshedding could be announced by the end of March 2025, when an additional 2 500 MW in capacity is expected to become operational via large coal-fired units at Kusile and Medupi, as well as at the Koeberg nuclear power station.