From global developments to spontaneous power outages, and South Africa moving to level 1 lockdown, the start of October has been filled with mixed surprises. It was just last week when the UK announced South Africa would be coming off their red list from October 11, 2021, indicating all fully vaccinated individuals will be allowed to travel to and from the UK without having to quarantine for 10 days. This is a big step in the right direction for South Africa, as it provides new economic opportunities for the hospitality and tourism sector, especially with the holiday season coming up. This, in combination with the downgrade to level 1 lockdown protocols, promises a higher level of fiscal rewards in the near future for the hospitality sector. All non-essential businesses will now be able to operate at full capacity moving forward, with the curfew now from 12AM-4AM, an hour later than what was previously in place.
This slow migration to normality comes as a relief to our economy and the businesses that have suffered the most from the pandemic and subsequent lockdown in 2020, but it’s not all good news on the horizon. Stage 2 load shedding has recently commenced, and whilst Eskom has stated it would only last until Thursday, October 14, there’s a good chance it will be extended as it has been in the past. This doesn’t bode well for South African businesses, especially those in deeply affected sectors of our economy, as they try to rebuild their livelihoods and maintain some semblance of a profit margin.
The SARB has also recently released their bi-annual MPR, which continues to speak of higher and more immediate threat of an inflation increase in the near future. With this in mind, the reserve bank might consider starting the monetary policy normalisation process before January 2022, for fear of being unable to curb drastic inflation increases if they do not act soon. This implies interest hikes might be coming sooner rather than later, which is not what previous MPC announcements indicated, and according to the BER, all economic stakeholders should expect an interest hike in November 2021 of 25 basis points.
On the data front, there have been several statistical releases for various economic indicators. For starters, mining production increased by 2% year-on-year in August, with gold, iron ore, and PGMs being the main contributors, whilst coal had the largest negative impact, decreasing by -2.2 percentage points to -8.5% overall. Manufacturing production also increased by 1.8% year-on-year in August, with food and beverages and motor vehicles being some of the largest contributors. Finally, retail sales decreased by 1.3% year-on-year for August, with general dealers (non-specialised businesses selling food, beverages, and tobacco products) being the main negative contributor. Overall, there’s indication that our economy is on a positive economic trajectory, but only time will tell whether or not our economy is moving out of this recessionary phase.
There’s a lot of uncertainty surrounding us, but don’t give up hope and keep pushing, and if you find you need a helping hand, please reach out to the COBRA Initiative for business advisory and financial support.