The month of October has brought on new waves of load-shedding, revised estimates for interest rate hikes, and data releases that indicates South Africa is on a positive growth path. Earlier this week, it was announced stage 2 load shedding will be implemented, with a jump to stage 4 load-shedding on Wednesday that will last until Friday at 5:00AM. According to Eskom, the primary reason for the abrupt rise in rolling blackouts is due to three power stations having tripped between Tuesday and Wednesday, negatively impacting the supply of electricity across the country. To worsen matters, the brent crude oil price has risen drastically in October, from approximately $75/bbl in September to $85.5/bbl this month, which has resulted in soaring petrol prices. This likely informed high expectation of further increases in the price of gas as we enter November. This doesn’t bode well for businesses that are still struggling to survive in these harsh economic circumstances.
In other news, the USA’s reserve bank has indicated they plan to start tapering its bond purchasing programme, which poses a threat of a taper tantrum akin to what occurred in 2013. To recap, the Federal Reserve started slowing their purchase of assets and bonds in 2013 to start normalising their monetary policy, but this threw the global economy into a whirlwind, with emerging markets being hit the hardest. However, the SARB governor Lesetja Kganyago is cautiously optimistic that a taper tantrum will not occur because South Africa’s in a favourable position given a sizable current account surplus. Future interest hikes are also in the pipeline for November, but there’s a very low chance the SARB will increase the repo rate by more than 25bps, especially considering Kganyago’s vocality on exercising caution when it comes to countries adjusting their monetary policies without taking into account the recovery of their economy.
On the data front, StatsSA recently released CPI data for the month of September, which reflected a CPI increase to 5% year-on-year for September, from 4.9% year-on-year in August 2021. This result is well above the SARB’s inflation target of 4.5%. The major contributors to rising inflation are the following: the food and non-beverage sectors, transport, housing and utilities, and the miscellaneous goods and services sector. In comparison, core inflation, or inflation that excludes fuel and energy, and food and non-alcoholic beverages, was reported to be 3.2% year-on-year in September, up by 0.2 percentage points from August 2021. Irrespective of this, the predicted increases in fuel prices for November will have a significant negative impact on inflation data for November, with BER estimating CPI to be reported as 5.3% in November.
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 financial and business support services.