Now Reading:

South Africa's Rate Decision: Giving Priority To Foreign Investors

Global Market	1339 VIEWS
Global Market
1339 VIEWS

Friday, November 22, 2019 / 03:00PM / United Capital Research / Header Image Credit: Brand Spur

Recently, the South African Reserve Bank held its last monetary policy committee meeting for 2019, maintaining the status quo. Despite the widespread expectation of a rate cut, as inflation rate touched a nine-year low, at 3.7% in Oct-19, the MPC kept the country's key policy rate at 6.5%. Accordingly, we highlight our opinion on this decision and share our outlook for 2020.

Currently, the South African economy is in a delicate position, stuck between igniting economic growth and limiting severe capital outflows. Earlier, the country escaped a downgrade in its credit rating to junk status from Moody's, but its outlook was revised downward from stable to negative. Bearing the above in mind, we believe the decision to maintain the status quo and not join the global easing bandwagon, must have been spurred by the need to keep foreign investors happy. However, we believe a rate cut will have eased borrowing costs and soften pressures on the country's mounting debt.

Looking ahead into 2020, judging by the spread of the policy decision, with two out of five members choosing to cut, the outlook for monetary policy seems commingled but is pointing to an accommodative policy. However, the elephant in the room remains the need for extensive fiscal reforms on the power sector, which could ignite capital investments, and clear the dilemma that monetary policy is encumbered with.

Top African Stories

S.Africa keeps rates on hold as inflation risks balanced: South Africa's central bank kept its repo rate unchanged at 6.5% in a close decision on Thursday, saying it wanted to see inflation expectations closer to the midpoint of its target range, despite a sustained drop in headline inflation. Read more

Egyptian Tourism Revenue Surges to a Record: Egypt visitor numbers are returning to their 2010 peak after years of upheaval as authorities look to adventure and cultural tourism to help fuel growth for a key source of foreign exchange, an official said. Read more

Discoveries to help Senegal's gas-to-power switch - minister: Major gas discoveries offshore Senegal will enable the West African nation to switch its coal and oil-fired power plants to gas generation in the coming years, Petroleum and Energy Minister Mouhamadou Makhtar Cisse said on Thursday. Read more

S.African inflation slows to eight-year low, putting rates cuts back in picture: South African consumer inflation dropped in October to its lowest level since February 2011 as fuel prices fell sharply, raising the chances of an interest rate cut by the central bank on Thursday. Read more

Tanzanian LNG project faces possible delays: The envisaged liquefied natural gas (LNG) plant project could be delayed further following the temporary suspension of talks on the Host Government Agreement (HGA). Read more

Angolan government raises US$3 billion from issuing Eurobonds: The Angolan government on Tuesday issued US$3 billion in Eurobonds, in two tranches with different maturities, on the London financial market, according to an official statement issued on Wednesday in Luanda. Read more