6 Signs that the South African economy is recovering
South Africans have a lot to be optimistic about, with the economy having shown significant signs of recovery lately. Here’s what you may have missed:
1. Lower inflation and an interest-rate cut
Inflation continues its downward trajectory, hitting 4.4% this month. On 19 September, the South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) announced a 0.25% interest-rate cut, the country’s first in four years. A further 0.25% cut is expected at the next MPC meeting in November. If you have any kind of debt, simply keep up with your payments and take advantage of the lower interest rate to pay off your debt faster.
2. A strengthening rand
There’s good news for anyone investing abroad or planning international travel. First, the rand appreciated 1% against the US dollar during the second quarter. Now, interest rates have declined by 0.5% in the US this September. The marginally higher interest-rate differential for SA compared to the US is expected to strengthen the rand exchange rate even further.
3. Higher economic growth expected
South Africa experienced a full second quarter without loadshedding, as more capacity came on line and independent power producers continued to generate electricity through increased investment in renewable energy. Improved power supply is expected to have a positive impact on economic activity, despite ongoing challenges in the transport and freight sector.
4. Shopping spend bounces back
Retail trade showed a 4.1% year-on-year growth in June 2024, up from 1.1% in May. (Remember: although it’s tempting to treat yourself as consumer relief shows up in your wallet in the form of extra rands, it’s a better idea to put away your savings to build financial resilience).
5. Fuel price descends
During Q2, unleaded 93 petrol was lower by 3.5% in inland provinces and 3.6% for coastal regions, while diesel 50ppm declined by 6.4% inland and 6.6% in coastal areas. The strengthening exchange rate is expected to further reduce fuel prices for motorists during the second half of the year.
6. Equity and commodity markets look favourable
The JSE All Share Index (ALSI) increased 6.9% in Q2. Lower inflation and interest-rate cuts in the US have reduced concerns about a recession, which would favour equity markets. In SA, the formation of the Government of National Unity (GNU) has stimulated investor confidence in anticipation of market-friendly policy reforms. Meanwhile, the gold price is reaching new records by breaching $2 500 per ounce (a 4% increase over the past quarter) and the platinum price increased 11%, trading above $1 000 per ounce for several weeks during the second quarter.