Evan Pickworth

Exploration activity in South Africa was the lifeblood of the mining industry but it was not growing as fast as it should be compared to other countries, Chamber of Mines of South Africa chief economist Roger Baxter said on Tuesday. Baxter said: "Exploration has to be booming to boost the industry, but in the last few years we have missed the boat."

Mark Mobius, who oversees $30-billion in emerging-market equities at Templeton Asset Management, told I-Net Bridge on Monday that the relationship between the rand and commodities was not a simple one and that the key to reducing pressure on the balance of payments for a country was to add value to their commodities.

Standard Bank’s chief economist, Goolam Ballim, said at the bank’s economic briefing for 2007 on Tuesday that while the economic vista in 2007 would essentially be benign, the political atmosphere could be violent. "This year South Africans will more earnestly agonise over the presidency in 2009," he said.

South Africa’s seasonally adjusted leading economic indicator was reported by the South African Reserve Bank to have leapt to 120,7 for November 2006 from the still-high 119,5 recorded in October, and, according to an analyst, this indicates that growth is still quite spectacular.

South African bonds ended the week marginally weaker than last week, with the yield on the R153 rising by four basis points to 8,22% and the yield on the R157 rising by one basis point to 7,83%, with concerns around interest rate increases and selling by foreigners weighing on the market.

While overall levels of South African building activity are being maintained, the outlook for short-term growth has declined on the back of higher rates, according to analysts. While overall levels of South African building activity are being maintained, the outlook for short-term growth has declined on the back of higher rates, according to analysts.

South Africa’s exchange, the JSE, reported on Friday that it anticipated its consolidated earnings and headline earnings per share for the year ended December 31 2006, to be "marginally higher than the previous reporting period". The JSE highlighted that the earnings for the period had been impacted by a number of events, notably robust world equities market performance.

Total South African vehicle sales surpassed the 700 000 level for the first time in history during the past year, clocking up a tally of 714 340 including non-reports, but analysts point out that interest rate increases are starting to put a brake on passenger sales.

In reporting a dip in both December to 13,5% (14%) and overall in 2006 to 15,2% (22,7% in 2005) Absa’s senior economist, Jacques du Toit, said that growth in 2007 could be expected to continue the downward trend to 9% before improving again in 2008.

On the back of worse-than-expected trade data, the latest M3 and PSCE figures are another tick in the February interest rate hike column, say analysts. "These data have acted as counter-weights to the better-than-expected inflation data released earlier in December," say independent economic analysts RLJP.

Pockets of profit-taking put a lid on the JSE’s record run in the last trading day of 2006, but the outlook for the new-year remains in line with the recent bullish trend. The JSE closed at noon on Friday ahead of the new-year’s long weekend, the same time as the other local underlying financial markets.

The new year promises to be a volatile one politically in the lead-up to the election of the new African National Congress leader in December 2007, and this uncertainty is expected to have repercussions in the economy during the course of the year, particularly as to how foreigners react.

South African Reserve Bank Governor Tito Mboweni said on Friday evening that while CPIX inflation is expected to hit the upper end of the 3% to 6% target band by the first quarter of next year, it should peak around April and then begin to come down. "We should only begin to see a breaching of the upper end in April," he said.

South African Reserve Bank Governor Tito Mboweni’s words in mid-November that South Africans need to tighten their belts came home to roost on Thursday when he put a dampener on the Christmas spirit by raising the repo rate by 50 basis points to 9%. In mid-November he sent a strong message that this rise was coming. On Thursday he followed through with this.

South African real retail sales growth in September rose considerably to 13,6% year-on-year (y/y) from August’s 8,8%, with consumers possibly buying strongly in anticipation of tighter conditions which beckoned. Total retail trade sales amounted to R35,8-billion, while real growth for the year to date — recorded by Stats SA — came in at 9,9%.

South Africa’s budget deficit for October 2006 was recorded at R3,3-billion compared with a small surplus of R384-million in October 2005, indicating the government is on track to meet its projected budget deficit of R7,8-billion. The cumulative deficit for the year is R7,2 billion compared with a cumulative deficit of R13-billion in October last year, National Treasury’s statistics show.

South African Finance Minister Trevor Manuel said on Tuesday that South Africa’s economy was on track to reach the 4,4% growth forecast in 2006 as set out in the Medium Term Budget Policy Statement, but at the same time he pointed to a few dark clouds on the horizon that needed to be kept in check.

Credit Guarantee said on Monday it had reviewed and upgraded its credit ratings of four of South Africa’s trading partners and had also re-rated Angola as open for export cover. "Having emerged from under the cloud of civil war, enormous opportunities now exist in the construction, agricultural, infrastructural, tourism and oil/mining-linked sectors [of Angola]," said Credit Guarantee.

<i>Moody’s Economy.com</i> says while the rand could remain vulnerable to further bouts of weakness and volatility in the coming months, its medium-term outlook is for a stronger rand amid rising foreign reserves and strong inflows of foreign direct investment.

In its November country report on Lesotho, the International Monetary Fund (IMF) said that while the country had made good progress towards macroeconomic stability, economic activity needed to pick up speed and the medium-term fiscal position needed to be strengthened.

The World Bank has highlighted infrastructure investment, improving the investment climate, harnessing skills for innovation and building institutional capacity as critical areas demanding action in sub-Saharan Africa. The World Bank says success on these four fronts will help the region and Africa as a whole make up for missing two decades of global growth.

Global investment house Lehman Brothers said on Friday morning that while they remained concerned about the long-term outlook for South Africa and its markets, things were okay for now. Commenting on the views expressed on oil by central bank governor Tito Mboweni they added that they would argue that the recovery of the rand since the last Monetary Policy Committee meeting was at least as positive.

Standard Bank’s house price index shows a moderate uptick in house-price growth in October to 8% growth compared with a year ago, although the researchers say that this does not signal an improvement in the housing market or general consumer activity.

South African Reserve Bank governor Tito Mboweni said on Thursday morning that South Africa was very much part of the global village and was heavily influenced by international economic developments, but added that many of these developments had resulted in increased uncertainty and risk.

After the more moderate 8,7% increase in retail sales in August from the revised 9,6% in July, any further cooling in retail sales growth in September will be good news on the interest rate front, say analysts. Nedbank researchers Dennis Dykes and Magan Mistry say that growth in retail sales is expected to ease off a high base as consumers begin to react to rising interest rates.

While no meaningful reduction in personal income tax should be expected in the February 2007 main budget, the focus could be on the corporate tax regime instead, says Sanlam group economist, Jac Laubscher. "While government seems favourably disposed to lowering tax rates, it is keeping its options open as far as lowering taxes in the main budget in February 2007 is concerned," says Laubscher.

Many were surprised by the projected budget surplus for the next fiscal year of 0,5% of gross domestic product, announced in the Medium-Term Budget Policy Statement on Wednesday this week. One of the debates that are now raging is whether the government’s fiscal policy is more on the loose or the tight side.

With interest rates on the rise in South Africa, and further hikes expected before the end of February 2007, analysts say that this will affect the financial health of firms and individuals at the margin, but will also place a check on irresponsible debt accumulation and inefficient operations.