Helmo Preuss

In contrast to most other economists, Standard Bank expects the rand to firm to an average of R5,77 per dollar this year from R6,45 last year, according to Standard Bank group economist Goolam Ballim. The strong rand and strong consumer demand will put only minor pressure on the current account.

Private capital flows to South Africa surged by 825% in 2004 to $5,312-billion from $574-million in 2003, according to data supplied by the Washington-based Institute of International Finance, an association of the world’s banks and financial institutions.

South African President Thabo Mbeki, Minister of Finance Trevor Manuel, Minister of Trade and Industry Mandisi Mpahlwa and South African Reserve Bank Governor Tito Mboweni will lead a high-level delegation to the annual World Economic Forum (WEF) meeting in Davos, Switzerland, sources confirmed on Wednesday.

The rand and bonds are weaker now than their Tuesday close before international ratings agency Moody’s Investors Service of South Africa’s upgraded country ceilings for foreign currency debt and bank deposits to Baa1 from Baa2. This seems to confirm that South Africa once again was hit by the ratings jinx, although mildly.

South Africa’s real retail sales rose by a record 12,8% year-on-year (y/y) in September after a revised 11,9% y/y increase (original estimate was 11,7% y/y) in September, Statistics South Africa said on Thursday. This brought real retail sales growth for the first 10 months to 9,9% y/y.

The dollar recovery in the first week of 2005 has put pressure on the rand, which weakened to R6,1448 per dollar on January 6 from the 2004 best level of R5,5850 per dollar reached on December 29. After reaching a record worst level of $1,3668 per euro on December 30, the dollar strengthened to a best level of $1,3027 per euro on January 7.

South Africa’s gross domestic product (GDP) growth should trend about 4% for the next few years as employment growth finally completes a virtuous circle. In May last year, South Africa entered its longest "upward economic phase", as the previous longest upward phase lasted from September 1961 to April 1965.

An improving inflation outlook should result in a 50 basis points cut in the South African repo rate later this week according to London-based economist Razia Khan from emerging market specialist bank, Standard Chartered Bank. "While demand in South Africa is undeniably strong, there is little conclusive evidence that the strength of demand will have inflationary consequences," she said.

Although house prices in South Africa have risen by more than 30% over the past year, the International Monetary Fund (IMF) staff have said, at this stage, there are no clear indications of a bubble having developed. Available data suggest that real estate prices rose from very low levels and there are significant regional disparities.

South Africa’s third quarter 2004 gross domestic product (GDP) growth is expected to increased to a median forecast of 4,9% on a quarter-on-quarter seasonally adjusted annualised basis from 3,9% in the second quarter, according to a survey of economists. The range of forecasts is from 3,8% to 6,2%.

New York Mercantile Exchange near-dated oil futures price has fallen below $50 per barrel and is currently trading at $49,13 per barrel, meaning that the South African Reserve Bank (SARB) monetary policy committee meeting on December 8 and 9 could once again look at a further interest rate cut.

Structural changes that have been implemented over the past decade of freedom will support faster South African economic growth, raising growth from an average of only 1% in the decade prior to April 1994 to an average of 3% in the subsequent decade, with the prospect that growth will average more than 4% in the decade ahead, says Minister of Finance Trevor Manuel.

The current record high crude oil prices are unsustainable, according to economists surveyed by I-Net Bridge, but a return to last year’s Opec basket of seven crude oils’ average of $28,10 per barrel is also unlikely, mainly because of the depreciation of the dollar against other currencies.

China’s Three Gorges Project (TGP) on the Yangtze river will be the world’s largest hydro-electric plant when it is finally completed in 2009 after work started in 1993. Apart from the electricity generated, the TGP has two other main benefits: flood control and a higher carrying capacity for the Yangtze river.

The "official rate of interest" used by the tax authorities was cut by 50 basis points to 8,5% with immediate effect, the South African National Treasury said in a media statement on Wednesday. The cut followed the 50 basis-points reduction to 7,5% in the South African Reserve Bank’s repo rate, announced on August 12.

SA Tourism CEO Cheryl Carolus will not renew her three-year contract when it expires at the end of October 2004, the tourism marketing body said on Tuesday. Carolus was previously the African National Congress secretary general and the South African High Commissioner to the Court of St James, a post she assumed in March 1998.

The South African Reserve Bank has increased its "creaming off of excess dollars" from the open market to $469-million in July from only $254-million in June. The July 2004 trade-weighted rand average of R62,17 was the strongest since October 2000. This is 52,5% stronger than the December 2001 monthly average of R40,78.

South African house prices increased by a record 26,3% year-on-year (y/y) in July 2004 from a revised record 26,1% y/y in June 2004 and a revised 25,7% y/y in May. This meant that house prices have doubled since June 2000, while consumer inflation has risen by less than 25% over the same period.