Angelika Goliger, EY Africa’s Chief Economist
“The SARB’s decision of a 50bps point hike was not unexpected given recent events. The Monetary Policy Committee (MPC) raised the Repo rate to 8.25% from 7.75%, citing upside risks to the inflation outlook, due to expected higher fuel prices and global inflation being sticky. Unfortunately, geopolitics has very quickly become a significant economic issue in South Africa – second to only loadshedding.
There is going to be a lot of uncertainty in the lead up to the BRICS summit, which is to be held in South Africa on 22-24 August. Our key trading partners, the US and EU, and the world, will be watching how the government engages with Russia preceding and during the summit. In the coming weeks, we could see measures against entities based in third countries for allegedly helping Russia evade sanctions, as the EU wraps up its efforts to monitor the impact of current sanctions against Russia.
The Rand, which has previously reflected confidence towards emerging markets, has now become a measure of RSA-specific investor sentiment. With our import basket growing and our exports declining, the weaker Rand and resultant inflation is something that the SARB has no choice but address. While there is a lot of uncertainty around the rate path going forward, I would not discount another 25bps point hike at the next meeting.
In the context of loadshedding, weaker commodity prices, persistent inflation globally and now China’s recovery being weaker than initially anticipated, further missteps on the foreign policy front is something that the economy cannot afford.
The SARB can only do so much to support the economy in this context.”