For indebted consumers, they are measures most unwelcome, but increased interest rates, the amendment of the National Credit Act and the country’s overall monetary policy seem more advantageous when one looks at the bigger picture.
At least when FNB economist Alex Smith paints the bigger picture, which is one where South Africa’s trade deficit is closed or at least narrowed to relatively low levels. This picture appeared to be one that will boost investors’ confidence in the country.
In January, the monetary policy committee (MPC) increased the repo rate by 50 basis points, which pushed the prime lending rate to 9 percent.
That increase in interest rates has already started to affect credit extension and thus consumers’ consumption patterns, according to Willie Coetzee, FNB’s regional head of global transactional services.
And with many economists believing this was the beginning of an upward cycle in interest rates, one can expect consumers’ consumption and expenditure to take more strain in the next year or two.
The idea is that with decreased consumption and demand for exports, South Africa would be able to narrow its trade deficit. This would help to avert any further credit rating downgrade and thus keep the investments that would be forced to exit the country if the credit rating decreased even by a notch.
On Friday, the SA Revenue Service reported a R17.06 billion trade deficit for January, the first in three months, as imports grew by 26.3 percent. The deficit was recorded even after the inclusion of Botswana, Lesotho, Namibia and Swaziland since late last year.
The so-called fragile five emerging economies, comprising South Africa, India, Indonesia, Brazil and Turkey, were the hardest hit when the US Federal Reserve decided to scale back on tapering from January. Emerging-market countries have suffered losses as investors repatriated their money to the US.
But consumer expenditure is what has driven South Africa’s growth in the years since the 2008/09 recession, so Smith said, in order to enable this plan to work, we will need manufacturing and mining outputs to grow in excess of gross domestic product.
ICT policy
The National Integrated Information and Communication Technology (ICT) Policy Green Paper was presented for public comment yesterday.
It represents the biggest overhaul of the aggregated policy framework for the ICT sector since the advent of democracy.
It means that South Africa can move into driverless cars or risk being left behind “traversing the ICT landscape in our donkey carts”, according to Communications Minister Yunus Carrim, who presented the paper.
It will lead to a White Paper which will provide a framework for major amendments to ICT legislation. The provincial public hearings will start on Friday and will be held over the next six weeks. The department has invited written comments from the public by March 24.
“Technological advancement waits for no one. The rest of the world is moving forward at an incredible speed.
“From driverless cars to advances in robotics, the pace of ICT development is fast and furious,” he said.
The paper is intended to complement the state’s New Growth Path and National Development Plan.
The latter’s aims include that by 2030 ICT will “underpin the development of a dynamic and connected information society and a vibrant knowledge economy that is more inclusive and prosperous”.
An estimated 30 percent of South Africans own a smartphone. It is expected that by 2025 most of the world’s population of 8 billion will be online. “This is the world we have to prepare for,” Carrim said.
He has challenged citizens to ask the following while scrutinising the Green Paper:
Has it sufficiently addressed the reasons for the ineffectiveness of some of our policies?
Has it paid adequate attention to the appropriate market structure for an all-encompassing communication system and is it sufficiently attuned to the 21st century? If not, how do we collectively ensure it is?
Edited by Peter DeIonno. With contributions from Londiwe Buthelezi and Asha Speckman.