The Reserve Bank’s monetary policy committee (MPC) faces a dilemma over the decision it takes on interest rates, not necessarily at this week’s meeting but also in future meetings this year, particularly if the value of the rand continues to depreciate or the currency remains weak.

This dilemma is caused by the fact that any interest rate hike will dampen economic activity at a time when the economy cannot by any stretch of the imagination be described as overheated. In fact, the economy is struggling to achieve growth rates that will maintain current employment levels, never mind achieving growth rates that will help to reduce the sky-high unemployment rate.

The reality is that the sharp depreciation of the rand will result in higher inflation, which will be of concern to the MPC, particularly if it moves strongly about the upper limit of its target range and looks set to remain there for any length of time.

Although a single hike in interest rates of 50 basis points is unlikely to have any major financial impact, the psychological impact on the willingness of consumers to spend and increase their debt is likely to be more profound and depress economic activity.

A general election is also scheduled to take place some time in the first half of this year although the date for the election has not yet been announced. This potentially also clouds any decision on moving interest rates.

Although the Reserve Bank is supposed to be independent, no ruling government likes the prospect of going into an election when the economy is heading south, the currency is depreciating, inflation and interest rates are rising and unemployment worsening. It would, therefore, be interesting to be a fly on the wall during the MPC deliberations at its next few meetings.


Despite the slowdown in the global economy, weaker commodity prices and rising costs, there is a light at the end of the tunnel especially for mining operations in Africa. The continent’s high-quality assets were an attractive opportunity for investors with access to capital, Rajat Kohli, Standard Bank’s global head of metals and mining, said yesterday.

Kohli’s observation is notwithstanding the turbulence in the labour mining environment, regulatory uncertainty and the demand by African governments for increased royalties and taxes.

The attractiveness of the continent’s resources is not news, but Kohli’s forecast on more merger and acquisition (M&A) activity in Africa is appealing.

Kohli said it was likely that the M&A activity would be facilitated with equity financing mainly raised from the JSE. Investors can tap into the continent’s resources including copper, platinum group metals and coal, which are mainly consumed in China. For example, China’s consumption of refined copper is expected to increase between 4 percent and 5 percent as the country beefs up its railway and other infrastructure.

To feed the demand for the country’s infrastructure development, China has an interest in a number of mining assets in Africa. Wesizwe Platinum in the North West is an example.

“Increasingly Chinese companies are keen to buy assets to run them as businesses. It’s not only about the security of supply,” Kohli said.

The problem is that sources of capital have dried up amid the economic global slowdown, and some junior investors have been sent packing. A case in point are foreign junior coal producers who have had a tough time in South Africa.

Continental Coal, the Australian-listed company, has voluntarily suspended its shares and warned that it will be forced into administration. page 19

ICT sector

Further black economic empowerment (BEE) in the information and communication technology (ICT) industry has been mooted in the National Integrated ICT Policy Green Paper that was gazetted on Friday.

The Department of Communications acknowledged that foreign direct investment (FDI) in an economy such as South Africa’s, which has limited capital on the domestic market, was important.

The approach to FDI, however, “has been largely a balancing act, navigating through pressures of modernising and growing the economy on the one hand, and transforming the apartheid economy on the other. BEE has to be advanced amid the limited capital on the domestic market,” the paper proposed.

The Green Paper was published last week and is open for public comment. The department intended to organise public hearings by the end of next month.

A subsequent discussion document will be developed. This will serve as the basis for the National Integrated ICT Policy White Paper that is expected to be finalised by August. The White Paper will provide the framework to adopt new ICT legislation that is more suitable to the changing domestic and international ICT environment, according to the department.

The ICT sector is an important enabler of commercial and other functions. It contributed 6 percent to the economy in 2012, according to research by Statistics SA.

This Green Paper is important. The last significant policy review of the ICT sector was conducted five years ago, following the national elections in 1994.

Then, separate white papers had been developed for the telecoms, broadcasting and postal services. Today, it was impossible to review these sectors in isolation because of the convergence technology facilitated between these segments of the industry, Minister of Communication Yunus Carrim argued in his foreward. The Green Paper was long overdue, he added.

Luckily for Carrim, much of the spade work was already under way by the time his disgraced predecessor Dina Pule was booted out of office last year.

Edited by Peter DeIonno. Contributions from Roy Cokayne, Dineo Faku and Asha Speckman.