The decision by the monetary policy committee (MPC) of the Reserve Bank to raise the repo rate by 50 basis points baffled many economists baffled who had expected rates to be kept on hold.

They say there was absolutely no reason for the hike that will now see borrowers out of pocket.

So why did the MPC increase the rates? Iraj Abedian, the chief economist at Pan African Investment and Research, put it succinctly: “They watched Turkey, They panicked. It was peer pressure.”

Late last month the Central Bank of Turkey increased interest rates to a whopping 10 percent from 4.5 percent to defend Turkey’s currency, the lira.

Likewise, the Reserve Bank of India hiked its rates by 25 basis points to 8 percent to combat inflation, surprising the markets. Abedian pointed out that the MPC was now hoist on its own petard. “It started it, it must keep going.”

In its South Africa monthly macro review, RMB Global Markets research says it expects a still weak rand and high short-term inflation will warrant another 100 basis points of rate hikes as inflation breaks through the top end of the target band of 3 percent to 6 percent.

According to Annabel Bishop, the chief economist at Investec, the interest rate cycle has turned at a point when households are financially vulnerable – 62 percent of individuals are delinquent in the repayment of current debt and 50 percent have defaulted.

She says substantially higher utility bills, mounting travelling expenses and rising debt repayments will reduce domestic demand. Bishop says the official measure of core inflation is running at 5.4 percent, below the MPC’s 6 percent upper limit of the target.

The annual rise in the consumer price index less administered prices, the true measure of demand-led inflation, is 4.8 percent, down from 5.3 percent in the third quarter of last year. So why is the MPC inflicting so much needless pain on us?


South Africa is not alone in attracting more tourists this year. Travel is also booming in Kenya and other countries.

Until May 2012, the City Lodge group, which now has 6 755 rooms across four brands in South Africa, Kenya and Botswana, operated only in this country. Its first venture outside the country was to take a 50 percent stake in the Fairview Hotel and neighbouring Country Lodge in the Kenyan capital of Nairobi.

Now it has acquired the other half of the joint venture from the Fairview Hotel company. It has also opened a new hotel under its Town Lodge brand in Gaborone, Botswana, and is looking for other opportunities for expansion in both east and west Africa and some countries in the Southern African Development Community.

Now Legacy has expanded into Francophone Africa with its first hotel in Libreville, the capital of Gabon, less than four hours’ flight from South Africa, which is increasingly popular with mainly French and Italian tourists.

Its new Hotel Le Cristal provides luxury accommodation within walking distance of the presidential palace and the business district. Gabon is a middle-income country with per capita incomes four times the sub-Saharan average.

So far the improving economies of many African countries have attracted mainly business travel to the continent, causing major hotel groups to invest in it, but Reed Exhibitions, organisers of the annual World Travel Market in London, expects tourism to follow.

It is organising the first African World Travel Market in Cape Town in May with three separate exhibitions covering general travel, luxury travel and business travel including the incentive market. It expects the event to bring at least 400 buyers for travel organisations.

Edited by Peter DeIonno. With contributions from Wiseman Khuzwayo and Audrey D’Angelo.