SA Reserve Bank governor Lesetja Kganyago said the bank’s forecasting model suggests there might be room for interest rate cuts in the next year or two.
Despite this favourable economic data suggesting that the economy is stabilising and recovering somewhat, geopolitical cracks globally and domestically had negative effects on the South African economic wall exposing the exchange rate, bond rates and equity markets. The ongoing legal battle between Minister of Public Enterprises Pravin Gordhan and the Public Protector Busisiwe Mkhwebane on issues like the SA Revenue Service’s “rogue” unit, set the tone.
The announcement by the Minister of Finance Tito Mboweni that the government would provide an additional R26billion to struggling power utility Eskom had negative effects on the rand and financial markets.
Rating agency Moody’s put South Africa on notice last Thursday that they could downgrade the country’s sovereign debt to junk given the further bailout of the power utility.