There was some relief today for consumers in South Africa as the price of fuel dropped at midnight last night. The price of 91 octane petrol decreased by 29 cents a litre, while 93 octane dropped by 27 cents and 95 octane by 25 cents. The wholesale price of diesel dropped by between 55 and 65 cents a litre, whereas the wholesale price of illuminating paraffin also dropped by 65 cents a litre. This is the third consecutive month that fuel prices have been cut. The Department of Mineral and Energy says lower crude oil prices contributed towards the price cuts. But for how long will the crude oil prices remain low? Not for long according to analysts in the US. Following on from the financial crisis gripping the US right now, some are predicting the crude oil price to rise as high as $250 a barrel. This would certainly not be good news for consumers across the whole world.

Trevor Manuel will remain as Minister of Finance after being appointed in the cabinet led by South Africa’s new President, Kgalema Motlanthe. After the announcement of this news, the rand started to strenghthen against the US dollar. Could it just have been a coincidence or does Trevor Manuel have the ‘power’ to dictate which way the rand goes? Earlier in the week when Manuel had said he was going to resign from his position after Thabo Mbeki resigned, the rand took a knock with many saying that loosing Manuel as Minister of Finance would leave a lot of uncertainty in the South Africa economy. But Manuel was quick to say he would be available to the new leaderhsip if chosen. And today we have just seen Manuel being included in the new cabinet as Minister of Finance showing signs of stability in the governance of the country. 

At 17:21 the rand was bid at R8.1085/$ from a previous close of R8.1543. It was bid at R11.8746/€ from a previous R11.9075 and at R14.9670/£ from R15.0346 before. Is this all due to Manuel staying or because the US dollar is just under a lot of pressure as the US seeks a rescue plan?

Kgalema Motlanthe has been voted as the new president of South Africa this afternoon. Motlanthe received 269 votes from MPs in the National Assembly against Democratic Alliance candidate Joe Seremane’s 50. There were 41 spoilt ballots. Motlanthe will act as interim head of state until after next year’s general election. He succeeds Thabo Mbeki, who was asked to step down last week by the ANC’s National Executive Committee.

Motlanthe will be watched closely to see how he handles the South Africa economy. Motlanthe has already come out today and said, “In a turbulent global economy, we will remain true to the policies that have kept South Africa steady, and that have ensured sustained growth.” This is a sign the he looks set to continue doing things as they were and not try rock the boat with new economic policies that could potentially see investors turn away from South Africa. For now many think that Motlanthe is going to go with the old saying, “If it is not broken, then do not fix it.”

There are still concerns with regards to the South Africa economy. Statistics released today show that the consumer price index excluding mortgage rate changes (CPIX) for metro and other areas, which is used by the South African Reserve Bank (SARB) for its inflation target, was up 13.6% year-on-year (y/y) in August from 13.0% y/y in July. Forecasts had expected inflation to come in at 13.2% so the 0.4% differential has many worrying.

It is thought that inflation is not going to come down as quickly as many may think, as food and electricity prices continue to rise. In the long term, as fuel prices start to ease, we may start to see a decline in the rate of inflation. It will be interesting to see how the reserve bank looks at these new figures and if they decide to increase interest rates again. The general consensus is that the central bank will not hike rates any time soon as we all hope that the rate of inflation will start to come down in early 2009.

The Rand continues to slide and today it reached its lowest level in five years against the US dollar. Why is the Rand tumbling you may ask; It is really more of the US dollar gaining strength due to commodity prices dropping amid a rise in global risk aversion. The stronger the US dollar gets, the weaker the Rand as going to be against the greenback. 

By 16:00 the Rand was bid at R8.3010/$ from a previous close of R8.1883 after earlier hitting R8.35 its worst level since May 2003. It was bid at R11.5562/€ from a previous R11.4316 and at R14.5789/£ from R14.3308 before.

The JSE had a technical glitch again yesterday (Monday 8 September). This is the second time in less than two months that trade has halted on the JSE; on July 14, the bourse failed to open on time when a network glitch stopped public data about the equities markets from reaching all its customers. Yesterdays error was blamed on the London Stock Exchange (LSE). A technical glitch hit the London Stock Exchange, the platform from which the Johannesburg Securities Exchange (JSE) trades went offline, affecting all trade of local equities, single-stock futures and associated instruments.

This glitch yesterday left traders seething as they missed out on cashing in as the markets were expecting a good rebound. Looking at potential losses; a broker has estimated that the stock broking community has lost about R100m in commissions based on the R15bn turnover that was meant to be expected whilst the exchange was down.

In the world of technology we live in today, such occurrences as yesterdays do happen but one has to weigh in the cost of some errors occurring. What is worrying is that, this is the second time this has happened in a short amount of time. Hopefully this does not become a trend with the JSE as it was set a bad example.

Some relief is on the way. Fuel prices will drop for a second consecutive month at midnight tonight. The Minerals and Energy Department made the announcement last Friday that the retail price of petrol will drop by between 69 and 78 cents per litre. The wholesale price of diesel with 0.05% sulphur content will drop by R1.44 per litre. Diesel with 0.005% sulphur content would drop by R1.46 per litre. This comes as a huge relief to consumers who had been battling with the increased fuel prices a couple of months ago.

The wholesale price of illuminating paraffin will drop by R1.46 a litre and the single maximum national retail price for illuminating paraffin by R1.94 a litre. This is also much welcome for consumers of paraffin who were not happy that the price of paraffin did not drop when the petrol and diesel prices last dropped.

It is now a matter of waiting to see if the fuel prices continue to drop. The drop has been attributed to the strengthening rand and the softening world oil prices. But with the hurricane season approaching it will be interesting to see how oil prices react. We may see oil prices rising due to decreased supply because of the hurricanes.