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.

It seems like there is no stopping the ever rising rate of inflation in South Africa. At this rate one wonders even if the likes of Usain Bolt would even be able to catch up with the rate the way it is going. The increase in South Africa’s 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 13.0% year-on-year (y/y) in July from 11.6% y/y in June. This is the sixteenth month in a row that the CPIX has been outside the central bank’s target of having inflation being between 3 - 6%. Before the release of todays statistics, a survey carried out by I-Net Bridge had forecasted inflation to come in at 12.9%.

The question most of us will be asking now is, “Where to from here?” If the inflation rate continues to go up at this rate, the central bank is going to be forced to increase interest rates again. We were lucky the last time the MPC met and they decided not to change interest rates, but next time around we may not be so fortunate. It seems like unimaginable that the rate will drop down from 13% to the target of below 6%. If only the saying of ‘the higher you go, the harder you fall’ could hold with the rate of inflation, we would be happy. But as high as the rate is going, do not expect it to come down as fast. In that famous words of Tito Mboweni, “It is time to tighten up your belts!”

Today (Thursday 14 August), Reserve Bank governor, Tito Mboweni, announced that the Reserve Bank’s (SARB) Monetary Policy Committee (MPC) has decided to keep the repo rate at 12%. “The MPC has considered recent economic developments and the outlook for inflation and has concluded that, notwithstanding certain risks to future inflation outcomes, the current monetary policy stance is appropriate,” Mboweni said. This news comes as a huge relief to many who had feared that interest rates could go up again. But one should not be overly happy as the MPC will continue to monitor the situation and if need be, they will rise interest rates as they see fit. Read the rest of this entry »