Data released today (29 April 2009) shows that South Africa’s targeted consumer inflation slowed slightly to 8.5% year-on-year in March from 8.6% in February. Analysts had predicted the rate to come down as low as 8.4% but they were not too far off. It is expected that the consumer price index (CPI) should come down to the central banks target of between thee and six percent by October this year. Headline CPI inflation stood at 1.3% on a monthly basis in March compared to 1.2% in February.

All eyes will now be on the central bank tomorrow when they make a decision on interest rates. Most are expecting interest rates to go down by 100 basis points tomorrow but we could only see a 50 basis point drop.

The elections are over now in South Africa and the ANC won the elections by sweeping 65.9% of the votes. The fact that the ANC did not get the two thirds majority vote need to be able to change the constitution is seen by financial analysts as a good thing. The ANC themselves may not be too concerned about not winning a majority vote as they probably have no intentions of changing the constitution but investors may see this as a good thing. Investors tend not to be keen on one-party states.

Many analysts are expecting the economy to remain the same even if Jacob Zuma is the president of the country. It is very unlikely he will make drastic changes to economic policy. The first thing Zuma may want to do is to make sure that Trevor Manuel and Tito Mboweni remain in their respective positions of minister of finance and reserve bank governor. These two have in many peoples eyes been behind the relative success of the South Africa economy.

What is critical though is that we as South Africans should not think we are immune to the global economic crisis. I have heard many people thinking that what is happening in the USA and Europe will not happen in South Africa. I beg to differ. We could possibly head the same direction as those countries currently struggling, if economic policies are not kept in check and thus the importance of good governance.

A lot of eyes are going to be focusing on the ANC in the upcoming months to see how they deliver. More so now that there is a larger opposition presence in National Assembly committees as well as a significant DA and COPE presence in the National Council of Provinces. The ANC failed to win the Western Cape vote which went to the DA. It will be interesting to see how the ANC handles the Western Cape as it is one the most richest and important provinces in South Africa economy.

Now that we know the ANC has won the elections and Jacob Zuma will be the next president of South Africa, everyone is waiting to see if current minister of finance, Trevor Manuel will remain as the minister of finance in the Zuma lead government. It would be really unwise for Zuma to get rid of Manuel who many people, including the important foreign investors, have faith in. There was a time, not too long ago, when some had thought that Manuel was going to step up after Thabo Mbeki was recalled, and that sent the markets into a frenzy as they feared that a departure by Manuel could cause chaos in the South Africa economy.

On Monday (27 April 2007), a senior official in the ANC said Trevor Manuel will continue to have a cabinet-level role in government thus quashing away the specualation that Manuel may be given another role which is not that of a minister. ANC treasurer-general Mathews Phosa, a former lawyer and ally of new South African President Jacob Zuma, said the final decision on Manuel’s future would be made in the next two weeks. I guess we just have to wait until then to find out exactly what is going to happen to Trevor Manuel.

It is still no surprise that people are not buying cars in South Africa like they used to. Honestly, how many people can afford to buy a new car today with the economic hardships being faced? Yes, interest rates are coming down, but the smart person realises that this is not the best time to buy a car and would rather use that extra cash they saving from interest rate repayments for something else rather than a new car. South African new vehicle sales in March 2009 were down 30.3% year-on-year compared with a fall of 36.3% y/y in February, figures from the National Association of Automobile Manufacturers of South Africa (Naamsa) on Thursday (2 April) showed.

Statistics show that in March 2009, new car sales were 21 282 units reflecting a decline of 6 508 units or 23.4% compared to the 27 790 new cars sold during March 2008. Even on the car export front, things are not looking great. Exports of South African manufactured motor vehicles during March 2009 were 17 896 vehicles, a decline of 5 061 vehicles or 22.0% compared to the 22 957 vehicles exported during March last year. Yet again, no surprise in this figure as most cars exported from South Africa are for the European, Japan and ISA markets and we all know what they are going through with the credit crunch!

Another cheer for people in South Africa today! The South African Reserve Bank’s (Sarb’s) monetary policy committee (MPC) has cut the key repo rate by 100 basis points, bringing it down to 9.5%, with the prime lending rate dropping to 13%. This rate cut takes the cumulative cut since December 2008 to 250 basis points. Many economists had predicted this 100 basis point cut today and they expect another 100 basis point cut in April.

Some of you may wonder why these drops are occurring so regularly when in the past the MPC did not meet as often. The committee announced on March 18 that it would be changing meeting dates for the rest of 2009, with the committee meeting every month, except for July.

Reserve Bank governor Tito Mboweni said that the decision to cut rates was based on an improved medium-term outlook for inflation and the volatile global environment.

An emergency meeting by the Monetary Policy Committee should spell one thing – Interest rate cut, in light of the recession we are in marked by an increase in inflation, GDP pointing south and a shrinkage in the mining and manufacturing sectors of the economy.
Anticipation is rife for a 1% decrease in the interest rate which should aid in fine tuning the wheels of the country’s economy but at grass roots level what does a 1% decrease in interest translate to?

If you are like me and live in a borrowed house and drive a borrowed car (need I go to the very clothes on my back?) a 1% reduction makes me sigh in relief as this means a couple hundred rands in my back pocket. Reason calls me to keep paying the mortgage at the current rate as this will reduce the tenure of the borrowing but the thought of lining my stomach with a prime matured steak and other luxuries I had relegated to better times . Instant gratification vs. a sound investment move, maybe wisdom will prevail the next time we get another rate cut possibly mid April?

The stock market ended the week on a high, with a high likelihood that it could be interest rate induced I guess we will watch and see what happens after today`s extra ordinary meeting.

A huge relief has come to South Africans. South Africa’s central bank has cut its key repo rate by 100 basis points to 10.5 percent today (Thursday), as expected, and hinted there may be more cuts to come. For many it was not a question if rates would be cut or not but just a matter of by how much will they be cut. Suggestions ranged from 50 basis points to 200 basis points, but it looks like the MPC (Monetary Policy Committee) has settled on 100 basis points for now. However, Reserve Bank Governor, Tito Mboweni said today that he personally wanted a 200 basis point cut in interest rates but the MPC agreed on 100 only. This could easily mean that we will see another 100 basis point cut in April when the MPC meets again.

The full percentage fall, the biggest single adjustment in more than five years, adds to December’s 50 basis point cut that started unwinding the 5 percentage points in hikes between June 2006 and June 2008.