The South African rand fell over 4% against the dollar to around 17.95 before paring losses to the lowest since November 4th, after “farmgate” rumors spread that President Cyril Ramaphosa was considering resigning after a panel report found preliminary evidence, he may have committed serious misconduct. Ramaphosa was due to address the nation on Thursday, Ramaphosa’s spokesman Vincent Magwenya said: “An announcement is imminent. … I can’t confirm the date and time, we will advise.” in response to Reuters.
Ramaphosa is alleged to have covered up a $4 million theft from his Phala Phala farm in the northeast of South Africa in 2020. An amount of $580,000 of this was found beneath sofa cushions.
A spokesperson for elite police unit the Hawks said its investigation into the theft at Ramaphosa’s farm was continuing, while the central bank said it did not comment on exchange control investigations.
The ANC is set to hold an elective conference later this month that will decide if Ramaphosa gets to run for a second term on the ANC ticket at a 2024 election.
“I think the president has to step aside now and answer to the case,” Nkosazana Dlamini-Zuma, Zuma’s ex-wife, who narrowly lost the ANC’s 2017 leadership contest to Ramaphosa, wrote on Twitter late on Wednesday.
Tourism Minister Lindiwe Sisulu, who has campaigned to be elected ANC leader this month, wrote: “CR MUST RESIGN NOW!”
The panel’s recommendations are not binding on parliament, which is set to debate the report on Dec. 6 and where the ANC holds a majority of seats.
South African Reserve Bank
Last week the South African Reserve Bank (SARB) increased its benchmark repo interest rate by another 75 bps to 7% at its November 2022 meeting, as widely expected. Prime is now at 10.5%. This was the 7th consecutive rate hike as the SARB tries to tame inflation expectations more firmly around the mid-point of the target band and achieve the inflation target in 2024. South Africa’s inflation rate unexpectedly rose to 7.6% in October from 7.5% in September. The decision was not unanimous, three members of the MPC preferred 75bps, two preferred a 50bp increase.
South Africa like other emerging nations has to balance the rate differential with the US Federal Reserve raising rates, currency flight, inflation and growth risks.
South Africa Inflation
South Africa’s inflation rate unexpectedly rose to 7.6% in October from 7.5% in September, staying above the upper limit of the central bank’s target range of between 3% and 6% for the sixth straight month. The headline CPI forecast was revised up to 6.7% in 2022 (vs 6.5% in September) and to 5.4% in 2023 (vs 5.3%) but lowered to 4.5% in 2024 (vs 4.6%). Core inflation estimates were left unchanged for this year at 4.3% but revised higher to 5.5% in 2023 (vs 5.4%).
The Governor said local food price inflation was revised up due to the weaker exchange rate and was now expected to be 8.8% in 2022.
“Food inflation is revised higher to 6.2% in 2023 and unchanged at 4.2% in 2024. In 2024 and 2025 we expect headline inflation of 4.5%,” he said.
South Africa Growth
GDP growth projections were cut to 1.8% in 2022 (vs 1.9%), 1.1% in 2023 (vs 1.4%) and 1.4% in 2024 (vs 1.7%), mainly due to rolling blackouts.
The SARB concluded in their monetary policy statement that; “Economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, monetary policy decisions will continue to be data dependent and sensitive to the balance of risks to the outlook. The MPC will seek to look through temporary price shocks and focus on potential second round effects and the risks of de-anchoring inflation expectations. The Bank will continue to closely monitor funding markets for stress.”
Source Nehanda Radio
From The Traders Community Research Desk