Tag: South African Reserve Bank (SARB)

The South African Reserve Bank (SARB) cut rates by another 100 basis points this morning in an inter-meeting move. Rates are now down 225 bps since the start of the year, and down 250bps since July last year.

There was more salt in the wounds for South Africa when Fitch announced that they were downgrading government's credit rating another notch, this follows the announcing by Moody's a week ago that they were also downgrading the credit rating.

Moody’s cut both the local and foreign currency-denominated debt from Baa3 to Ba1 and retained the negative outlook. Their statement highlighted South Africa’s deteriorating fiscal situation amidst very weak economic growth, saying: 'The key driver behind the rating downgrade to BA1 is the continuing deterioration in fiscal strength and structurally very weak growth.'

The Monetary Policy Committee (MPC) unanimously decided to decrease the repo rate by 100 basis points to 5.25%. This somewhat unprecedented move was a direct result of the deterioration in economic conditions due to the COVID-19 pandemic experienced in South Africa and across the globe.

In the midst of a recessionary domestic economy, favourable inflation outlook and lower oil prices, the South African Reserve Bank (SARB) got room to cut interest rates by 100 basis points to 5.25%. A rate cut, downside inflation outlook and supportive rand boost agriculture rebound.

The global economy has been hit by five shocks as the coronavirus spread rapidly. This could not have been predicted, though with hindsight the market was initially much too complacent. The situation is so uncertain now that a strategy based on trying to predict the future is bound to get it wrong.

With severely limited fiscal space, planned economic reforms need to be fast-tracked. South Africa is in a grip of panic over the impact of the coronavirus disease 2019 (COVID-19). The situation prompted an extraordinary address to the nation by President Cyril Ramaphosa on the evening of March 15. Apart from very real human health concerns, he commented that the outlook for the local economy – already on a weak footing heading into 2020 – is a big headache. Economic growth forecasts have been cut over the past few weeks as forecasters realise that the impact of the pandemic will be larger than previously thought. This begs the question: how will local authorities respond?

There is a distinct lack of good news at the moment, and certainty is in short supply. The coronavirus is spreading rapidly in Europe, the Middle East and North America, and we have to assume it will continue spreading at a rapid rate.

South Africa has been bleeding skills in recent years. A top reason being the punitive 'expat tax' regime promulgated in December 2017, and effective 1 March 2020.

The South African Reserve Bank and National Treasury have become aware of an increase in payroll deductions in recent years. Stakeholders were engaged to create a regulatory framework to govern payroll deductions and the resulting proposal has led to three very limited options on how companies can govern employees’ payroll deductions.