Business news

2016-08-18 06:00

THE South African Reserve Bank is of the view that there will be zero GDP growth in South Africa this year. Deputy governor Francois Groepe indicated that key sectors in the economy remained under pressure due to the impact of the severe drought and soft commodity prices.

He indicated that the banks accommodating stance on interest rates was driven largely by the lack of growth and that had growth been stronger, it would probably have been necessary to consider raising rates again given the stubborn level of inflation.

In a press release last week the central bank said that the recent rally in the strength of the Rand had somewhat reduced the inflation risk but it was only cautiously optimistic about the currency going forward. Any future weakness in the Rand would increase pressure on inflation and influence rate adjustments later this year.

The CEO of the JSE, Nicky Newton King, commented on significant capital inflows into South Africa linked to investment in renewable energy projects. These inflows amounting to nearly R200 billion had helped to offset capital outflows as a result of “hotly contested local elections”. She went on to say that capital outflows were not peculiar to South Africa but rather a feature affecting all emerging markets. Other emerging economies, like Brazil, China and Russia, have experienced capital outflows as well.

In an environment of stagnant growth, capital outflows and stubborn inflation some major groups seem to have bucked the trend. Massmart (retail sector) expects headline earnings for the six months to June 2016 to be between 12% and 20% higher than the previous reporting period. Diversified industrial group KAP (logistics and manufacturing) announced a 19% increase in profits to June 2016 and the Aveng Group (civils and construction) expects a significant improvement in results.

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