International
What an eventful month it was. An assassination attempt (the first of its kind in 43 years) was made on Donald Trump just four months before the US Presidential election. His ear was clipped, but security immediately surrounded him. However, there are serious fall outs on the FBI and heads will roll. However, this propelled his chances of becoming the next president.
Then President Joe Biden dropped out of the 2024 race ending his bid for re-election and endorsed Vice President Kamala Harris. A resurgent Trump meanwhile has pulled ahead in polling with plans to strongly reduce environmental spending, introduce incentives for more domestic oil and gas production, and reduce tax rates. Although Harris seems set to be the new candidate, the appointment is not formal yet.
On PredictIt, where booking bets are received, Trump's odds have dipped slightly from 60% on Sunday 21 July to 57% as of Wednesday 24 July, and Harris' odds rose from 40% to 45% in that time.
The UK had their upsetting elections as well, with Labour party leader, Sir Keir Starmer accepting the role of being the new prime minister. This change comes after Prime Minister Sunak's Conservative party has been in power for 14 years.
However, all eyes are currently on the Fed and the interest rate cycle. Regional differences in terms of inflation and economic growth have resulted in more central banks cutting interest rates ahead of the United States (US) Federal Reserve (Fed). Among the major central banks, the European Central Bank (ECB) announced its first rate cut in June 2024 and the Swiss National Bank (SNB) implemented its second interest rate cut in June.
Source: Trading Logistics
While interest rate cuts have gained momentum globally, the International Monetary Fund (IMF) has flagged that elevated services inflation and wage growth could stall global disinflation and lead to higher-for-even-longer interest rates.
A lower US inflation print and initial jobless claims led to a rotation trade away from tech into equity laggards, broadening equity performance on the hopes of rate cuts. This implies that indices like the S&P500, which was buoyed by these tech giants, might lose some of its lustre in ‘n cyclical change in interest rates.
Current forecasts suggest that the US might cut rates three times in the foreseeable future, starting in September or November.
Source: Trading Economics
South Africa
President Cyril Ramaphosa announced that the cabinet had been largely restructured to accommodate members of the government of national unity. Before the elections, Ramaphosa’s cabinet included 30 ministers. It has grown to 32, and there are now 43 deputy ministers – from 36 previously. The DA has six cabinet positions, the IFP two, the PA one, the PAC one, the Good party one and the FF+ one. More than 70 ministers and deputy ministers were sworn in to their respective offices by Chief Justice Raymond Zondo.
President Cyril Ramaphosa’s opening of parliament speech suggests that South African politics may have entered a new era - one of political maturity. He detailed plans to fix local government, address poverty and the high cost of living, and infrastructure maintenance to reignite the slow-growing economy.
The government of national unity has inspired cautious optimism from industry and financial markets. However, many citizens and political analysts fear the coalition will struggle to deliver economic growth and social change. Business Leadership SA said the GNU will find a willing partner in business, which will enthusiastically back reform.
South Africa’s stock market has rallied since May’s election, which produced a market-friendly outcome. The market reached an all time high on 15 July 2024.
Source: Fund Focus
The rand also strengthened against the US dollar, weighing on offshore returns.
Source: Fund Focus
The Absa Purchasing Managers’ Index (PMI) shows that imports are still being delayed as South Africa continues to battle port congestion. The port delays caused by adverse weather conditions in the Western Cape will also weigh on economic activity. However, signs of some improvement in both ports and Transnet have been noted by companies like Sasol and Kumba.
There seems to be a sudden return to discipline in South Africa. High profile politicians like Zizi Kodwa are on trial and the former chairperson of the defunct VBS Mutual Bank, Tshifhiwa Matodzi, has been handed a 495-year sentence. He claims in his testimony that the EFF was paid R5 million as well as R1 million monthly “donations” to clean up the bank’s bad reputation after giving former president Jacob Zuma a home loan for Nkandla. This is vehemently denied, but investigations are in progress.
The South African Reserve Bank's Monetary Policy Committee has kept the repo rate at a 15-year high of 8.25%, while the prime lending rate that banks charge consumers remains at 11.75%. Reserve Bank Governor Lesetja Kganyago said that inflation was still not at the mid-point of the target range at 4.5% with current consumer prices sitting at 5.2%.
Source: Momentum Investments
However, most market analyst still expect local rate cuts of 0.25% in September and November, as well as two more before June 2025.
Investor optimism appears to have been sustained, with JSE data showing that foreign investors have pumped R9.1 billion into South African stocks over the past weeks. This marked a sharp turn against the trend, with foreign investors dumping local assets due to uncertainty surrounding the election. South Africa recorded seven consecutive quarters of net outflows.
The two-pot system is less than 2 months away, however, not every retirement fund member will be included in it. Members who were 55 years and older on 1 March 2021 can choose to opt into the two-pot retirement system between 1 September 2024 and 1 September 2025.
Snippets from the market
South Africa was one of only two countries in the first quarter of 2024 to experience a decline in trade (due to a drop of both imports and exports).
Moody’s Investors Service has upgraded Cape Town’s credit rating from stable to positive. It affirmed Cape Town’s Ba3 ratings. This is one notch below South Africa’s sovereign rating of Ba2.
Eskom has announced the successful transfer of Kusile power station’s unit 5 to commercial operation, adding 800MW to the national grid.
Communities in the Western Cape have been experiencing a severe weather crisis with massive storms and flooding.
The Food and Agriculture Organisation (FAO) indicated that SA’s excess maize will not be sufficient to cover demand from Southern African countries that were disproportionately affected by El Niño.
The President announced that the Government of National Unity (GNU) will look to expand the current list of 19 food items exempt from Value-Added Tax (VAT).
The fuel price formula and other administered prices will also be reviewed.
Opposition parties get eight portfolio committees.
More than 120 consecutive days of no-loadshedding at time of writing
Legal challenge to John Hlope’s position on JSC. The DA has formally lodged a court application.
Gauteng government on unstable ground as the ANC EFF alliance seem to buckle. Requests for the removal of Kabelo Gwamanda as mayor are gaining momentum.
Call for Malema and Shivambu investigation by lobby group AfriForum.
The SA Communist Party national chair Blade Nzimande has once again denied allegations that the party benefitted financially from the VBS scandal.
More private participation in rail: Transport Minister Barbara Creecy said she wants to extend private sector participation in South Africa’s rail network and plans to establish a dedicated unit in her department to pursue this goal.
The national nuclear regulator has approved Eskom’s request for a licence to extend the operating life of Koeberg nuclear power station unit 1 by 20 years until July 2044.
Consumer price inflation (CPI), according to Statistics South Africa (Stats SA), dropped to 5.1% year-on-year in June 2024 from 5.2% in May.
Core inflation eased to 4.5% from 4.6% over the same period.
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