From updated growth estimates and the SARB’s interest rate decision, to a rapidly decreasing infection rate, the month of September has been unexpected. Recently, the Monetary Policy Committee conducted several sessions to discuss whether or not to raise the repo rate, and it comes as no surprise that the final decision was made to maintain the interest rate at its current level. This comes after the SARB slashed the repo rate to 3.5% in the first half of 2020 to jumpstart the economy and increase economic activity. The Reserve Bank also released their inflation forecasts for the next three years, which have remained more or less the same, with CPI remaining under 5% until 2023. The most important announcement the SARB made, however, was about the updated estimates for South Africa’s growth trajectory in the second half of 2021. Despite a devastating third wave and unexpected civil unrest in July, the reserve bank now estimates a 5.2% real GDP growth for the second half of 2021, up from the initial 4.2%estimate in July. One of the major contributing factors to this upwards revision of South Africa’s growth trajectory is the high growth performance the country had achieved in the first half of 2021, and is a primary indicator that the economy is gaining what was lost in the 2020 pandemic and subsequent lockdown.
On the data front, StatsSA recently released tourist accommodation and food and beverages industry data for July, which shows the negative impact of the looting and rioting, as well as the resultant strict and immediate lockdown protocol that was put in place to manage the situation. Both industries were picking up since February 2021, but seasonally adjusted income for the tourist accommodation industry took a huge hit. The occupancy rates for tourist accommodation were registered at 16% in July when in 2019, the average occupancy rate was 46.6%. Similarly, total income for the food and beverages industry declined by 13.6% month-on-month, with restaurants registering a decline of 22.9%. To make matters worse, the rand exchange rate did not do well over the past couple of weeks. The rand lost over 3% against the dollar, pound, and euro, and South Africa’s major commodities, primarily iron ore and rhodium, continued their price decline, losing a further 20%over the past two weeks as a result of movements in the global economy. Whether or not the rand will bounce back in the coming months is dependent on how the global economy performs and what South Africa does to buffer the impact these price decreases will have on day-to-day business.
On a more positive note, the country’s infection rate has continued to decrease, with the rate of positive COVID-19 tests reduced to single digits. As we move closer to herd immunity, and our vaccination programme continues to gain momentum, there’s a good chance reduced lockdown regulations will be implemented in the following weeks. This bodes well for economic activity for the second half of 2021, but it’s important to keep in mind that there are talks of a fourth wave internationally, and South Africa is no different. This means the race against time has started, and the faster we can reach herd immunity, the better for our economy and our people.
There’s a lot of uncertainty surrounding us, but don’t give up hope and keep pushing, and if you find you need a helping hand, please reach out to the COBRA Initiative for business consulting services and financial support.