The South African Reserve Bank will not raise interest rates again until May, according to a Reuters poll, taken after the central bank surprised many economists last month by adding 25 basis points to borrowing costs.



The median forecast in the poll of 25 economists, conducted over the past week, suggests the central bank will wait until May before hiking interest rates by another 25 basis points, taking its key rate to 7.00 percent.



The Reserve Bank increased its benchmark lending rate for the first time in nearly three years last month, saying the risk of higher inflation in the longer-term remained elevated and that it could not risk waiting until later to take action.



“Risks to the inflation outlook remain to the upside, on possible rand depreciation and above inflationary increases in administered prices, particularly electricity tariffs,” Investec economist Kamilla Kaplan wrote in a note.



She pointed out that debt-troubled state-run utility Eskom proposes to increase electricity tariffs by 15 percent a year for the next three years.



The poll predicted inflation would quicken to 5.3 percent next year from 4.7 percent in 2018.



A separate poll last week suggested the rand&nbsp;<a href="https://www.reuters.com/finance/currencies/quote?srcCurr=ZAR&amp;destCurr=USD">ZAR=D3</a>&nbsp;will erase around a third of the 10 percent gains it made in the past two months in the run-up to elections next May as strong volatility rattles the currency, adding to inflationary pressures.&nbsp;



However, the Reserve Bank reacts more strongly to any signs of second round effects on its inflation outlook rather than to currency weakness.



Another poll showed analysts are increasingly pessimistic about the prospect of an oil price rally next year, even though markets expect OPEC to cut output.&nbsp;



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Wall Street rises on trade optimism



Brent crude LCOc1 eventually affects local inflation, from factories through to consumers.



South Africa’s Reserve Bank tries to keep inflation in the middle of its 3-6 percent target range.



The South African economy is expected to expand to 1.5 percent next year from 0.7 percent this year. The economy expanded 2.2 percent in the third quarter, taking the country out of recession. -Reuters



<ul><li>Vuyani Ndaba</li></ul>



<ul><li>Additional polling by Khushboo Mittal in Bengaluru</li></ul>

South African Reserve Bank, Pretoria, Tshwane, Gauteng, South Africa

South Africa’s Central Bank To Wait Until May For Next Rate Hike

Tito Mboweni inherits Africa’s recession-hit country as president Cyril Ramaphosa chases growth.

If the performance of South Africa’s currency in the week since Tito Mboweni was picked as finance minister is any good, Africa’s only economy in official recession might be on to a good thing.
The rand, Africa’s most freely-traded currency, gained more than 5% against the dollar in the week since the former central bank governor replaced Nhlanhla Nene who quit after lying about his dealings with a business family, the Guptas, accused of bribing government officials including former President Jacob Zuma.
The former labor minister brings a no-nonsense approach analysts say will be needed to take Africa’s second-largest economy out of a largely self-inflicted second recession in less than a decade amid graft allegations. He will need to rein in government spending, six months before elections that may drop the ruling African National Congress’ (ANC) support below half for the first time since the dawn of democracy in 1994.
“Fiercely independent and often regarded as a bit of a maverick, Mr Mboweni is nevertheless likely to emerge as one of Mr Ramaphosa’s more inspired decisions,’’ says Gary van Staden, analyst at Cape Town-based NKC Research.
<blockquote>“He is certainly among the more highly-regarded choices the president could have made and we expect him to add momentum to the decisions of the job summit and economic stimulus package.’’</blockquote>
Mboweni served four years as labor minister in former President Nelson Mandela’s government where he developed the first post-apartheid labor law. At the South African Reserve Bank, where he was the country’s first black governor, Mboweni spent a decade, and built a reputation as a conservative banker and defender of the country’s newly-adopted inflation-targeting regime.
His major achievement was building the country’s foreign exchange reserves from less than $10 billion to $40 billion when he left in 2009 after two terms deemed by most as successful.
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“The economy is now in a safe pair of hands. It is someone senior both in the ANC and in the government as he served as a minister of labor previously. What is also important is we have ratings agencies watching us and this will bode well for them,’’ says independent economist Mike Schussler.
Mboweni takes charge of an economy that was in recession in the first six months of the year, hobbled by nine years of poor management under Zuma which left business confidence shattered. With the economy barely growing during the period, the country lost its investment grade rating from Standard &amp; Poor’s (S&amp;P) and Fitch Ratings.
Only Moody’s maintained its rating above junk and the company deferred a decision after Mboweni’s appointment, fanning hopes it will give him time to mend the country’s finances and present a credible growth plan.
But economists say it might be too late for a country that needs to cut spending while chasing economic growth.
“I am afraid we have overplayed our hand on the numbers,’’ says Dawie Roodt, an economist at Efficient Group in Johannesburg.
“The fiscal numbers are unsustainable and the debt numbers in particular are terrible. From a numbers point of view, I am afraid this is a downgrade.’’
The new minister has a full problem tray as he comes in: unemployment is sitting at 27.2% as companies grapple with soaring costs inflated by a weak rand, falling government revenues in a country where 17 million people depend on government grants, and weak business confidence.
But his appointment may provide the turning point the country desperately requires, according to Van Staden.
“The former Reserve Bank governor can be a difficult personality, but his skillset and deep understanding of financial markets are likely to see him embrace a market-orientated policy framework with a no-nonsense attitude and dedication to economic growth and social development. We expect the appointment to have a positive impact on the credibility of the Ramaphosa administration.’’
It is credibility Ramaphosa has been building and one he will need quickly, according to Ravi Bhatia, a director at S&amp;P which rates the country’s debt junk with a stable outlook. Its next rating decision is scheduled to be announced on November 23.
“He will have to get up to speed quite quickly,’’ Bhatia said pointing to the country’s Medium Term Budget Policy statement released in October. “He will have to push through measures that will deliver growth. We want to see growth being delivered and the fiscal line being controlled.’’
&#8211; Godfrey Mutizwa

Tito Mboweni sworn in as new finance minister in South Africa

Could Tito Mboweni Be The Turning Point?

He doesn’t look much like a multimillionaire but Michiel le Roux has done for banking what Bill Gates did for software and Muhammad Ali for boxing. He wears his net worth lightly, but a very task of creating a bank that in 15 years has forced its way into the top five in South Africa’s competitive industry.
“We said let’s build a bank and we were not going to experiment on a small scale, we always stayed very close to our clients and we knew what we wanted to bring to the industry,” says Le Roux.
Capitec was born in the worst of times. In the days leading up to its launch, Saambou Bank, one of South Africa’s significant players, went bankrupt. It was a very public collapse that did the image of banking no good at all. Lines of people appeared on TV news desperate to get their money out.
“The Reserve Bank closed them on a Saturday to minimize the impact on the markets and we listed Capitec Bank Holdings Ltd on the Johannesburg Stock Exchange on Monday, 18 February, 2002, the week later. That was a terrible time to list a bank and it also meant it was a terrible time to get finance whatsoever. I know I sound like an old man saying you learn from your mistakes but it’s true. Starting a business in good times is always very dangerous because you will think business is easy when the wind is blowing from behind and the sailing is smooth. When you start with wind blowing from ahead, then you know business is tough and you grow,” he says.
To survive, when others failed wasn’t easy.
“It’s a hard slog to create the infrastructure, to network, to decide what you want to do. We take pride in the fact that at that stage, when we were also starting, Old Mutual had a retail banking license and they wanted to start a retail bank. They were looking for systems when we were looking for systems and the rumor mill had that they paid out R800 million ($60 million) for their system and that was when the rand was about R4 to the dollar but they never opened that bank because they couldn’t make it work.”
About a decade ago, few deposited their salaries into Capitec, most had never heard of it. Today, Capitec has over 7.3 million active clients, 792 branches, 11,440 employees and holds R13.7 billion ($1 billion) in shareholders’ funds. For Capitec, simplicity is everything.
At Capitec, they take simple seriously. No suits, the CEO’s office is the same size as everyone else’s, the CEO shares a personal assistant, no personalized parking spots, even the guard at the gate calls him Michiel, while the receptionist jokes freely about his sense of style – or lack thereof.
“Here, there is no distinction between people. Nobody flies business class. How you fly, where you stay, the rental car you drive is the same whether you are the CEO or the junior in the company. Everyone gets the same treatment.”
There is a business reason for this. Everyone is important.
“A bank always determines the value of the client based on their net worth which to this stage in my mind doesn’t make sense because a guy with high net worth might be very frugal with the use of his credit card whereas a guy with a much lower net worth might be exorbitant with his credit card use. The guy that is exorbitant should be much higher in the rankings but banks don’t look at it that way.”
“If you are a factory worker and earn very little, they were not that interested in you and that to me was a failure on banks not accommodating the lower income people,” he says.
This simplicity and business acumen has made Le Roux a rich man; the 38th richest in Africa to be exact, according to FORBES. In just 15 years, this fortune has grown rapidly. It has nearly doubled from around $290 million in 2011.
It has earned him recognition by the publication you are reading.
“Michiel Le Roux has been a bold entrepreneur this year and an example to others in business,” says one of the FORBES AFRICA Person of the Year judges.
You can bank on him.

Tag: Reserve Bank

FORBES AFRICA SOCIAL MEDIA

South Africa’s Central Bank To Wait Until May For Next Rate Hike

Could Tito Mboweni Be The Turning Point?

Simplicity Is Everything