00:00As we were just mentioning there, leading into this decision, analysts were split and then we
00:05ultimately did see this MPC split. What does that tell you about where we are at right now,
00:12potentially in the easing cycle here in South Africa?
00:16I think it really shows that we're coming towards the end of the easing cycle, given the uncertainty
00:21and directions that we're finding at the moment, not just within the market, but within the MPC
00:26as well. As you highlighted, the market had not priced in either outcome. It was sitting 50-50
00:32between either a cut or a hold. The fact that we saw that 4-2 split between the MPC goes to show
00:39that there's also not a unanimous decision. From our side, we're viewing it at AG as the fact we
00:44didn't get a cut this month, but we're seeing another strong chance of a cut of 25 basis points
00:51in March. But Casey, as we heard from Lesetia Kanyaho, we still have this inflation target
00:59ban, this new inflation target ban, squarely in focus. What are the risks potentially? Because
01:05he did outline a few different scenarios that the MPC is looking at. What do you see as potentially
01:10the biggest risks to these scenarios?
01:13I think at this point, the biggest risk is just the heightened geopolitical uncertainty that we're
01:18seeing at the moment and the uncertainty of how that's going to filter into the emerging market
01:23space, particularly for South Africa. At this point, our inflation outlook is fairly benign.
01:28The Reserve Bank is forecasting inflation to average around 3.3% this year, which sounds moderate.
01:36But bear in mind, we now have that new inflation target of 3%. And the Reserve Bank is cautious
01:41around how these sort of uncertain events are going to filter down into the inflation outlook
01:45for South Africa, ultimately. At this point, we're seeing a strong boost from our terms
01:50of trade, thanks to a strong commodity cycle. The RAND is strengthening strongly off the back
01:55of dollar weakness. But we just don't know how these cyclical effects are going to play
02:00out just yet.
02:03Let's stay on the RAND, Casey, because you said that is in response to dollar weakness.
02:09Do you think that the strength of the RAND, though, is not a South Africa story? Does it squarely
02:14focus in on what we've seen with the dollar?
02:18Up until now, I think it's been a bit of a mix of the two. There has been a strong reform narrative
02:23in South Africa. We are getting a lot more on the local macro outlook that's been boosting
02:28the RAND in that sense. But that's been mixed with sort of dollar weakness, with policy uncertainty
02:32coming out of the United States. How I feel now is we're getting towards the end of this month.
02:37It's largely been a result of dollar weakness with uncertainty around the Trump administration
02:42and everything, again, we're seeing in the political environment there. So tilting a little bit more
02:47now towards the dollar weakness story.
02:50Do you think we have seen the lowest level of the RAND, or do you expect potentially some more strength?
02:59Well, that's an interesting question. Before, we were saying we're going to hit around the 15.75 handle.
03:05We blew past that at the beginning of the week. So I think we have potential to actually see this
03:10strengthen quite a bit further towards the 15 mark, perhaps even under. There's a good few market
03:16pundits at the moment saying we could even hit the $14 mark. At this point, my uncertainty is just
03:21around how long these cyclical effects are going. Yes, it's been a fantastic boon for this African
03:26macroeconomic environment at large. But again, a lot of this is very cyclical policy uncertainty.
03:32We just don't know how that's going to play out and how that's sort of feeding into our commodity markets.
03:37Bearing in mind, South Africa is an exporting nation.
03:42Yeah, and of course, automobiles is part of that story. We've talked quite a bit about AGOA here
03:47in the office and the potential for South Africa to not be included in the renewal.
03:52When you think about trade and the factors that could affect the growth of this economy,
03:58how much is contingent on South Africa being a part of AGOA?
04:01It depends on some of the export lines that we're looking at. Quite topical at the moment
04:08is the fact that the South African government authorities are looking at perhaps not adding
04:12on a up to 50% tariff on car exports, for example, from both China and India. That would be
04:19significant given the fact that the car manufacturing lines is a significant part of the AGOA trade
04:24agreement for South Africa. Bear in mind, the United States has put a 30% tariff rate on South Africa,
04:29and that is one of the markets alongside our agricultural sector that looks set to be hard
04:34hit. Hence why now we're seeing this policy uncertainty coming in from our own local authorities
04:38on how best to counter that. Unfortunately, the murmurings around that haven't gone down
04:43too well in the markets. There's a lot of concern that we'll be now hitting those tariffs and making
04:47ourselves even more uncompetitive in the grander scheme.
04:51Is your expectation that we do need to hear from the finance minister on some definitive
04:57tax measures in order to potentially sustain some of the growth and the levels that we're
05:01at right now?
05:02Yes, precisely. South Africa's main budget story is coming now in February next month.
05:09Up until this now, murmurings are, at the end of the day, just murmurs we need to see hard,
05:12fast policies coming in from the budget, understanding where we'll be tracking for the next 12 months. At this
05:18point, we're looking at a fairly positive scenario around the budget. Spending has largely been
05:23constrained. And of course, South Africa's term of trade is extremely strong at the moment. We're
05:27receiving a lot of tax revenues coming in from our very strong sort of commodity cycle, thanks to our
05:33exports.
05:33Casey, let's just finish on geopolitical uncertainty. The governor mentioned electricity and food costs,
05:41but I wonder how you think about oil and the oil story right now, especially with regards to what
05:46we're seeing in Iran and how that could filter through into the inflation outlook.
05:51Now, oil is extremely significant. Energy costs are one of the most volatile components of South
05:58Africa's inflation baskets, and it's one of the largest subrometers that we monitor within the market
06:03space. At this point, again, all costs faltering down into our energy costs here in South Africa
06:09have been extremely muted. That's why it's been keeping our inflation outlook fairly benign. But again,
06:14as you mentioned, the governor of the Reserve Bank noted a word of caution around that, given the
06:19geopolitical space, if we see tensions starting to heighten in Iran, and oil prices take a bit of a
06:24spike from that, that will filter straight down into our inflation basket at quite a significant rate
06:29as well. Bearing in mind, we also have some some local food inflation issues as well at the moment. And of
06:34course, the oil energy costs filter down very strongly there in the second order effects.
06:38So is it too early to say it is a Goldilocks scenario right now in South Africa? How would you characterize
06:45this point?
06:47I would say it's very much a wait-and-see scenario at this point. Yes, things are looking incredibly
06:52positive, but there is a risk also going to tilt, I think, towards the upside now with all of this
06:58sort of going at play at the moment. So again, positive, nothing to worry about just at this point, but I think a strong
07:04note of caution is needed just for the outlook, especially over the next few months.
07:08high
07:15.
07:19Six
07:20.
07:22.
07:22.
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