MAIN IMAGE: South African Central Bank Governor, Lesetja Kganyago
Editor
Barely a month into the new year, South Africans are bracing for four big events that stand to impact our wallets and the country’s prospects, the first being the Reserve Bank’s Monetary Policy Committee meeting taking place on the 24th of January, followed by SONA and the Budget Speech in February. Next up is the announcement of the national election date, after which the race for votes kicks into higher gear.
The repo rate
It’s no secret that the repo rate significantly impacts the real estate industry, with house price growth and buyer affordability taking a serious nock during 2023, where we experienced a series of rate hikes, culminating in a 14-year-high of 8.25%.
In the short term, South African Central Bank Governor Lesetja Kganyago ruled out cutting interest rates while inflation remains persistent, explaining that, “Our real rates are not particularly high, and inflation has come down – it’s within target – but it is not quite where we would like to see it,” Kganyago said Tuesday in an interview on Bloomberg TV on the sidelines of the World Economic Forum in Davos, “And if we are to make any policy adjustments, we would have to see that inflation has declined to our anchor, which is 4.5%.”
While many are hoping for a rate reduction, it would seem that in the best-case scenario, this would only happen in the latter half of the year. The latest FNB Residential Property Barometer notes, “We expect that interest rates have reached their peak, with a measured cutting cycle coming into view in the latter half of 2024. Nevertheless, persistent risks, including heightened geopolitical and adverse weather patterns, complicate the deceleration trend in inflation and could prolong the lift in inflation expectations away from the target. This could cause interest rates to remain high for longer than we currently anticipate, and market weakness would be protracted”.
SONA
The President’s State of the Nation Address is set to take place on the 8th of February. Of particular interest will be any statements regarding the future of Eskom and the implementation of green energy, plans to grow the economy and reduce the high unemployment rate, and an update on the proposed NHI.
The BUDGET speech
While SONA has the potential to boost investment or throw a spanner into the works, the budget speech is going to be critical, and according to Finance Minister Enoch Godongwana, speaking to Newzroom Afrika at the World Economic Forum, “the message we are likely to put across in February is going to be a difficult one”.
Importantly, for the real estate industry, there will be changes to transfer duty brackets and personal income tax. An increase in personal income tax is highly likely as the minister warned of tax hikes this year in his Medium-Term Budget Policy Statement last November, as the Treasury seeks to raise an additional R15 billion in revenue.
The National Election
Expect an announcement about the date for the national election early this year, with the elections most likely taking place as early as May but no later than August.
What to expect from the 2024 election?
That’s the big question, as Natasha Marrian, Financial Mail deputy editor and columnist, explains, stating that “The reputable pollsters are unanimous that the ANC won’t win a majority, but the predictions for the DA and the EFF are all over the place”.
Writing for the Daily Maverick, Dr Seelan Naidoo, principal associate at Public Ethos Consulting, outlines what he believes will be the five likely scenarios that will play out, ranging from the ANC getting 40% of the vote through to 62%, with the DA getting anywhere between 26% and 40%, followed by the EFF getting 9% to 15%.
Everyone seems to agree that this election will be the most closely contested in three decades. What is certain is that the run-up to and the results of this election will directly impact investor confidence and our economic performance.
Buckle up; it’s going to be a busy year.
Photo source: Conversations with Lincoln
