Commenting on repo rate on 19 September, 2024, High Street Auctions Director Greg Dart says SA Reserve Bank Governor Lesetja Kganyago’s announcement of a 25 basis-point rate cut will be an instant boost for South Africa’s property market, and boost investor confidence even further.
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Dart says: “It would have been great if the MPC had followed the US Fed and cut its key lending rate by half a percentage point. Like us, US consumers haven’t seen a prime lending rate cut since the pandemic, and 50 basis points will sharply lower borrowing costs.”
“That said, SARB Governor Lesetja Kganyago wanting cooler inflation to be sustained for a longer period before jumping with the repo rate, is a sensible position.
“His statement that the repo rate will stabilise above 7% next year also augers well for South Africa’s economic outlook.”
Key factors
Dart adds that besides inflation coming in at 4.4% in August, dropping below the SA Reserve Bank’s 4.5% target for the first time since April 2021, three other key factors have influenced investor confidence in the economy.
“Positive sentiment towards South Africa following the establishment of the Government of National Unity (GNU) can’t be underestimated. Since the election, the GNU has played a crucial role in stabilising the rand, with foreign purchases of South African bonds totalling R18.5 billion.”
“The currency continues to strengthen as well, trading at R17.43 during the MPC press conference.
“Just over a year ago, in June 2023, the rand plummeted to an all-time low of R19.92 against the US dollar.”
“Another significant factor boosting international and national investor confidence has been the uninterrupted power supply.”
“At the beginning of the month, Deputy Governor Rashad Cassim noted that the country had not experienced load-shedding for more than 155 days.”
“This is unequivocally a good news story for the country, because of the double impact on both growth and inflation.”
Dart says the 19 September announcement is significant, because it marks the first sign that South Africa’s economy is turning.
“There’s still a long way to go, but if the country continues in this direction, economic recovery is certainly possible – something business couldn’t say with any certainty a year ago.”
