Feb 27

South African Market

Our local market followed in the footsteps of their offshore counterparts, with significant gains for January, with the All-Share index up close to 9%, together with strong gains in the Indi-25, up by over 13% for the month, largely driven by a strong showing in its core constituents, namely: Prosus (up just shy of 18%), and Naspers (up over 18%). The Resi-10 was up over 7%, driven by gains in the BHP Group (up over 14% for the month), and Anglo American (up over 10% for the month), as well as Financials (Fini-15) being up just over 4%. There was some weakness in the property sector, however, lower by 1%.

SA inflation numbers slowed for a second month, coming in at 7.2% for December vs the previous reading in November of 7.4%, and retail sales improved 1.1%, given impetus by the Black Friday sales initiatives, with increased sales in appliances, household goods, clothing, and footwear,

The SARB again downgraded its growth expectations for 2023, to only 0.3%, and remaining around the 1% level until 2025, due to energy supply shortages and the resultant increase in the quantum of rolling blackouts being experienced (a total of 250 days expected in 2023, 150 days in 2024, and 100 days in 2025). The SARB expects the weaker growth trajectory and muted confidence to put a dampener on fixed investment income, coupled with a slowdown in household consumption. Notwithstanding these factors, the SARB’s Monetary Policy Committee raised rates by 25 basis points, taking the repo rate to 7.25%, despite the weaker growth outlook, attempting to anchor inflation expectations and to arrest the rising cost-of-living crisis.

With a big week expected from the Minister of Finance Budget speech along with the Financial Action Task Force meeting to decide in South Africa’s ‘grey listing’ we will provide further commentary thereafter.

Ian Kilbride is the Chairman and CEO of The Spirit Group and an Honorary Professor at Stellenbosch Business School