Repo rate cut; rand rallies; Richemont rides online wave; property market optimism; Eskom Bigwig wanted

By Linda van Tilburg 

  • The South African Reserve Bank has cut its benchmark interest rate for the first time since March 2018 as it almost halved its economic growth forecast for the year. It was a unanimous decision by the Monetary Policy Committee to lower the repurchase or repo rate by 25 basis points to 6.5% per annum. The bank lowered its growth forecast for the year to 0.6% from 1% in May. Bloomberg says the move may be the last this year.  The Reserve Bank has lowered its forecast for annual inflation from 4.4% to 4.5% and sees inflation staying inside this band at least until the end of 2021.
  • The news of the repo rate cut strengthened the Rand, which traded at R13.88 which is a 10 cents gain to the greenback. The JSE gained some momentum towards the end of yesterday closing 0.37% higher. Pioneer Foods Group had a bumper day climbing by 6.3% while British American Tobacco gained just under 6%. It was also a good day for miners as Impala Platinum rose by more than 4% and Anglo Platinum, AngloGold, Gold Fields and Sibanye Gold all strengthened by around 3%.
  • Another company in the Rupert stable, luxury goods giant, Richemont has reported a massive increase in its online retail sales in the quarter ending 30 June. While total sales grew by 12%, online retail sales soared by 54% at actual exchange rates during the quarter. There was a surprise drop in revenue from its watches as business was impacted by protests in Hong Kong cutting sales in a key luxury market. The watch unit’s sales slid by 2% excluding currency shifts in the three months through June.
  • There is one industry that is buoyed by the repo rate cut, it is the property industry which is hoping that buyers that have been hesitant up to now will go from wait-and-see to ‘let’s buy”. Estate agents say the rate cut coupled to a cut in the price of petrol could boost consumer confidence. It is seen as the first bit of encouragement of the government to spend more. Some estate agents have however indicated that they were hoping for a bigger cut.
  • South African platinum producers could use Sibanye Gold’s pay settlement with gold miners earlier this year as a benchmark in wage talks with labour unions according to Bloomberg. Sibanye agreed on a 5.5% increase in pay at its three gold mines. It is viewed as a good proxy for what’s possible in the platinum industry as cost structures are similar to deep-level gold mining. The first round of wage negotiations with the Association of Mineworkers and Construction Union (AMCU) which is demanding an increase of as much as 48%, began last week.
  • Now here is a post for a CEO who likes to tackle problems, big problems, the new CEO of power utility Eskom to replace Phakamani Hadebe when he leaves at the end of the month. Hadebe announced he was quitting in May after just 16 months in the post, citing health reasons. Eskom says the post will soon be advertised and an interim solution will be arranged by the board.
  • Back to metals – junkyard palladium is quickly becoming a growth market as mined supplies of the metal used in catalytic converters are running increasingly short. With palladium prices up 83% since mid-August, recyclers are gaining an edge. Recyclers can recover about to 90% of the metal from catalytic converters for a fraction of the cost of mining it.  In 2018 3.2 million ounces were returned to the market which was up 11 percent from a year earlier; that’s half the amount produced.