Inflation slows; JSE, Rand gain; Sars IT head suspended; Arms deal ruling white-washed; Growth could see outages

By Linda van Tilburg

  • South Africa’s headline consumer inflation slowed to 4% year-on-year in July, which is the lowest in seven months; it is down from 4.5% in June according to Statistics South Africa. Investors in South African bonds are cheering as it gives the Reserve Bank more room to lower interest rates. Analysts say the news is good at a time when the government is increasing borrowing to bail out Eskom and the low CPI reading is positive for the rand as it increases real rates and is helping on the fiscal side. Yields on rand-denominated government bonds due December 2026 dropped 10 basis points, the most in a month, to 8.29%. The rand strengthened 1% to 15.20 per dollar, leading emerging-market currency gains.
  • The inflation figure helped a recovery on the Johannesburg Stock Exchange with the All Share Index gaining 0.66%. Steinhoff shares which reached 87 cents in trading yesterday climbed back above R1.00, and ended the day on R1.14. KAP Industrial Holdings soared by more than 11%, pharma company Aspen gained almost 7%, while Discovery regained some of its losses of the past month and rose by 4.77%. Sasol gained 3.32% and the financial sector also increased with ABSA adding 2.5%, Nedbank 2.42% and FirstRand 2.25%. The major movers down were Kumba Iron Ore that dropped 4.69% and Billiton and Exxaro were down by more than 2%.
  • SARS has suspended its controversial IT chief Mmamathe Makhekhe-Mokhuane following serious allegations of misconduct. Makhekhe-Mokhuane has been forced to apologise for her testimony at the Nugent Commission and is known for her interview with the SABC where she asked the presenter how she could protect herself against questions about what was going on with the IT system at SARS. It brings to five the number of executives of the Tom Moyane era who are facing disciplinary action.
  • South Africa’s High Court has set aside findings of an inquiry that found no evidence of corruption in the arms deal in the 90s linked to former President Jacob Zuma. The Seriti inquiry was widely regarded as a whitewash. The High Court found that the Seriti inquiry set up by Zuma in 2011 had failed to test witnesses and was regarded as “hardly an investigation, objective was to get to the bottom of allegations.” The unanimous ruling is a blow for President Jacob Zuma who is seeking a permanent stay of prosecution on corruption and racketeering for allegedly receiving bribes through his adviser Schabir Shaik. President Cyril Ramaphosa is yet to say whether he will constitute a new inquiry.
  • And finally, you would think growth in GDP is good for the country, but according to an Eskom board member, it could lead to power outages. Nelisiwe Magubane told Bloomberg that the energy availability of Eskom’s generation fleet is supposed to be as high as 80%, but is currently as low as 69% and even a 0.1% rise in GDP could result in outages. Magubane said South Africa has not seen load shedding because demand is down. If it picks up, the country could see load shedding every day, he said.