{"id":811322,"date":"2025-02-12T09:35:45","date_gmt":"2025-02-12T07:35:45","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=811322"},"modified":"2025-02-12T09:42:00","modified_gmt":"2025-02-12T07:42:00","slug":"blow-for-the-south-african-reserve-bank","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/budget-speech\/811322\/blow-for-the-south-african-reserve-bank\/","title":{"rendered":"Blow for the South African Reserve Bank"},"content":{"rendered":"\n

South Africa will probably wait until next year to lower its inflation target to address more pressing issues such as weak economic growth and fiscal consolidation, according to a survey of investors and analysts.<\/p>\n\n\n\n

The South African Reserve Bank and National Treasury have been working on revising the inflation goal for almost a year and will hold a conference on the matter next month. <\/p>\n\n\n\n

Inflation averaged 2.9% in the last three months of 2024, its lowest level since the second quarter of 2020 and below the current 3% to 6% target range.  <\/p>\n\n\n\n

Governor Lesetja Kganyago wants to update the goal that\u2019s been in place for a quarter of a century. <\/p>\n\n\n\n

He has argued that a single-point target of 3% would be in line with South Africa\u2019s peers and allow for lower interest rates. <\/p>\n\n\n\n

His counterpart at the Treasury, Finance Minister Enoch Godongwana, said he is unlikely to announce a new inflation target when he delivers the national budget on Feb. 19<\/strong>, as more work\u00a0needs to be done\u00a0to achieve political consensus.<\/p>\n\n\n\n

Of the 13 investors and analysts surveyed by Bloomberg on the matter, most agree with Godongwana that the process shouldn\u2019t be rushed.<\/p>\n\n\n\n

\u201cI don\u2019t see a problem that if you don\u2019t change the target now, given that inflation is under control, that you\u2019ve missed the opportunity,\u201d said Kevin Lings, Stanlib\u2019s chief economist.<\/p>\n\n\n\n

\u201cThe target is a long-term objective.\u201d<\/p>\n\n\n\n

The median estimate of the 13 participants in the Bloomberg survey is for the target to be lowered next year to 3% in a phased manner.<\/p>\n\n\n\n

Bigger Priorities <\/h3>\n\n\n\n

They argue that the Treasury has bigger fish to fry.<\/p>\n\n\n\n

\u201cMy view is it will be a debate, but we won\u2019t see a change anytime soon,\u201d said Elna Moolman, head of South Africa macroeconomic research at Standard Bank Group Ltd. <\/p>\n\n\n\n

\u201cIt\u2019s partly because ultimately it\u2019s a Treasury decision, and I think that Treasury is rightly focused on other political battles at this stage, primarily fiscal consolidation.\u201d <\/p>\n\n\n\n

South Africa\u2019s debt-service costs have become its largest spending item and are rising faster than economic growth, crowding out funds for health and education.<\/p>\n\n\n\n

Those surveyed also argue that the Treasury would be reluctant to agree to a new inflation target now as it may have repercussions for growth, even if they were to be minimal, as Kganyago has argued.<\/p>\n\n\n

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\u201cWe need growth as a matter of urgency,\u201d said Carmen Nel, head of multi-asset at Terebinth Capital.<\/p>\n\n\n\n

\u201cThere are long-run benefits toward low and stable inflation, but we should not rush it because you do risk curtailing what is an ascent recovery or upswing in being overly hawkish.\u201d<\/p>\n\n\n\n

Economic growth has averaged less than 1% annually in the past decade because of logistic and energy constraints and is foreseen to accelerate to 1.7% this year and 2% next. <\/p>\n\n\n\n

The low growth and high debt burden also need to be addressed to attract investment, said Rashaad Tayob, portfolio manager and macro strategist at Foord Asset Management.<\/p>\n\n\n\n

South Africa\u2019s \u201chigher risk premium is due to debt risk \u2014 higher debt burden and persistent fiscal deficits \u2014 and the lack of growth-orientated economic policies from the government,\u201d not inflation, Tayob said.<\/p>\n\n\n\n

\u201cThe markets are now looking for a better policy framework out of government which can improve the growth outlook, rather than SARB reducing inflation further.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Finance Minister Enoch Godongwana is unlikely to announce a new inflation target in the upcoming budget speech.<\/p>\n","protected":false},"author":59,"featured_media":646203,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13716],"tags":[1850,3796,3619],"class_list":["post-811322","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget-speech","tag-bloomberg","tag-national-treasury","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/811322","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=811322"}],"version-history":[{"count":7,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/811322\/revisions"}],"predecessor-version":[{"id":811337,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/811322\/revisions\/811337"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/646203"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=811322"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=811322"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=811322"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}