Summary of macro-economic research views:


  • Inflation: Although there are upside inflation risks still on the radar, the broader disinflation trend is expected to remain intact, with headline inflation likely to approach the 4.5% midpoint of the SARB’s target range by mid-2024. In turn, this will offer the SARB some scope to consider cutting rates.
  • Repo Rate: The SARB kept the repo rate unchanged at 8.25% for a fourth consecutive meeting in January. The decision entrenched the view that South Africa’s rate-hike cycle has ended, barring any major inflationary shocks or sharp ZAR selloffs. Looking ahead, interest rates will likely decline by 75bps through 2024, with the first likely coming in July.
  • Government Finances: South Africa’s fiscus remains weak, with government finance statistics still trending weaker. This implies that foreign investors will need to be compensated for the higher level of risk associated with investing in the country. The upcoming budget will be key, but there is a lot the government needs to do to stabilise its finances.
  • GDP Growth: GDP growth has fallen back below 0%, with the economy struggling to grow amid headwinds such as high interest rates, load shedding, and structural constraints that will weigh on any future performance. There is also no obvious reason to expect that GDP growth will pick up meaningfully, especially since global growth is expected to slow down.
  • Currency: The ZAR continues to trade at a discount as investors prepare for the many risks and challenges that SA faces. Against the USD, EUR, and GBP, the balance of probabilities still favours exporters taking out forward currency, as the probability of beating the prevailing spot rates in 12 months’ time is high.
  • Offshore Conditions: Global growth is expected to slow through H1 of this year. The US economy remains more resilient than most, as highlighted by last week’s blowout nonfarm payrolls report. The Fed and other major central banks are set to cut rates this year, but the cycles will likely start towards the middle of the year, later than what the market has predicted.