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  • Writer's pictureDr Roelof Botha

On Balance - Economic Update April

The downside

Two key indicators of the level of economic activity, retail and wholesale sales, have not enjoyed a bright start to 2024, with marginally lower year-on-year figures for January and February, while new vehicle sales remain under pressure. Unfortunately, the utilisation of manufacturing capacity also took a knock in the first quarter of the year and now stands at 78.5%.

The main reason for the lethargy in the economy can be found in the explanation for the decline in the latter indicator, namely insufficient demand. This, in turn, is a direct result of the highest interest rates in 14 years, which has raised the debt cost burden of households to 9% of disposable income (from 8.5% four years ago).

It is a pity that the Monetary Policy Committee of the Reserve Bank continues to focus on the midpoint of the target range for inflation (4.5%) instead of appreciating the fact that the consumer price index has been comfortably within the range of 3% to 6% for ten successive months. It has become imperative to lower interest rates and follow a policy approach that encourages growth and employment creation.

The upside

Sound performance by JSE

Following a poor start to 2024, the all-share index (Alsi) on the Johannesburg Stock Exchange has rebounded strongly, ending April at above 76,000 – a gain of more than 9% over the index value in September last year. The April Alsi value was 71% higher than at the end of the disastrous first quarter of 2020, when the uncertainty over the extent of the Covid pandemic and the lockdown regulations decimated share prices in bourses worldwide.

S&P PMI for South Africa

A recent survey amongst domestic fund managers in South Africa has indicated a renewed appetite for local equities. Against the background of impressive dividend yields and mostly single-digit price/earnings ratios for several blue-chip resource sector stocks, this is not surprising.

Since the end of March 2020, the JSE Alsi has increased by an annual average of 13.7%, significantly higher than the average interest rates on money markets and capital markets over this period. With relatively stable global economic growth foreseen over the medium term and the world's most populous country, India, expected to grow its GDP by more than 7% in 2024, the future for several resource stocks on the JSE looks rosy.

Trade surplus maintained

After a disappointing start to 2024, South Africa’s exports surged by more than 12% to R161 billion in February and increased marginally in March. At almost R470 billion, total exports for the 1st quarter of the year were sufficient to record a cumulative trade balance of R11 billion, compared to a deficit of more than R5 billion for the first three months of 2023.

The trade section for minerals, which includes iron ore and coal, remained solidly in the number one position as the largest contributor to foreign exchange earnings, followed by precious metals and agriculture & food.

Vehicles and spares came in at number four, but in terms of year-on-year growth, this key section outperformed the rest of the top ten by a huge margin.

Any surplus on the country’s trade account is most welcome due to its stabilising effect on the rand exchange rate, which could assist in lowering inflationary pressures in the economy.

A full month without load shedding

For the first time in several years, South Africa enjoyed a full month of uninterrupted electricity during April, mainly due to the expansion of solar power installations. Eskom has announced that its energy availability factor has reached 65.5 percent for the first time since 2021.

According to Isabel Fick, the head of Eskom’s systems operations, the contributions of solar power plants and rooftop solar installations allowed Eskom to replenish its pumped storage capacity during the day rather than at night. In 2023, about 2 500 MW of rooftop solar capacity was added, which was coupled to battery storage, increasing the overall installed base to above 5 400 MW.

An estimated 2,800 MW of photovoltaic solar power is already connected to the Eskom grid. The next stage of harnessing more solar power will focus on two crucial issues: expanding grid capacity and designing a model that allows surplus solar capacity from independent power producers to become available. Business chambers around the country have welcomed the renewed stability of electricity supply, which has raised productivity and lowered input costs.


Dr Roelof Botha

On Balance by Dr Roelof Botha deliberately emphasises positive news that, more often than not, confirms the resilience of the South African economy and the immense scope for new business opportunities.



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