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Ok. Got itAlthough it is premature to call it a peak, infection rates in the Western Cape appear to have plateaued, with improvements recorded in other provinces. Read more in our latest market review.
Although it is premature to call a peak, infection rates in the Western Cape appear to have plateaued, with improvements recorded in other provinces. In line with international trends, financial support measures were extended as lockdown persisted, providing a lifeline to businesses and the most vulnerable.
South Africa’s journey throughout this global pandemic has been characterised by good intentions and haphazard implementation. Sentiment has fluctuated in tandem, leaving a tired and frustrated nation dealing with the tangible challenges of load-shedding and the invisible threat of a virus. It is, therefore, not surprising that confidence surveys, including new survey data for the services industry*, confirm record-low confidence from consumers and businesses. This underscores the unfolding economic crisis and the urgency of treating the country’s ailments with the same urgency as the health crisis.
The International Monetary Fund extended South Africa a lifeline, approving the request for Covid-19 funding of $4,3bn under the Rapid Financing Instrument (RFI). Many of the policy commitments made in the letter of intent also feature in the Supplementary Budget, but re-emphasise a commitment to fiscal consolidation, economic growth reforms and accountability for state-owned enterprise (SOE) performance.
The SA Reserve Bank (SARB) cut interest rates by 25 bps with two out of five members voting to keep rates on hold. Although the SARB maintains its easing bias, the tone was more cautious, leaving investors less convinced of further cuts. Local bond markets delivered modest returns, with the All Bond Index returning +0,6% in July. Eskom won its court case against energy regulator, NERSA, with a judgement that the R69bn equity injection from government should not be classified as revenue. This means that Eskom will now be able to recoup an additional R23bn per year for the next three years from electricity tariffs – resulting in a circa 10% increase in the 2020/21 tariff. A blow for an economy and consumer already on its knees and a possible pain point for future inflation.
Local equity markets benefitted from global momentum and a weaker US dollar, with the FTSE/JSE All Share gaining +2,6% over the month. Resources set the trend for the month, returning +9,0%. Gold miners rose in line with a soaring precious metal price, gaining +23,2% over the month, while platinum returned +20,7%.
* Bureau for Economic Research