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South Africa’s Vehicle Market Proves Resilient as Affordability Reshapes Demand

Location: Business
  • Passenger vehicle sales reached 114,517 units in Q1 2026, with year-on-year growth moderating to 12.6%
  • Chinese brands account for more than 19% of new passenger and light commercial vehicle sales nationally
  • Hybrid vehicle interest rose to 39%, reinforcing hybrids as South Africa’s primary pathway in the shift toward electrified vehicles

South Africa’s passenger vehicle market remained resilient in the first quarter of 2026, but demand is evolving. Rising affordability pressures, higher fuel costs, the growth of Chinese brands and shifting powertrain preferences are reshaping the automotive landscape.

According to TransUnion’s Q1 2026 Mobility Insights Report, passenger vehicle sales reached 114,517 units in Q1 2026, slightly higher than the 114,246 units recorded in Q4 2025. Year-on-year (YoY) growth eased to 12.6%, down from the stronger performance seen during parts of 2025, but demand remained elevated despite a more uncertain macroeconomic environment.

A Stronger Start, But Growing External Pressures

The report, which provides a first quarter overview, indicates that South Africa entered 2026 on a stronger economic footing. This was supported by easing inflation, lower interest rates over the previous year, reduced load-shedding, and improved financial conditions.

However, rising geopolitical tensions in the Middle East and the associated oil price shock have heightened downside risks. In March 2026, inflation increased from 3.1% to 4.0% in April 2026, while the Monetary Policy Committee (MPC) recently raised the prime lending rate by 25-basis points in May 2026. Combined with higher fuel and transport costs, these factors are expected to place renewed pressure on affordability and consumer spending.

“Vehicle demand has not collapsed, but the market is moving into a more selective phase,” said Ayesha Hatea, director of research and consulting at TransUnion South Africa. “Consumers are still buying vehicles, but affordability is no longer only about the purchase price. Fuel costs, financing costs, insurance, servicing, and total cost of ownership are becoming central to the decision.”

Residual Value and the True Cost of Ownership

The report found that residual values are becoming an increasingly important component of vehicle affordability. As finance terms extend beyond six years for many buyers, depreciation and resale performance play a growing role in ownership economics, giving brands that retain value more effectively a competitive advantage.

The shift towards longer financing terms and the use of balloon structures reflects a growing focus on monthly affordability and cash-flow flexibility. However, this trend also increases exposure to residual value risk. Where vehicle values underperform expectations, consumers may face refinancing pressure or negative equity at trade-in, making used vehicle market performance an increasingly critical consideration.

Chinese Brands Reshape the Competitive Landscape

One of the most notable structural shifts is the continued rise of Chinese automotive brands. Chinese car sales grew by 75% YoY in Q1 2026, significantly outpacing traditional OEM growth of 2% and the broader passenger and light commercial vehicle (LCV) market growth of 12.7%. As a result, Chinese brands accounted for more than 19% of new passenger and LCV sales nationally, meaning nearly one in five new vehicles sold in South Africa was from a Chinese manufacturer in Q1 2026.

The shift is no longer driven solely by entry-level pricing. Chinese brands are increasingly competing on technology, features, fuel efficiency, range, warranty offerings, and perceived long-term value. On a combined portfolio basis, Chery Group, including Chery, Jetour, Omoda, and Jaecoo, recorded combined sales of 16,094 units in Q1 2026, positioning itself as a top three automotive player.

“Chinese brands have moved beyond the role of price disruptors. They are becoming structural industry players, influencing dealer networks, financing ecosystems, ownership perceptions, and the wider discussion around localisation and industrial competitiveness,” said Hatea.

Diverging Trends Across New and Used Markets

The new and used vehicle markets continued to show differing trends. NaTIS data indicates that new vehicle registrations increased by 11.6% YoY in Q1 2026, marking a sixth consecutive quarter of double-digit growth. In contrast, used vehicle registrations increased by 2.6%, suggesting a modest recovery in the secondary market, although it still trails the stronger momentum seen in new vehicle sales.

The used-to-new registration ratio declined to 2.3 in Q1 2026, the lowest level recorded over the reporting period. While used vehicles still make up the majority at 69% of total registrations, the share of new vehicles has risen to 31%, up from 23% in Q4 2025. This shift has been supported by favourable pricing dynamics, with new vehicle inflation falling to 0.8%, while used vehicle prices remained in deflation at -1.3%.

Confidence Rises, But Caution Remains

Dealer sentiment also reflects the stronger demand environment. New vehicle dealer confidence increased to 67 in Q1 2026, its highest level in 13 years. However, the report cautions that increasing fuel costs, inflation risk, and rising operating expenses could create more challenging conditions in the quarters ahead.

Forward-looking consumer data remains constructive. TransUnion’s Consumer Pulse Survey found that consumers likely to purchase a vehicle in the next few months increased from 19% in Q4 2025 to 22% in Q1 2026. Short-term purchase intent is strongest amongst younger consumers, with 26% of Gen Z and 24% of Millennials indicating plans to buy.

A Gradual Shift in Powertrain Preferences

Powertrain preferences are also evolving. Internal combustion engine vehicles remain the most popular choice, preferred by 49% of consumers in Q1 2026. However, interest in hybrid electric vehicles has grown significantly to 39%, up from 30% in Q4 2025, making hybrids the leading electrified option. Interest in both battery electric vehicles and plug-in hybrids also increased, with each reaching 26%.

“Hybrids are emerging as a practical transition pathway for South African consumers. They offer fuel savings and lower running costs without full dependence on charging infrastructure, which makes them relevant in a market where affordability and operating certainty remain critical,” said Hatea.

A Market Entering Its Next Phase

While domestic demand continues to support the industry, passenger vehicle exports remain under pressure amid trade uncertainty, geopolitical disruption, protectionism, and changing decarbonisation requirements.

“The South African automotive market is not reverting to its previous structure. The next phase will be defined by affordability, value, access to finance and how effectively industry players respond to evolving consumer behaviour,” said Hatea.

Read moreSouth Africa’s Vehicle Market Proves Resilient as Affordability Reshapes Demand

Cost-Of-Living Squeeze Deepens as SA Consumers Shift into Survival Mode

Location: Business

South African households are entering a more constrained financial period, as the modest momentum seen at the end of 2025 comes under pressure from rising living costs.

According to TransUnion’s latest insights, increases in fuel prices, renewed food inflation, and persistently higher borrowing costs are reshaping consumer sentiment, shifting from early signs of recovery in 2026, to a more defensive posture.

This comes as the South African Reserve Bank’s Monetary Policy Committee (MPC) delivers its latest interest rate decision of a 25-basis points increase, against a backdrop of rising inflation, which increased to 4.0% in April from 3.1% in March, reflecting persistent price pressures across essential categories.

Incremental Increase Adds to Mounting Financial Pressure

Following the MPC’s decision to increase interest rates by 25 basis points, TransUnion notes that the move reinforces a financial environment where household momentum is already being challenged, and cost pressures are compounding.

“A 0.25% increase lands on households that are already under strain,” says Lee Naik, chief executive officer, TransUnion Africa. “This is not a new shock; it is an amplification of pressures that consumers are already managing. The combination of higher instalments and rising living costs accelerates the shift from cautious optimism to caution.”

Data from TransUnion’s Q4 2025 Industry Insights Report shows elevated delinquency across several credit products, while TransUnion’s Q1 2026 Consumer Pulse Study highlights increased reliance on credit and sustained reductions in spending.

“When fuel, food and borrowing costs rise together, the impact is not incremental; it is compounding. That is where we see the real pressure emerge, and where financial behaviour shifts decisively,” Naik adds.

Multiple Cost Pressures Converge

“The risk is not just higher rates; it is the combination of cost pressures hitting at once. The affordability challenge becomes immediate and more difficult to manage,” Naik adds.

TransUnion notes that the key issue is no longer the rate decision in isolation, reflecting the cumulative strain of overlapping cost pressures on household affordability.

“At the start of 2026, there was a sense that consumers were beginning to stabilise, with some early signs of recovery in repayment behaviour and financial resilience. That momentum is now being challenged,” says Naik.

“We are seeing a clear shift toward greater caution, as rising fuel and food costs begin to outweigh any incremental relief. The financial pressure facing households is no longer emerging, it is entrenched.”

Even ahead of the MPC outcome, the financial environment facing consumers has materially tightened. TransUnion’s Q1 2026 Consumer Pulse Study showed widespread behavioural adjustment, with households cutting discretionary spending, increasing reliance on credit, and drawing down savings buffers to manage rising living costs.

At the same time, household affordability is being eroded by cost escalation across essential categories. Household food basket data (PMBEJD April 2026) shows the average basket rising to R5,452.09, marking a clear re-acceleration in food inflation driven by fuel and logistics costs.

Credit performance data from TransUnion’s Q4 2025 Industry Insights Report  further reflects growing strain, particularly in non-bank lending segments where delinquency remains elevated, signalling deep financial vulnerability among consumers.

“Consumers are not reacting to a single shock. They are responding to a sustained financial pressure building over time,” adds Naik. “What we are seeing now is a structural shift in behaviour, where households are increasingly prioritising essentials, protecting debt commitments and managing risk more cautiously.”

Looking Ahead: A Structurally More Cautious Consumer Cycle

TransUnion’s outlook remains clear: South African consumers are entering a more cautious financial cycle, as the momentum of 2025 is increasingly challenged by sustained and broad-based cost pressures.

“The environment has shifted from short-term stress to structural pressure,” concludes Naik. “Consumers are no longer adjusting temporarily, they are recalibrating how they manage money, prioritise spending and engage with credit in a more constrained and uncertain environment.”

Read moreCost-Of-Living Squeeze Deepens as SA Consumers Shift into Survival Mode

South Africans Shift Spending Toward Essentials and Savings as Cost Pressures Persist

Location: Business

TransUnion’s Q1 2026 Consumer Pulse Study highlights more deliberate financial behaviour

  • More than four in ten (41%) of South Africans cite inflation for everyday goods as their top financial concern, while 35% of all surveyed expect to be unable to pay at least one current bill or loan in full
  • Consumers are actively adjusting behaviour: 51% said they cut discretionary spending, 35% paid down debt faster, and 29% increased emergency savings or stokvel contributions in the last three months
  • Nearly seven in ten (69%) remain optimistic about their household finances over the next 12 months, although this has declined from 72% in Q4 2025, reflecting more cautious confidence

South African consumers are adjusting their financial behaviour in response to ongoing cost pressures, with TransUnion's Q1 2026 Consumer Pulse Study[1]  revealing meaningful shifts in how households spend, save and manage credit. While many households remain under financial strain, the findings point to a shift toward more deliberate and considered financial decision-making.

The study found that inflation for everyday goods remains the leading financial concern, cited by 41% of respondents as their top financial worry. 35% of consumers indicated that they expect to be unable to pay at least one of their current bills or loans in full.

Against this backdrop, consumer sentiment remains measured. More than two-thirds (69%) of respondents said they are optimistic about their household finances over the next 12 months, down from 72% in Q4 2025, while 14% expressed pessimism and 17% indicated they are neither optimistic nor pessimistic.

“Consumers are not necessarily experiencing financial ease, but they are responding in practical ways to manage pressure,” said Ayesha Hatea, director of research and consulting at TransUnion South Africa. “What we are seeing is a shift toward more deliberate financial behaviour, where households are actively adjusting spending, prioritising obligations and, where they can, building financial buffers.”

Spending Pullbacks and Savings Adjustments Take Hold

In response to continued financial pressure, many South Africans have adjusted their financial behaviour over the past three months. More than half of the respondents (51%) reported cutting back on discretionary spending such as dining out, travel and entertainment, while 31% said they cancelled subscriptions or memberships.

At the same time, some households report taking steps to strengthen their financial position in the past three months. The study found that 35% of respondents said they paid down debt faster, while 29% reported increasing contributions to emergency savings or stokvels. A further 23% said they increased their retirement savings.

“These behaviours reflect a more cautious and intentional approach to money management. Consumers are looking for ways to maintain stability, whether by reducing non-essential expenses, managing debt more actively or setting aside funds for future needs,” said Hatea.

Financial Outlook Reflects Cautious Confidence

Despite ongoing affordability challenges, the study points to cautious consumer expectations at the time it was conducted. The research was carried out in late February, prior to recent geopolitical developments and ahead of the most recent South African Monetary Policy Committee (MPC) announcement, which left the prime lending rate unchanged. Emerging global market volatility may further shape consumer sentiment and financial behaviour going forward.

More than one in three consumers (35%) expect their spending on bills and loans such as housing, utilities, insurance and credit cards to increase over the next three months. The same percentage (35%) anticipate higher spending on medical care and services during that timeframe. Additionally, 38% expect to increase contributions toward retirement funds and investments. Conversely, a smaller percentage said they’d increase their spending on in-store or online retail shopping such as clothing, electronics and durable goods (29%), large purchases like appliances and cars (26%), digital services (25%) and discretionary spending (21%).

“This pattern suggests that consumers are prioritising essential and future-oriented expenses, while remaining more selective in discretionary areas. It reflects a mindset where financial decisions are being made with greater scrutiny,” said Hatea.

Credit Remains Important, but Caution is Evident

Access to credit continues to play an important role in how consumers manage their finances. However, when it comes to new credit products, TransUnion’s survey indicates that households are approaching borrowing more carefully in the current environment.

Among respondents, 41% indicated that they have used Buy Now, Pay Later (BNPL) services in the past year. For those who have used BNPL, avoiding credit card interest was a key motivation, while non-users most frequently cited avoiding additional debt as the top reason for never using BNPL.

“The role of credit is evolving,” Hatea said. “Consumers still rely on it to manage cash flow and navigate short-term pressures, but there is also a clear awareness of the need to avoid overextension. That balance between access and caution is becoming more important.”

Adapting to a More Demanding Financial Environment

The quarterly findings point to a consumer environment defined less by financial comfort and more by ongoing adjustment. While sentiment has softened slightly from the previous quarter, many South Africans are actively managing their finances amid ongoing cost pressures.

“Rather than a broad sense of financial confidence, we are seeing a more grounded and pragmatic approach,” said Hatea. “Consumers are making deliberate trade-offs to stay on top of their obligations and build resilience where possible. As economic uncertainty persists, the ability to adapt spending, savings and credit behaviour is likely to remain a defining feature of the South African consumer landscape.”

Consumers can get their free annual credit report from TransUnion here. 
 

[1] Methodology: Online survey of 992 South African adults conducted 10–23 February 2026 by TransUnion in partnership with Dynata.

 

Read moreSouth Africans Shift Spending Toward Essentials and Savings as Cost Pressures Persist

Interest Rates on Hold, but South African Consumers Remain Under Pressure

Location: Business

Following today’s decision by the South African Reserve Bank’s Monetary Policy Committee (MPC), the latest data from TransUnion points to a consumer environment that remains fragile, with many households continuing to navigate mounting financial pressure.

While some improvement in repayment behaviour was observed toward the end of 2025, this stability is proving short-lived. Rising living costs, increasing reliance on credit, and limited financial buffers mean that many consumers are entering 2026 in a vulnerable position, with little capacity to absorb additional economic shocks.

The decision to leave interest rates unchanged may offer a sense of short-term stability, but it does little to ease the underlying financial strain facing households.

“Stable rates do not translate into financial relief for most consumers,” says Fatgie Adams, Head of Credit Risk Solutions at TransUnion. “Many households are already under pressure, and upcoming increases in fuel and food costs are likely to erode any temporary stability created by a hold decision.”

Insights from the TransUnion Q4 2025 Consumer Pulse Study (CPS) show that households have already begun adjusting their behaviour in response to financial stress. More than half of consumers report cutting discretionary spending, while a significant portion have reduced clothing purchases, delayed major expenses, and scaled back on services such as subscriptions and digital platforms. At the same time, the study indicates a growing reliance on credit, with a notable share of consumers using credit to manage shortfalls in their monthly budgets.

This behavioural shift is reinforced by credit performance trends from the TransUnion Q4 2025 Industry Insights Report (IIR), which highlights continued strain in key segments. Credit card delinquency remains elevated at 17.4% (balance-level), while non-bank personal loan delinquency is critically high at 53.4% (consumer-level). These figures highlight deep vulnerability among financially stretched consumers, with short-term credit products showing the most acute distress. Although home loan delinquency remains relatively stable at 7.5%, it is still elevated, pointing to persistent pressure even within more structured credit product.

“Consumers may appear stable on the surface, but in reality, many are already in a form of financial triage,” Adams adds. “A flat rate environment simply provides time to prepare, it does not remove the pressure.”

With fuel prices expected to rise sharply in the coming months and food costs remaining persistently high, the overall cost of living is likely to increase further, placing additional strain on already stretched household budgets.

Regardless of the outcome, the broader picture remains one of rising pressure on household finances. The combination of higher living costs, constrained income growth and existing debt obligations means that many consumers will need to navigate the months ahead with increased caution.

Maintaining a clear view of essential expenses, staying on top of repayments, and making considered financial decisions will be critical as cost pressures continue to build.

Read moreInterest Rates on Hold, but South African Consumers Remain Under Pressure

SARB reduces repo rate by 25 basis points

Location: News

SARB reduces repo rate by 25 basis points

The South African Reserve Bank's (SARB) Monetary Policy Committee (MPC) has decided to reduce the repo rate by 25 basis points, with effect from 31 January 2025.

“Four members preferred this action, while two supported an unchanged stance. The committee ultimately agreed that it was possible to reduce the degree of policy restrictiveness, making the stance somewhat more neutral. However, all members were concerned about the uncertain global outlook,” SARB Governor Lesetja Kganyago said on Thursday.

Delivering the first Monetary Policy Committee statement for 2025, he said consumer prices and headline inflation averaged 4.4% last year, near the middle of the target range. 

“Inflation slowed to 3% in December, having started the year above 5%. This was mainly due to favourable goods-price developments, including food inflation reaching 15-year lows, as well as lower fuel costs.

“Because of these transitory factors, inflation is likely to remain in the bottom half of our target range through the first half of this year. But headline inflation should revert to around 4.5% thereafter, aided by core inflation which remains at or below the midpoint over the forecast horizon,” the Governor said.

According to the most recent survey, inflation expectations have also now largely aligned with the midpoint objective.

“The risks to the inflation outlook are assessed to the upside. In the near term, inflation appears well contained. However, the medium-term outlook is more uncertain than usual, with material risks from the external environment. Domestic factors such as administered prices are also problematic,” Kganyago  said.

He said the forecast sees rates drifting slightly lower over the next few years, stabilising near 7.25%. 

“But this rate path from the Quarterly Projection Model remains a broad policy guide. The MPC would like to emphasise that its decisions will be made on a meeting-by-meeting basis, with no forward guidance and no pre-commitment to any specific rate path. 

“Such decisions will continue to be outlook dependent, responsive to data developments, and sensitive to the balance of risks to the forecast. Given the challenging global environment, the MPC spent some time during this meeting reviewing a trade war scenario,” the Governor said.

This featured a universal increase of 10 percentage points in US tariffs, with retaliatory measures by other countries. 

“The scenario showed higher inflation and interest rates globally, as well as greater risk aversion in financial markets. In response, our model projected the rand depreciating to nearly R21 to the dollar, with domestic inflation reaching 5% and the policy rate half a percentage point higher, at its peak, relative to the baseline forecasts.

“We also looked at a scenario of accelerated structural reforms, domestically. This showed growth picking up gradually, getting to 3% in 2027. Importantly, this scenario also showed lower inflation and lower interest rates in South Africa, demonstrating how structural reforms can reduce the country risk premium and create more monetary policy space,” he said.

Considering the difficulties of the external environment, the Governor said it remains crucial to sustain domestic reform momentum while protecting macroeconomic stability.

“The MPC’s main contribution is to deliver low and stable inflation, with well-anchored inflation expectations. The committee remains vigilant, and ready to recalibrate policy as needed.

“Additional measures that would improve economic conditions include reaching a prudent public debt level, further repairing and strengthening network industries, lowering administered price inflation, and keeping real wage growth in line with productivity gains,” he said. - SAnews.gov.za

nosihle
Thu, 01/30/2025 - 15:34

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Read moreSARB reduces repo rate by 25 basis points

SARB announces repo rate cut

Location: News

SARB announces repo rate cut

The South African Reserve Bank’s Monetary Policy Committee (MPC) has - in a unanimous decision - decided to cut the repo rate by 25 basis points, bringing it down from 8% to 7.75% with effect from Friday.

This is the second consecutive repo rate cut announced by Reserve Bank Governor Lesetja Kganyago following a meeting of the bank’s MPC.

“The committee agreed that reducing the level of policy restrictiveness is still consistent with achieving the inflation target,” Kganyago said.

He warned, however, that the risk outlook “requires a cautious approach”.

“Global interest rates could well shift higher again and the recent Rand depreciation demonstrates how rapidly changes in the global environment can affect South Africa.

“The forecast sees rates easing further in future, stabilising a bit above 7%. But this rate path from the Quarterly Projection Model remains a broad policy guide. The MPC would like to emphasise that its decisions will be made on a meeting-by-meeting basis, with no forward guidance and no pre-commitment to any specific rate path. 

“Such decisions will continue to be outlook dependent, responsive to data developments, and sensitive to the balance of risks to the forecast,” he said.

Kganyago’s announcement comes on the heels of an announcement by Statistics South Africa that inflation had dipped to 2.8% - its lowest since June 2020.

This is also below the SARB’s inflation target range of between 3 – 6%.

In this regard, Kganyago said the SARB has assessed risks to inflation outlook as “balanced”.

“[We] anticipate inflation expectations will moderate further. These expectations have been quite backward-looking, with higher past inflation projected well into the future. Survey expectations remain above our midpoint objective.

“We expect that our policy stance, and the experience of lower inflation, will anchor expectations more firmly at lower levels.

“In the near term, inflation appears well contained. However, the medium-term outlook is highly uncertain, with material upside risks. These include higher prices for food, electricity and water, as well as insurance premiums and wage settlements,” Kganyago said. – SAnews.gov.za

 

NeoB
Thu, 11/21/2024 - 15:26

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Read moreSARB announces repo rate cut

Repo rate drops for the first time since 2020

Location: News

Repo rate drops for the first time since 2020

The South African Reserve Bank’s Monetary Policy Committee (MPC) has decided to cut the repo rate by 25 basis points, bringing it down to 8%.

The cut – the first one since 2020 – moves the prime lending rate to 11.50%.

The cut was announced by Reserve Bank Governor Lesetja Kganyago following a meeting of the bank’s MPC.

“In discussing the stance, MPC members considered an unchanged stance, a 25-basis point cut, and a 50-basis point cut. The MPC ultimately reached consensus on 25 basis points, agreeing that a less restrictive stance was consistent with sustainably lower inflation over the medium term.

“The forecast sees rates moving towards neutral next year, stabilising slightly above 7%. As before, the rate path from the Quarterly Projection Model remains a broad policy guide, changing from meeting to meeting. Decisions of the MPC will continue to be data dependent, and sensitive to the balance of risks to the outlook,” Kganyago said on Thursday.

The cut comes on the heels of an announcement by Statistics South Africa that inflation has once again dipped to 4.4% – the lowest it has been since April 2021.

Kganyago said the bank forecasts that this will be sustained.

“Moving to inflation, headline eased to 4.4% in August, a three-year low, and close to the middle of our target range. Our forecast suggests this progress will be sustained, with inflation contained below the 4.5% midpoint of our range through to the end of the forecast horizon, in 2026.

“In the near term, we continue to see a dip in headline inflation, supported by the stronger exchange rate and lower oil prices. The implied starting point of the rand is R18.04 to the US dollar, an appreciation of nearly 2% relative to our July assumption. 

"This contributes to fuel price deflation, which helps keep headline below 4% through the first half of next year. As usual, we will look through this near-term supply shock, focusing on the medium-term outlook,” Kganyago explained.

The Governor warned that it is crucial for South Africa to sustain the momentum of reforms, “given a potentially adverse external environment”.

“This entails both structural reforms to support growth capacity, and macroeconomic efforts to rebuild fiscal and monetary buffers.

“The MPC’s main contribution is to deliver low and stable inflation, with well-anchored inflation expectations.

“We also recommend additional measures that would improve economic conditions. These include reaching a prudent public debt level, further repairing and strengthening network industries, lowering administered price inflation, and keeping real wage growth in line with productivity gains,” Kganyago concluded. – SAnews.gov.za

NeoB
Thu, 09/19/2024 - 15:30

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Read moreRepo rate drops for the first time since 2020

World faces era of new economic challenges

Location: News

World faces era of new economic challenges

The world is entering an era of new economic challenges, even as the recent ones have yet to be overcome, says South African Reserve Bank (SARB) Governor Lesetja Kganyago.

“The global economy continues on a long recovery path from the pandemic. This path has been a troubled one, and despite better prospects in recent months, remains beset by risks and vulnerabilities built up during the pandemic. 
“Inflation remains stubbornly high, and public debt levels globally are at record levels,” the Governor said on Tuesday.

Addressing the 104th annual Ordinary General Meeting of the SARB shareholders in Pretoria, Kganyago asserted that technological development carries both risks to cybersecurity and the hope of large and sustained boosts to global productivity.

“Inflation remains a major policy concern for central banks globally. Although global inflation declined from 8.7% in 2022 to 6.8% in 2023 and continues to ease in 2024, it remains high relative to the 2–3% inflation targets that many countries are trying to achieve.

“Restrictive monetary policy, along with the recovery in supply chains and other pandemic-related bottlenecks, has helped inflation to recede from its 2022 highs. However, global disinflation has slowed recently, as is well illustrated by consumer price inflation in the United States (US) still sitting at 3% relative to their 2% target,” Kganyago said.

He said the slow pace of disinflation reflects a pattern of lower imported inflation but higher services inflation across most economies. 

“In some [economies], rising wages and sustained pent-up demand for services have been key factors. In emerging markets specifically, fiscal challenges and sustained currency depreciations have played more of a role.

“Policy commitment to reduce inflation back to targets has been strongly signalled around the globe, and central banks have generally been cautious in their approach to policy. Deepening geo-economic fragmentation, higher temperatures and other supply-related risks raise concerns about the long-term prospects for inflation, and considerable effort is going into reassessments of neutral real rate levels,” the Governor said.

While inflation remains higher than desired, global economic activity has proven to be more resilient than expected. 

“Global growth surprised higher at 3.3% in 2023, despite considerable divergence in growth across individual economies. Generally, however, global growth rates are expected to remain below pre-pandemic trends. This reflects the impact of protectionist measures on global trade, relatively tight financial conditions as well as uncertainty of future policy trajectories,” Kganyago said.

Domestic real economy developments

Despite South Africa’s low economic growth, employment levels have recovered the 2.2 million jobs lost during the height of the pandemic.|

“As of the first quarter of this year, total employment surpassed its 2019 level. Nonetheless, job creation has been too slow and not enough to offset the growth in the labour force, leaving the unemployment rate elevated at 32.9% in the first quarter of this year,” the Governor said.

The South African economy slowed to 0.7% in 2023 from 1.9% in 2022, and remains well below growth in peer emerging markets.

“Load shedding and logistical challenges have been weighing heavily on economic activity, depressing the credit appetite of businesses and the spending of households.

“South Africa’s tailwind for growth coming from strong terms of trade continued to fade, despite still remaining at historically good levels. Exports also suffered over the past 12 months from energy and logistics challenges as much as price factors. Imports were also muted by logistics. 

“As energy and logistics constraints continue to ease, the growth outlook will also improve. The domestic economy is expected to grow by 1.1% this year, rising to 1.7% by 2026, as both household spending and investment start to strengthen,” Kganyago said.

Domestic inflation dynamics

As with the global trend of moderating inflation, South Africa’s headline inflation decelerated over the past year, falling from 6.9% in 2022 to an average of 6% in 2023.  

“These annual averages, however, hide the ongoing volatility in the underlying components of inflation, in turn demonstrating the risks and uncertainty marking the disinflation path. 
“Since September of last year, headline inflation has been fluctuating between 5% and 6%, with frequent monthly setbacks coming from fuel, food and services prices.

“In February, core inflation rose by 0.4 percentage points to 5%, propelled sharply higher by medical insurance inflation. Encouragingly, as of June, core inflation has moved to 4.5%,” Kganyago said. 

The SARB sees core inflation averaging 4.6% this year, from 4.8% last year. Inflation expectations eased in the first half of this year, but still remain well above the midpoint of the target band.  

“While headline inflation came out between 5% and 6% for much of the past year, our current forecast shows it easing to 4.9% this year, pulled lower mainly by softening food and fuel inflation, and resting at the midpoint in 2025 and 2026. 

“Even with some quantitative and qualitative adjustments to risk perceptions over time, the Monetary Policy Committee (MPC) has felt it appropriate to maintain the repurchase (repo) rate at 8.25% – a level set in May of 2023,” he said. - SAnews.gov.za
 

 

nosihle
Tue, 07/30/2024 - 14:14

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Read moreWorld faces era of new economic challenges

Repo rate remains at 8.25%

Location: News

Repo rate remains at 8.25%

The South African Reserve Bank’s monetary policy committee (MPC) has decided to keep the repo rate at 8.5% for the seventh time in a row, despite a slight improvement in the inflation rate.

Reserve Bank Governor Lesetja Kganyago announced the decision following the July MPC meeting in Pretoria.

Four members voted to keep the rate unchanged, while two preferred to cut it by 25 basis points. 

“In discussing the stance, MPC members agreed that restrictive policy remains appropriate to stabilise inflation at 4.5%. The committee assessed that an unchanged stance remained appropriate, given the inflation risks.

“Some members, however, were of the view that the inflation outlook had improved enough to reduce the degree of restrictiveness,” Kganyago said on Thursday.

This means that the current prime lending rate remains at 11.75%, based on a repo rate of 8.25%.

However, Kganyago said the Bank remains concerned about administered prices. 

“We have had to mark up electricity inflation for this forecast round, even as other categories shifted lower,” he said, adding that services price inflation also remains uncomfortably above the mid-point.

He spoke at length about inflation. The most recent headline print for May was 5.2%, unchanged from April and still in the top half of the target range.

“The outlook, however, has improved somewhat. Headline consumer price inflation for this year is now projected at 4.9%, compared to 5.1% at the previous meeting.”

Meanwhile, Kganyago predicted that in the next few quarters, the headline is expected to drop below the 4.5% midpoint, mainly due to fuel and food prices.

“This outlook is supported by the stronger rand. The implied starting point for our forecast is now at R18.35 to the US dollar. Over the medium term, we continue to see inflation stabilising at 4.5%, with core inflation remaining close to this midpoint objective throughout.”

The Governor said the forecast continues to see rates easing into more “neutral territory” by next year.

“As before, the rate path from the Quarterly Projection Model remains a broad policy guide, changing from meeting to meeting,” he said.

He said the decisions of the MPC will continue to be data-dependent and “sensitive” to the balance of risks to the outlook.

“We are committed to stabilising inflation at the mid-point of the target band. Achieving this outcome will improve the economic outlook and reduce borrowing costs.”

Kganyago stressed the committee’s views on additional measures that would improve economic conditions. 

He mentioned the need to achieve a reasonable public debt level, enhance the operation of network industries, reduce controlled price inflation, and align real wage growth with productivity gains.

The next meeting of the MPC will be on 19 September 2024. – SAnews.gov.za
 

Gabisile
Thu, 07/18/2024 - 16:14

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Read moreRepo rate remains at 8.25%

Repo rate stays at 8.25%

Location: News

Repo rate stays at 8.25%

The Reserve Bank’s Monetary Policy Committee (MPC) has kept the repo rate unchanged at 8.25%.

Briefing the media following a meeting of the MPC, Reserve Bank governor, Lesetja Kganyago said the decision was unanimous.

In its statement on Thursday, the MPC said inflation outcomes were worse than expected early in the year, leading to a repricing of rate expectations.

“There is still considerable uncertainty about the longer-run inflation outlook, globally. That said, inflation outcomes in the United States have been more benign recently, and markets still see some room for adjustments by the US Federal Reserve this year. We may also see easing by other major central banks.”

The country’s current inflation rate stands at 5.2%.

The MPC further said the exchange rate of the rand has been particularly volatile since the previous MPC meeting in March.

“Turning to the outlook, we now see inflation stabilising at our 4.5% objective in the second quarter of next year. This is an improvement on our March forecast, which only reached this milestone at the end of 2025. The changes to the outlook, however, are not large when compared to our March forecast. Average inflation for 2025 is only a tenth of a percentage point lower. The task of achieving our inflation objective is not yet done.”

The bank has revised down its 2024 food and core forecasts marginally due to better than expected CPI releases in March and April.

Fuel price inflation is now expected to be higher, in the near-term, but it improves for 2025.

“Nonetheless, the Committee remains concerned that inflation expectations are elevated. After three years of inflation being above 4.5%, few survey respondents, especially from businesses and trade unions, now believe that inflation will be at 4.5% in two years’ time.

Although the MPC assesses the inflation forecast risks to be broadly balanced at present, high inflation expectations require that we deliver on our target sooner rather than later, to re-anchor expectations.”

The MPC welcomed the recent improvement in the supply of power, with no loadshedding since 26 March.

“We have revised our load shedding assumption down, but additional revisions may be required if this performance is sustained. Overall, our forecasts show a modest acceleration in growth, over the next few years, alongside a gradual stabilisation of inflation at our target. However, uncertainty is unusually elevated at the moment.

“Considering this outlook, the MPC decided to keep the repo rate unchanged at 8.25%,” said Kganyago.

The next meeting of the MPC will be in July. - SAnews.gov.za

Neo
Thu, 05/30/2024 - 18:17

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Read moreRepo rate stays at 8.25%

THIS is How We Will End Load Shedding

Location: News

The Multi-Party Charter group says that South Africa’s first-time voters of 2024 have never known life without loadshedding. Our economy has lost hundreds of billions of Rand, and countless small businesses have shut their doors, because the ineptitude, corruption and mismanagement of Eskom by national government has destroyed South Africa’s energy security. In 2024, there …

Read moreTHIS is How We Will End Load Shedding

Government activities for the week 22 – 26 January 2024

Location: News

Government activities for the week 22 – 26 January 2024

On Wednesday, 24 January, and Thursday, 25 January, the Department of Employment and Labour will be embarking on a series of service delivery activities in Thaba Nchu as a build up towards a Jobs Fair to be held in Botshabelo.

On Wednesday, 24 January, the Minister of Transport, Sindisiwe Chikunga, will release the 2023/24 festive season road traffic statistics at a media briefing scheduled to take place in Gauteng.

On Tuesday, 23 January, and Wednesday, 24 January, the Minister of Small Business Development, Stella Ndabeni-Abrahams, will embark on a monitoring and oversight visit to schools in the King Sabata Dalindyebo Local Municipality in the Eastern Cape.

On Wednesday, 24 January, Minister of Employment and Labour, Thulas Nxesi, will host employers and engage with aspirant workers at an Employer breakfast session and Jobs Fair event to be held in Botshabelo, in the Free State.

On Thursday, 25 January, the South African Reserve Bank’s monetary policy committee (MPC) will announce the first repo rate for the year.

 

Janine
Tue, 01/23/2024 - 10:50

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Read moreGovernment activities for the week 22 – 26 January 2024