BMW ZA has revealed what many of us had feared for a long time. That industrial action is a deterrent to investment. Specifically, the current strike has scared off the German parent from investing in a new production line at the Rosslyn plant, near Pretoria, which would have meant more exports, more jobs, more taxes paid and more wealth for the country. What do our experts make of it?

Mario Pretorius from Telemasters:
The time has come for implementing economic sabotage legislation, and for enforcing it without mercy. The entire concept of ganging up, via labour OR management, against shareholders reeks of an ancient age and a primitive economic world. Labour unions may look after their workers, but merit alone should determine the remuneration of each. Any attempt to go slow, go rogue, or go against the economic interests of the country should be treated as treason to our common economic interests, as sabotage, and with the harshest penalties possible. Ditto for management when doing the Nokia-Microsoft type of deals, where workers and shareholders get shafted.

Frans Cronje from the SAIRR:
Sentiment in that industry is changing. It’s a competitive global market, and plants in other regions compete with South Africa for production quotas. On a few occasions those plants have had to bail out South African plants laid low by union action. The risk is that that South Africa loses its quotas or that the manufacturers walk out. If one goes, we should expect some others to follow. It is already the case that new investment now seems to be off-limits, and will go to other global plants. Our trade unions can be directly blamed for this and it is a good example of what reckless union leaders are costing both SA and their own members. My sense is that such negative consequences are driving the ANC’s apparent increasing hostility to some of its union allies.

Jeff Osborne from Gumtree Auto ZA:
As a source of automotive manufacture, SA is far from the global markets. We therefore must be reliable and competitive if we are to retain our status as a source of automotive supply. There is no shortage of manufacturing capacity around the world for vehicles; in fact there is an over-capacity. These strikes, which seem to have become an automatic part of negotiations, are crippling for the SA auto industry. Exports for September this year plummeted by 75% compared to September last year. Vehicle manufacturers will simply not continue to expose themselves to this type of practice, which devastates their companies. This also profoundly affects levels of investor confidence and will almost certainly compromise not only future investment, but also existing operations. From an SA economic perspective, the automotive sector is a major exporter, and is very important in reducing our balance of payment deficit. We need to move away from rhetoric such as "strike season" every time negotiations take place, and can’t afford to make strike action an automatic part of the process. If not, we can expect more of this type of reaction from multinational vehicle manufacturers.

Craig Pheiffer from Absa Investments:
There is no doubt that protracted strike action – with lost production that can’t be made up – tarnishes perceptions of an affected industry. Where foreign investment has set up that original factory/industry it is susceptible to being repatriated when output is compromised and orders can’t be filled. Where foreigners have been eyeing potential industries for investment, then news headlines of irrecoverably lost production or unfilled export orders simply divert that investment to alternative, less hostile, destinations. Strike action may have short-term benefits for the work incumbents if wages are raised but it may prevent additional job creation through higher operational costs – and it may well prevent additional job creation through potential foreign investment that is lost. Additionally, lost production and activity hampers economic growth and it is no secret that global capital follows growth opportunities, not contracting industries and economies. The rand is really the barometer of the situation and at R10/$ it doesn’t paint a rosy picture.

Mike Schussler from economists.co.za
The fact is Companies need to make profits to stay in SA and they need to deliver on the contracts. No-one in the world has six to seven weeks disruptions to an industry. That was last the case in the Brittian of the late seventies and early eighties. We lose more man days per 1000 workers than the UK did in the winter of discontent in 78/79! We will not create the jobs or the wealth we need – that is fast becoming a future fact. We are now in danger of losing the jobs we already have! The Madness of strike after strike in a particular industry must stop. If the leaders of our country do nothing then we will be talking extreme poverty in 2050. The ultra leftwing NUMSA who get Ultra Leftwing monies via the Rosa Luxembourg foundation do not even know that they are being used to get jobs going in Germany again!

Duane Newman from Cova Advisory:
I suppose the day had to come. It is a pity, but up to now there had been no real visible consequences to strike action. I believe Unions got away with lots of unnecessary strikes, as it seemed as if business was "crying wolf". The loss of automotive investment is very significant as it is seen as a special case investor, due to the overall confidence it gives to all other investors. This is why the automotive sector receives such generous ongoing incentives. I hope this is a signal for government to start taking a firm stand on strikes, especially illegal strikes, and we start arresting the union leaders for breaking the law. As Trevor Noah joked in his show last night, we have so many strikes in SA that next we will be having babies striking for a 12% increase in breast time.

Conclusion: BMW has spoken clearly and forcefully. Government cannot ignore this. But we need more courage and more comment from our business community. NB: ZA Confidential did seek comment from the dti and from Cosatu. If it is forthcoming,or other commentators come back to us, this newsletter will be updated on the www.zaconfidential.com website.

Tweet of the Day:

Lord Skip Licker VC: Why can’t NASA source their own funding? It’s not rocket scie….. Oh.

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One of our leading economists Dawie Roodt has just published an excellent book entitled: Tax, Lies and Red Tape (Zebra Press). It provides an accessible, sometimes controversial, and entertaining look at a range of economic issues. Why weren’t there books like this when I was studying economics? ZA Confidential had a short chat with Dawie to learn more about this venture….

ZAC: A central theme of this book seems to be your mistrust of government, and firm belief in the private sector. How badly do you think the imbalance is in ZA?

DR: It’s quite bad and getting worse. In fact, in recent years politicians have been putting all sorts of pressure on private rights: nationalisation, the ‘secrecy law’, a clamp-down on the press, and so on.

ZAC: Is there any realistic hope that the tax burden on businesses or individuals could be eased?

DR: Not really. The reality is that pressure will increase on the state to provide more – inevitably meaning more taxes. But the good news is that eventually the tax burden gets so heavy that community simply revolts – France is a nice example of that happening now, and the opposition against the e-Tolls is an example in SA.

ZAC: You try in your book to explain complex issues and to make it possible for the man and woman in the street to understand. How worried are you that all too often economists don’t communicate their views effectively?

DR: I think it used to be a much bigger problem in the country. In the past, economists spoke a language nobody could understand – but today economics is much more of a braaivleis subject, thanks to guys like Mike Schussler, and hopefully myself.

ZAC: The plight of the rhino is a big concern currently. You suggest that rhino horns should be freely traded. How would that help ensure the survival of the animals?

DR: It will lead to the official price of a rhino – R250 000 to R300 000 – and the market price of over R10m getting closer to each other. The results will be better prices for farmers, and therefore a stronger incentive to protect rhinos, and a lower price for consumers – and most probably lower consumption because lower prices reduce the so-called Rolex effect, where expensive stuff is more attractive. Of course I am not advocating a free-for-all overnight, as some controls may be needed, and also education. But the reality is that nobody can fight the market indefinitely – and currently the market is trying to close the gap between the official and market prices. The pressure will remain until the gap is closed.

ZAC: DA leader Helen Zille wrote a foreword to your book. Does that mean the DA has the best economic policies?

DR: Most definitely not! I like Helen because I think she is a good leader and also an honest leader. But there are many instances where I have criticised the DA’s policies. I also think that they are moving away from their intellectual roots in their attempt to get more votes.

ZAC: This week we saw new tariffs on imported chicken. Is this an example of an over-active state, or the right response to predatory dumping in our market?

DR: It’s an excellent example of how a pressure group can establish themselves as rent seekers. The priority of the chicken producers will now shift to making sure this protection is maintained, by keeping up the pressure on the politicians. Under proper competition, their emphasis would have been on how to make their industry more competitive. Also, keep in mind, somebody dumping produce in SA means that somebody else is subsidising my consumption – what a bargain!

Tweet of the Day:

J Montana (@JMontanaPOTL): People try to live within their income so they can afford to pay taxes to a government that can’t live within its income.

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The seasonally adjusted Kagiso Purchasing Managers’ Index (PMI) for September fell sharply by 7.4 points to 49.1 in September. The index is now below the key 50-point mark for the first time since March this year. What do our experts make of it? We give some extracts from their recent statements.

Abdul Davids, Head of Research at Kagiso Asset Management:
Intermittent mining sector disruptions and fears about future industrial action may be weighing on manufacturers. If this is the case, an end to the vehicle component strike and a quick resolution to AMCU’s strike in the platinum mining sector should see an imminent rebound in activity and orders.

Coenraad Bezuidenhout from the Manufacturing Circle:
The manufacturing recovery shock signalled by the Kagiso PMI for September must be laid squarely at the feet of the protracted industrial action we have seen in vehicle manufacturing, automotive components and the platinum sectors. It is a wake-up call that a myopic and reckless approach to industrial relations will lead to reversals in manufacturing recovery, and ultimately to job losses. If industrial peace does not prevail to support other positive developments in the manufacturing space (weaker rand, local procurement traction) this could impact the growth of the economy markedly, and lead to employment losses as manufacturers contract or mechanise to stay afloat. The way our dismal labour market outcomes undermine the ability of our economy to recover should be viewed as a national emergency that requires resolute political action. The fact that we have recently again seen 11th hour concessions to labour demands in Parliament for an even more punitive employment dispensation (in relation to labour relations and employment equity amendments, as well as the Employment Services Bill) means the ranks of the unemployed will grow and the sustainability of our economy will deteriorate. This environment will also limit any positive impact that the Employment Incentives Bill may have on growing youth employment, as it will undermine overall employment growth. Growing the economy and jobs require tough trade-offs. President Zuma will have to decide how long his government will shore-up organised labour at the cost of economic growth and jobs, and the growing exclusion of the unemployed and the poor. As the PMI illustrates, the negative impact for manufacturing is very real.

Conclusion:
A worrying indicator. However, things should pick up if there can be a speedy resolution to the latest wave of strikes. Trade data out yesterday show that ZA can ill afford a sick manufacturing sector.

Tweets of the Day:
Funny Tweets ™ (@Lmao): Someone: so what are you getting for Christmas? Me: fatter.

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This morning, Minister Rob Davies of Trade and Industry announced new chicken tariff rises on all imports, apart from those from the EU – with levels climbing to as much as 82%. Local producers claim they are struggling to compete against dumped chicken, and government has investigated their application for protection, and gone through an elaborate procedure – required under WTO rules. Davies said the new tariff regime has already entered into force. He claimed action was needed following a drop in the local production of poultry products, with imports rising. He said action was needed to support an industry which supports 48 000 people, with 100 000 jobs at stake if you include indirect jobs. Said Davies: “The industry is bleeding.”
There are different rates applied to 5 categories of poultry products, with the highest jump imposed on whole birds from 27% to 82%. Offal, which Davies said is an important source of protein to low-income households, saw a tariff rise from 27% to 30 %, and similarly bone-in portions saw a relatively modest rise. Aside from the whole chickens, Davies said the average tariff increase was 8.75%, and he did not appear too worried about big price rises for poorer consumers – while acknowledging there would be a noticeable impact on the cost of a Sunday roast chicken. He warned local producers not to be greedy, and said he would not tolerate uncompetitive behaviour to thrive behind a tariff wall. There would be an early review of the new tariffs – which would look at production trends, employment trends and import trends. The new tariffs don’t apply to the EU, which has its own trade agreement with ZA, but Davies said he would like to negotiate the right to more easily apply safeguard measures to imports from the EU as well. In answer to questions, he said tariff duties are imposed as tools of industrial development, and denied he is being protectionist as ZA does have the right to boost tariffs within certain limits. “This is a potential employment generating sector. If we can’t produce chickens in SA, what can we produce?”

Conclusion:
The government is clearly concerned about hitting then poorer consumer as we head to an election, but inevitably chicken prices will rise as a result of these new tariffs. The message to wealthier consumers might be: “Let Them Eat Offal”

Tweets of the Day:
Jana Marais (@janamarais): "If you like what we’re doing, buy our shares. If you don’t, buy our shares so you can fire us."- Jabu Mabuza in high spirits at #Telkom AGM
Puns (@omgthatspunny): When the TV repairman got married the reception was excellent.
SpikeWilton (@spikeWilton67): I’m a dyslexic agnostic insomniac; I’m awake all night wondering if there really is a dog.

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It has finally happened. Having flown to New York at taxpayers’ expense for a UN junket, our beloved President has signed into law the new e-Tolling regulations, which will mean those of us without blue lights atop our luxury limos will have to pay extra to use many stretches of Gauteng highway. The legal challenges will continue, but this is certainly a big step in the wrong direction. Roads must be paid for, but surely not through these bureaucratic, kleptocratic and wasteful tolls. What do our experts think?

Jeff Osborne, Independent Motor Industry Analyst:
The timing of the signing of the Bill is astounding. One would have imagined that the outcome of the Supreme Court action would have been awaited. Although this now grants sweeping powers where e-tolling is concerned, one has to question, if they go ahead, whether it will work – given the myriad of unaddressed issues, and the financial woes of SANRAL?

George Glynos from ETM:
Last week we had the TransUnion Consumer Credit Index which fell to lows last seen in 2009; yesterday we had the release of the BER’s Consumer Confidence Index which fell to the lowest levels in 10 years. This frames beautifully the financial difficulties that households are faced with. The effects of a weaker ZAR which effectively reflect weakening purchasing power of every rand, and inflation – which is above 6% and eats into the disposable income of households – paint a gloomy picture for the second half of the 2013 and early 2014. The implementation of e-Tolls simply adds to that pressure and would not need to impact as heavily if the government utilised the more efficient method of tax collection through the fuel levy – rather than active tolling, which is significantly more expensive. Given that many do not have the luxury of alternative methods of transport and need to use the highway, the impact will be significant for many and we fear that there will be both economic and political ramifications to the move which we feel highlights how out of touch the government is with the will of the people.

Dawie Roodt from the Efficient Group:
My view is that the huge public protests against the tolls should rather be seen as a kind of “tax revolt” and not necessarily as anti-toll as such. Most people I have spoken to are happy to pay for the tolls as long as “my money is well spent”. People are getting tired of an ever-increasing tax burden combined with deteriorating service delivery. Once the tolls are implemented this revolt is likely to morph into another similar public protest.

Writer and motoring enthusiast David Bullard:
A bizarre move, bearing in mind that the matter is still in play, from a legal perspective. Either he (Zuma) was badly advised or the need to screw more money out of the working minority is getting rather more pressing by the day.

Leon Louw from the Free Market Foundation:
President Zuma should not sign Gauteng’s proposed gantry e-Toll system into law for reasons that are unrelated to e-Tolling. He should refer it to the Constitutional Court because the policy seems to have been adopted in violation of section 195 of our Constitution according to which policies must be preceded by effective public participation. His problem is that section 195 is routinely disregarded, especially regarding roads. A constitutional ruling in this case will have far-reaching implications for all government policies. That aside, few issues entail more muddled thinking than the e-Toll saga. What, precisely, do opponents oppose? It ranges from procedural constitutionality to whether any roads should be tolled in any way. Are objectors specifically against Gauteng gantry technology, tolling in Gauteng per se, or proposed pricing? Confusion is compounded by the fact that tolling is already commonplace and tollerated (misspelling intended) throughout the country. So why not Gauteng highways? The most distressingly idiotic objection, repeated, for instance, by leading radio talk show hosts, asserts that roads should be a free public service. Roads must be paid for, the questions are: by who; users or non-users; efficiently or inefficiently; fairly or unfairly?
Regardless of where one stands on Gauteng e-Toll technology, pricing or constitutionality, roads must be paid for. Fairness and economic efficiency suggest that people who use specific roads rather than people who don’t, should pay for them. One of the biggest problems here is that the illusion of free roads over the years has resulted in massive spacial distortions, such as people living far from where they work by virtue of the illusion that commuting is cheap. The fact that the real costs are concealed means that billions of Rands are diverted to excessive infrastructure. There should be two and only two debates, one of which is not whether there should be tolling — there should on all roads as cheap modern technology allows. Legitimate debates are (1) constitutionality and (2) best road-pricing methodology. Road tolls are, in most contexts, the best way to price and fund roads. That, emphatically, does not mean the Gauteng system, which entails real or suspected corruption on a massive scale, and, it seems, extremely cost-inefficient technology. It should be common cause that what we have now, inherited from the dreaded apartheid regime, is the worst of all worlds, whereby revenue collected from road users goes into the amorphous pot of general misallocated revenue. Until the 1980s South Africa had a sensible alternative to road tolling, a dedicated road fund, into which revenue from fuel, tyres, batteries, vehicle licences and the like was spent on roads. It was a user-pays system, albeit less precise than individual road tolls. At the very least, a dedicated road fund should be demanded by toll objectors. The debate should not be between opponents and supporters of the user pays principle, but about how best to have users fund what they use.

OUTA Chairman Wayne Duvenage:
OUTA is surprised at the President’s signing of the eToll bill into law, especially in light of very recent mention that he was considering the technicalities related to the tagging of the bill as proposed by the Freedom Front. In addition, the recent Presidential Commission on the review of State Owned Entities recommended that ‘social infrastructure, including roads, should rely less on user pays funding and more on general taxation’. Then we still have the Supreme Court’s ruling to be heard but even if this gives eTolls the green light, the real test has yet to come, that of practical implementation and enforcement. We have said in the past, laws are only as good as they are governable and eTolls will be under huge pressure in this space. It has been rejected by society at large due to its high costs, cumbersome process and anger at funds going to enrich European based Kapsch TrafficCom. The public, in my opinion, will make it unworkable, in which case, it will fail and this is the sad reality we face with a Government that refuses to listen to its people.

Conclusion::
These tolls are an inefficient way of paying for better roads. But there appear to be vested interests in the e-toll system. I worry about the impact on restaurants, gyms and other small businesses as the shrinking wallets of Gauteng motorists takes their toll, so to speak.

Tweets of the Day:
Political Humor (@PoliticalLaughs): Q: What are the three most common words in the English language? A: Made in China.
Puns (@omgthatspunny): A cardboard belt would be a waist of paper.

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Capitec Bank has continued to impress with good results today for the six months to August, with headline earnings a share up 20%, and a similar hike in the interim dividend. Meanwhile, CEO Riaan Stassen has announced his intention to stand down at the end of the year. What do our experts think?

Independent Analyst Ian Cruickshanks:
Capitec continued its steady growth, but it was not as explosive as it has been in the past. Maybe it is proving difficult to continue expanding the customer base, and loan growth, in an environment where consumers remain under considerable pressure on the income and employment sides. Shareholders will welcome the 20 percent increase in dividends and I am really impressed by the cost to income ratio of 33% – way beyond the 50% where the major banks operate.

Ron Klipin from Cratos Wealth:
This was a very sound set of operational results. The diversification of the deposit base resulted in better-quality funding and liquidity. The strong growth in transactional fee income is impressive, as well as the tightening of credit criteria. Many of the above factors are absent in the business models of its peers. The next six months will remain challenging, but management has had a good track record in the past in dealing with a difficult operating environment.

Simon Brown from justonelap.com
These were solid results, showing they tightened earlier in the cycle and hence are not getting hit as hard. They also generating significant revenue from the traditional banking model and they have a cost to income at an astounding 33%. Riaan Stassen retiring as CEO won’t hurt them, but it remains a complete mystery why at a certain age companies insist on showing people the door.

Conclusion:
Capitec is no longer a young pretender, but is an established predator and must be rattling the established big banks. It may be seeing a slowdown in growth but is still performing impressively. We will wait to see the transition to the new CEO and whether this causes any fallback – not that it needs to.

Tweets of the day:

superman (@MrSandeepP): Beginning of the day: I have so much work to do. *logs onto Twitter* 8 hours later: *Goes home*

Puns (@omgthatspunny): Alcohol and calculus don’t mix so don’t drink and derive.

Funny Tweets ( Funny Tweets (@iQuoteComedy): Life is short. Smile while you still have teeth.

Frankie Boyle (@frankieboyle): The best thing about twitter is that I no longer need to carry around a box of tiny opinionated idiots

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As expected, the Monetary Policy Committee (MPC) of the Reserve Bank left interest rates unchanged today. What is of more interest is the view which the Bank is taking of the economic outlook. Our experts gave their thoughts….

Peter Attard Montalto from Nomura:
The door to cuts was closed at the last meeting. The door to hikes has now been opened. We stick with a May 2014 hike baseline but think the chances of January are higher now. The MPC held steady through the Fed dovish surprise last night – keeping rates unchanged at 5.00% as both we and the market expected. The statement shifted, however, from being on the hawkish side of neutral at the July meeting (and at the May meeting on the dovish side of neutral) to this time both the statement and the Q&A being outright hawkish. This is most obvious from the fact that the inflation forecast was revised up not only in the short term but also the long term while the growth forecast remained unchanged. But the general language also shifted on inflation, while on balance it was broadly unchanged around growth.

Dr Andrew Golding of Pam Golding Properties:
The Monetary Policy Committee today took the welcome decision to announce that the repo rate would again remain stable. Our view is that while the housing market continues to show signs of gradual recovery, underpinned by positive sentiment among home buyers, the fact is there are a number of factors impacting on the residential property market, including access to finance. Although the economic recession caused house sales to slow and as a result less new homes to be built during that time, this has now created pent-up demand for homes and we are seeing an increasing take-up of available stock – both in terms of new and existing homes. An increasing trend is that in a number of high demand areas in all the major metropolitan areas of the country (across various price ranges, particularly up to R2 million or R3 million), stock shortages are being experienced. This trend is not necessarily across the board in every area but is being fuelled by desirability of location, access to schools, the workplace and a convenient and appealing way of life. In addition, buyers remain discerning and consider their options until the right property becomes available at the right price, resulting in a market which also remains very value-conscious. Other factors that are impacting on the current market include the fact that, as always, the housing market is very much driven by sentiment. Furthermore, mortgage funding continues to be less accessible than previously and even with interest rates at historical lows, the market has not responded as it would have in the past. Buyers need substantial deposits and are staying in their properties for longer periods of time in order to accumulate equity in their current bonds before looking to relocate – and they need to invest more of their own money in property. Having said that South Africans are gradually becoming accustomed to the new market conditions and new way of purchasing property, which augurs well for a sustained, steady, albeit slow recovery. We remain optimistic regarding the remainder of 2013 and expect that interest rates will remain stable during this period. Nationally and as a group, PGP continues to achieve growth in sales across all regions, as well as in other countries in Africa.

Nedbank’s Economic Unit:
The Reserve Bank’s inflation projections have deteriorated over the next two years, albeit slightly. The Reserve Bank has maintained its growth forecasts, with the output gap remaining large over the forecast period. The MPC’s decision to leave the repo rate unchanged was in line with our and the market’s expectations. The statement remained hawkish on inflation, with the MPC stressing the risks posed by the rand’s weakness and high wage settlements. Regarding the latter, the Governor emphasised their adverse effect on employment growth. Growth is projected to remain below potential over the coming two years. The MPC statement underlined the challenge of balancing weak growth prospects and rising inflation. We therefore maintain our view that this will persuade the Committee to keep monetary policy neutral over an extended period, with interest rates remaining unchanged well into 2014.

Conclusion:
Small relief for those in debt is overshadowed by the guarded economic outlook. We saw employment numbers this week showing that jobs are still being shed in the formal economy. While the lack of a rate hike may help the environment for job creation, the expected growth rate for the ZA economy is too low to produce much in the way of new employment.

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The latest CPI inflation number is out, and it shows inflation rose again outside the 3% to 6% target ban of the Reserve Bank – increasing in August to 6.4% from 6.3% in July. What did our experts think?

Ettienne le Roux from RMB:
The main culprits driving inflation over the month were: Petrol (up 2.4% m/m and 23% y/y (the y/y rate is unchanged from July) Other (a collection of items showing small increases over the month, for example, food (up 0.3% m/m), non-alcohol beverages (up 0.6% m/m), clothing (up 0.8% m/m) etc.) Transport (car prices, petrol, public transport) accounted for 0.2 percentage points of the 0.3% m/m increase in CPI. Core CPI inflation (CPI ex food, petrol, electricity and non-alcohol beverages) dipped slightly to 5.1% y/y, indicative of underlying inflationary pressures still being well contained, at least for now Prospects: CPI, in all likelihood has peaked, and from September onwards should start to slowly moderate back to below 6% by year-end, ending next year at around 5.5%. Key risks to this view are wage demands, the oil price and of course the rand. If CPI inflation follows our trajectory, interest rates should remain constant for a protracted period.

Nedbank Economic Unit:
The main drivers were housing and utilities (1,3 percentage points), transport (1,4 percentage points), miscellaneous goods and services (1,1 percentage points) and food and non-alcoholic beverages (1,1 percentage point). On a monthly basis average prices increased by 0,3 %, mainly driven by the transport category, which rose by 1 % m-o-m, contributing 0,2 percentage points to the headline figure, as well as the residual, which contributed 0,1 percentage point. The food and non-alcoholic beverages category, which increased by 0,3 % m-o-m, as well as housing and utilities (up by 0,8 % m-o-m) also contributed. We expect inflation to have peaked in August and to gradually ease back gradually to within the Reserve Bank’s target range by the fourth quarter of this year. Today’s numbers do not alter our interest rate view. They are generally in line with market expectations and are therefore not expected to persuade the Reserve Bank’s MPC to change interest rates at the end of its meeting tomorrow. We believe that the committee will opt to tolerate high inflation in the short term, especially as indicators suggest that demand driven inflation remains contained, and support the weak economic growth by maintaining the current policy stance well into 2014.

Conclusion:
Inflation is around the level economists had expected, but it is still uncomfortably high. Not enough, we think, to prompt an interest rate hike, but nowhere near the level at which a cut might be contemplated.

Tweet of the day:
sabelo ndlangisa (@Bhintsintsi): If 20 South Africans got lost in a forest, the first thing they’d do is to appoint a commission or task team to figure out what happened.

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