SA RESERVE BANK CUTS INTEREST RATES

Cape Town – The monetary policy committee of the SA Reserve Bank has reduced interest rates by 25 basis points. This means the repo rate (Interest rate at which the Reserve Bank lends money to commercial banks and the prime rate the rate at which commercial banks lend money to borrowers.) is now 6.5% and the prime lending rate.

Speaking in Pretoria on Wednesday after the conclusion of the three-day meeting of the bank's Monetary Policy Committee, SARB governor Lesetja Kganyago said the MPC in a split decision decided to lower the repo rate. Kganyago said the inflation forecast of the bank has shown a moderate improvement. Indications are that a low point of the inflation cycle has been reached. The main changes in the forecast relate to the exchange rate, among others things, he said. He also cautioned that the SARB's 5-year inflation expectations have declined. Kganyago said the MPC would prefer its inflation expectation anchor closer to the mid-point of the target range of 3% to 6%.

CONSUMER INTEREST RATE CUT, A BOOST FOR INDEBTED SOUTH AFRICANS

Cape town - With Moody's announcement last Friday night that saw South Africa escaping a "third junk" financial experts are confident South African Reserve Bank (SARB) Monetary Policy Committee(MPC) will most likely reduce the repo rate by 25 basis points on Wednesday.

According to Nedbank's Corporate and Investment Banking (CIB) after an analysis of its latest Interest Rate Barometer, on a weighted basis the barometer implies a split probability of a 47% chance of a hold and a 47% chance of a cut at this week's MPC's meeting. "Based on our analysis, we are of the opinion that the repo rate will be reduce by 25 basis points this week. However before Friday's rating action we thought a cut was more likely in May rather than at this week's meeting" said Nedbank.

John Loss, household and property sector strategist at FNB indicated that the First Rand Bank also experts a 25 basis points interest cut on the repo rate on Wednesday. He said from an "inflationary pressures" point of view, such a cut would appear completely justified in the light of the latest Consumer Price Index (CPI) inflation rate for February being at 4% - therefore in the lower half of SARB's 3% to 6% target range.

If the MPC cuts the repo rate by 25 basis points, this would lower the rate at which banks borrow money from the SARB 6.5% and prime lending to consumers to 10%.

SA ESCAPES THIRD JUNK RATING AS MOODY'S LIFTS OUTLOOK

Cape town - South Africa escaped a third junk as Moody's Investors Service kept it's assessment of the nation's debt unchanged, citing more transparent and predictable policies under President Cyril Ramaphosa. The Nation's outlook was revised to stable from negative on Friday night by Moody's Ratings Agency. The move will most likely bolster the rand which has been on its best since Ramaphosa took over as President last month.

Moody's maintained the nation's local and foreign currency assessment at Baa3, the lowest investment grade level. The affirmation keeps South Africa on the same level as that of countries like Indonesia and Romania. 

SA WAITS ANXIOUSLY FOR WHAT COULD BE THE "D DAY" FOR CREDIT RATING

Cape Town - By midnight on Friday South Africans should know whether Moody's has downgraded SA's sovereign credit rating to junk, or kept the country at above investment grade. Moody's was the only major ratings agency to not downgrade South Africa to sub-investment grade in 2017. It currently has the country at one notch above junk.

While its rival ratings agencies Fitch and S&P both downgraded SA to junk last year, Moody's maintained its sovereign rating for SA at Baa3, one rung above junk status. In November 2017, at the time of its last ratings announcement for SA, Moody's said it would assess the composition of the country's 2018 budget and the implications of recent political developments when making its decision. 

On Thursday Deputy Finance Minister Mondli Gungubele said at a meeting of public policy makers and business leaders in Johannesburg that Treasury had recently conducted "very frank and honest discussions" with ratings agencies. “As a result of that, I anxiously, and with all humility expect something better, but that is their decision to make,” he said. 

if Moody's does decide to downgrade the country, SA will automatically be removed from the Citi World Government Bond Index, forcing asset managers to sell SA bonds. This would result in billions of rands leaving the country.

REGAIN YOUR FINANCIAL FREEDOM TODAY

Cape Town - Many credit active consumers are struggling to keep up with their monthly repayments be it on their mortgages bonds, car loans, credit cars etc. When you find yourself in a position where you fall behind on your repayments its usually a sign that you are over indebted.
Once you default on your credit repayments, creditors' attorneys will come after you! You will have to pay legal costs in addition to your original debt and the interest you owe. The result of this is usually more debt, a judgement against you, garnishment of your salary, repossession of your possessions and/or poor credit rating.

This may sound like you will be stuck in a dead end, however the Government passed into Law a bill called the National Credit Act in 2005 which protects over indebted consumers from legal action. The bill provides consumers with a mechanism where by they pay off their debts in an affordable way while protecting their possessions. It allows an over indebted consumer to get counsel and advice from a Registered Debt Counselor who will assess the consumer's financial situation and renegotiate lower repayment terms with creditors resulting in a reduced, affordable and fixed monthly payment. The process that allows for such is called Debt Review. Once a consumer goes under Debt Review, they are relieved of being harassed by creditors and are protected from legal action being taken against them.

If a consumer opts for Debt Review, they will have more money each month. This is because the Debt Counselor will help you work out a budget that suits your lifestyle expenses. In some cases Debt counselors can reduce the amount you pay your creditors by up to 40% a month. Debt Counselling is the quickest way to regain your financial freedom with a clean credit record.

LISTERIA INFECTIONS EXPECTED TO INCREASE

South Africa’s health minister expects the infections from the worst listeria outbreak in history that has killed 180 people since January last year to increase and warned that there could also be other cases in the southern Africa region.

The government, which has been criticized for taking too long to find the cause, has linked the outbreak to a meat product known as “polony” – a cheap form of protein consumed by South Africans – made by Tiger’s Enterprise Food.

The disease causes flu-like symptoms, nausea, diarrhoea and infection of the blood stream and brain. “We are just at the beginning and we must expect other cases to emerge,” health minister Aaron Motsoaledi told reporters, without elaborating.

Motsoaledi – who met health ministers from the southern African region – also said he also expected more cases of the outbreak to be reported in the region but did not give details. Namibia’s health minister said on Tuesday it had recorded its first case of listeriosis, and the victim was fighting for his life in hospital in the nation’s capital. Namibia and several other nations in Africa have suspended imports of processed meat from South Africa after the outbreak was linked to the factory that makes polony, a cheap sausage.

Motsoaledi said the government would give information to anyone intending court action over the outbreak.

A human rights lawyer has said he plans to launch a class action lawsuit against South African food producer Tiger Brands on behalf of the families of people who died after health authorities confirmed the presence of listeria at its factory in the northern city of Polokwane.

Tiger Brands has said it appointed an expert team to identify the causes of the listeria outbreak traced to one of its factories.

MAJOR TAXES LIKELY TO HIT YOUR POCKET IN 2018

Cape Town - With VAT having been introduced on a number of products and expected to be in effect from the 1st April, there are a number of big changes that will hit South Africans come April.

VAT hike

Arguably the biggest of these is the increase in the effective VAT RATE, which will rise from 14% to 15% adding approximately R22.9 billion to the fiscus.

Bruce Fleming, a financial planner with Old Mutual Private Wealth Management said that the increase was a tough political decision – but said it was important to remember that it is the first such adjustment since 1993 and was therefore overdue.

However, Fleming warned that all households will feel the pinch of the increase, and while zero-rated food items will take some of the increased burden off the poor, there has been no further developments as to whether more items will be added to the basket or even if additional items will be introduced at all.

FUEL levy

Commuters are expected to feel additional pain from 4 April with an increase in the fuel levy although this increase could be slightly offset by a stronger rand and lower oil prices.

From this date the fuel levy will be increased by 52c per litre on 4 April, pushing up the general fuel levy to R3.62 per litre of petrol, after a hike of 30c per litre last year.

“This is quite significant as it will place an extra burden on all road users especially on those who mostly rely on public transport and will ultimately have an effect on inflation,” said Fleming.

SIN taxes

As expected there was another increase in sin taxes and South Africans will pay between 6% and 10% more for alcohol, while smokers will be paying 8.5% more to sustain their habit.

Fleming said that this is expected to bring in an additional R1.33 billion in revenue in the 2018/19 financial year.

However, the increase in South Africa’s sin taxes are also particularly notable this year, given the recent push towards further legislating both alcohol and smoking regulations.

This means that we could see both a ban on public smoking and an increased drinking age (from 18 to 21) by the next budget speech.

SOUTH AFRICANS BORROWING BIG AND SAVING LESS - EXPERT

Cape Town - Reducing indebtedness and improving savings in South Africa is a major socio-economic challenge, warned MD of Old Mutual’s Mass and Foundation Cluster Clarence Nethengwe. The metro working population spends an average of 19% of their salaries on paying back debt, according to the 2017 Old Mutual Savings & Investment Monitor.

The National Credit Monitor found that only 48% of the 24 million credit active consumers in the country were up to date with their credit repayments in the first quarter of 2017.The statistics, said Nethengwe, show that South Africans continue to be big borrowers and poor savers. "Although these bad money habits are fuelled by the current economic environment and rising living costs, it is a lack of financial knowledge that entrenches them," explained Nethengwe. He said the financial services sector has an important role to play in helping to build a society that understands the importance of financial planning and commitment. "While most South Africans know there is a connection between education and long-term prosperity, too few make the connection between savings and wealth creation," said Nethengwe. 

He said encouraging more responsible and informed decision-making not only benefits individuals, but also boosts the prosperity and financial stability of the whole nation. "Healthy, financially stable economies are built largely on the savings of individuals. "Strong national savings help to finance national development projects and reduce South Africa’s dependency on foreign investment," explained Nethengwe. He said concepts such as compound interest need to be taught from a young age, to help counteract the celebrity-driven allure of conspicuous consumption.