Latest news with #AfricanEconomy
News24
12 hours ago
- Business
- News24
SA could see R870bn in debt savings with a new inflation target
A lower South African inflation target coupled with a revised borrowing strategy could save the government as much as R870 billion in debt-service costs, according to a research document published by the nation's central bank. The working paper by authors including Christopher Loewald, the head of the South African Reserve Bank's economic research department, builds on Governor Lesetja Kganyago's argument last week that a reduction in the target of 3% to 6% would boost growth and lower borrowing costs. The Bank and the National Treasury have been in talks about a new framework since February 2024, with discussions 'ongoing,' Deputy Finance Minister David Masondo said on Monday. Over a decade, a 3% target in tandem with a strategy that emphasizes short-term and inflation-linked borrowing could generate R870 billion in 'nominal cumulative savings' on debt-service costs, the authors said. Costs would decline to about 4.8% of gross domestic product by 2029-30, and 3.8% by 2034-35, absorbing a diminishing share of state revenue, they said. South Africa's current inflation regime hasn't been altered since its adoption 25 years ago. Policymakers aim to peg inflation expectations at the midpoint of that range and are currently beating their goal, with annual inflation in April running at 2.8%. That 'high and wide' target keeps inflation risks 'higher than they need to be, depressing economic growth and deepening inequality,' the authors said.
Zawya
2 days ago
- Business
- Zawya
Why Uganda's private sector is squeezed out of credit market?
Uganda's private sector was pushed to the periphery of the credit market in the first quarter of 2025, even as the government tapped heavily into the local lending basket for funds. Data also shows that local telecommunications firms absorbed significant new loan facilities during the same period. Growth in private sector credit slightly declined to 7.9 percent between January and March 2025, compared to 8 percent recorded between October and December 2024, according to the latest Bank of Uganda (BoU) data. The growth rate for Ugandan shilling-denominated loans fell from 10.3 percent in the last quarter of 2024 to 10 percent during the first three months of 2025. In contrast, growth momentum in foreign exchange-denominated loans slightly increased, from 2 percent between October and December 2024 to 2.3 percent in the first quarter of 2025. The total value of commercial bank loans disbursed to the private sector rose by 4 percent to Ush21.5 trillion ($5.9 billion) between December 2023 and December 2024, while the industry loan default ratio fell to 3.9 percent over the same period. The increased government borrowing is attributed to slow growth in tax revenues and a surge in government expenditure driven by supplementary budget requests. Lenders also prefer lending to the government, as it offers higher returns, reducing their appetite for private sector lending as they seek to avoid risky loans.'Apart from domestic government borrowing raising rates for borrowers, its refinancing arrangements - through rollovers and not repaying principal amounts - reduce liquidity in financial markets, whose fund allocation is driven by market incentives,' said Dr Fred Muhumuza, a local economist.'It also diverts private investments from the real economy, which creates jobs and growth, to financial instruments that only generate financial wealth.'The real cost of borrowing incurred by private businesses seeking alternative sources of credit remains unclear. Average yields on the 91-day Treasury bill rose from 9.9 percent in the quarter ending April 2024 to 10.9 percent in the quarter ending April 2025, according to BoU data. Yields on the 364-day Treasury bill increased from 14.6 percent to 16.7 percent over the same period. The yield on the two-year Treasury bond rose from 13.3 percent to 15.5 percent, while that on the five-year bond increased from 14.8 percent to 16.2 percent. Similarly, the yield on the 10-year bond rose from 15.8 percent to 16.7 percent, and the 15-year bond yield climbed from 16.2 percent to 17.1 percent. Local telecommunications companies, however, dominated private sector borrowing during the same period. Their infrastructure investment needs and quarterly dividend payments were cited as key drivers of significant borrowing, though details of specific transactions remained unavailable at press time.'Most of the lending directed to telecommunications companies is meant for new infrastructure investments and quarterly dividend payments.'Their loans are priced on the Structured Overnight Financing Rate (SOFR), tied to a three-month average plus four percent, equivalent to an annual interest rate of 8 percent on US dollar loans.'Some loans disbursed to the telecommunications sector have a five-year tenure. These companies play a big role in the economy and provide a reasonable gauge for monitoring the country's economic health. We are less worried about credit risks in the telecommunications sector at this time,' observed a financial analyst at Absa Bank Uganda, who requested anonymity due to confidentiality obligations. Michael de Kock, an economist at Oxford Economics Africa based in South Africa, said that while precise data on borrowing costs from alternative sources was limited, tighter credit conditions suggest they are on the rise.'Despite tighter credit, April's PMI hit a five-month high, suggesting businesses are adapting to higher borrowing costs. The telecommunications sector's heavy bank borrowing reflects strategic confidence rather than financial distress.'The March 2025 network sharing agreement signed between MTN and Airtel further illustrates strategic capital optimisation while expanding coverage,' he explained. © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (
Zawya
5 days ago
- Business
- Zawya
The Minerals Council president: "Mining must succeed for South Africa to succeed"
Paul Dunne has been appointed president of The Minerals Council South Africa, after acting as caretaker president during 2024, at the Council's 135th Annual General Meeting. Paul Dunne has been appointed president of The Minerals Council South Africa, after acting as caretaker president during 2024, at the Council's 135th Annual General Meeting. c The Council also published its Integrated Annual Review and Annual Financial Statements for the year ended 31 December 2023 at the AGM. The reports present the dual role of the Minerals Council by presenting an accurate and relevant picture of the important role the mining industry plays in South Africa's economy, and the contribution to society of the mining industry as well as the activities of the Minerals Council in supporting and promoting its members and the sector. Cornerstone of economic stability 'Mining must succeed for South Africa to succeed,' says Dunne, as he reflected on the past year, saying that South Africa's mining industry remains a cornerstone of economic stability and progress. 'Despite formidable challenges, the sector continues to play a pivotal role in job creation, foreign exchange earnings and industrial growth, reinforcing its position as a vital contributor to the country's economic and social fabric,' he says in his president's letter in the IAR. 'Despite the vital role that mining plays in South Africa's economy, its contribution to GDP has declined over the years. 'This is not due to a lack of potential but rather the result of structural challenges, ranging from regulatory uncertainty to infrastructure constraints.' Dunne highlights the interventions the Minerals Council has led to address illegal mining, regulatory and infrastructure constraints in energy and rail and port infrastructure, while noting that water supply is an emerging risk that needs urgent collaborative action and responsible stewardship. 'Our industry's commitment to responsible water management is not only fundamental to mitigating this risk, but also to strengthening our social licence to operate and ensuring mining communities benefit from shared water infrastructure solutions,' he says. Bold action In his letter to stakeholders, CEO, Mzila Mthenjane, discusses the five outcomes the Minerals Council aims to achieve. These are: - To strengthen the climate response and advance a just energy transition by driving responsible mining practices and reducing carbon emissions - The enhancement of its advocacy through a data-driven approach to policy engagement where positions are backed by clear evidence of mining's impact on the economy and society. - Acceleration of investment promotion to showcase South Africa as a destination for responsible mining investment. - Contribution towards improving infrastructure efficiency in logistics and energy to remove barriers that hinder the sector's growth. - Transformation beyond compliance for a more inclusive and representative industry./ol> 'The future of South African mining requires bold action from both government and private sector,' says Mthenjane. Solutions He says the solutions are clear: 'The mining industry stands ready to invest, create jobs, and drive economic growth. 'What we need is an 'all-of-government commitment to removing barriers to encourage investment in exploration, mine development and existing operations,' says Mthenjane. The report details the Minerals Council's strategic plan and reports on how the organisation delivered against this plan during the year. The Integrated Annual Review and Financial Statements 2024 may be accessed on the Minerals Council website Read the reports here
Mail & Guardian
5 days ago
- Business
- Mail & Guardian
Reserve Bank cuts rate by 25 basis points to 7.25%
Reserve Bank governor Lesetja Kganyago The This is the fourth reduction in a series of 25 basis point interest rate cuts since September 2024, only interrupted by a pause in March. The decision, which was widely Kganyago said the decision comes against a volatile global scenario which has seen other central banks cutting interest rates, as well as a low growth projection for the local economy. 'The indicators for sectors like mining and manufacturing have been disappointing, and unemployment has risen. In our last meeting we warned of downside risks to our growth forecast. We have now trimmed our GDP projections, and currently expect growth of 1.2% this year, rising to 1.8% by 2027,' he said. 'The outlook for structural reforms remains positive, but there are also headwinds like lower global growth.' Citing 'This reflects the lower starting point, as well as a stronger exchange rate assumption and lower world oil prices. 'These factors offset pressure on fuel costs from the higher fuel levy announced in the budget. In addition, our previous forecast included VAT increases, which have since been cancelled.' The move will provide relief for South African consumers, FNB chief executive Harry Kellan said in a note. 'It comes at a time when we're seeing a more positive inflation outlook for the rest of the year, along with growing urgency to boost economic activity. That said, we may still see repo rates reduced once more this year, something we'll be watching closely in upcoming MPC meetings,' he said. Referring to current discussions to change the bank's inflation target, Kganyago said 'for some years now, internal and external analysis has shown that our inflation target is too high and too wide'. He added that the Reserve Bank and the treasury had extensively discussed this issue and technical work was at an advanced stage. 'Now that inflation has slowed, we have a chance to lock in lower inflation at low cost. This scenario illustrates that opportunity,' he said. Kganyago said there was a consideration for a 3% objective from the current 4.5% mid-point target, which would pave the way for lower interest rates. 'For a 3% objective, our quarterly projection model shows a lower path for interest rates. Both our baseline and the 3% scenario have a cut in this quarter. However, rates move steadily lower in the scenario as inflation comes down,' the governor said. 'Inflation expectations stabilise at 3% during 2026, helped by the experience of lower inflation. Growth is somewhat slower at first, because real rates are initially higher, but the The economy does better later in the forecast, as rates ease further.' The monetary policy committee will next meet in July.
News24
18-05-2025
- Business
- News24
SA's climate targets a chance to set a path for inclusive growth
Decarbonisation is not just about cleaner energy — it's about changing who owns, controls, and benefits from the new economy, write Lebogang Mulaisi and Dr Khwezi Mabasa. South Africa is standing on the edge of a transformational opportunity. The global climate transition is no longer a distant horizon — it is unfolding rapidly, reshaping investment flows, trade dynamics, and the future of work. At the same time, the worsening impacts of climate change are being felt locally, from water stress and agricultural losses to infrastructure damage and extreme weather. South Africa's updated Nationally Determined Contribution (NDC), submitted under the Paris Agreement, sets out more ambitious targets for reducing greenhouse gas emissions. But the NDC must be seen as much more than a compliance exercise — it should be the blueprint for a new, inclusive economic paradigm. The current growth model, inherited from a colonial and apartheid past, remains extractive and exclusionary. It continues to rely on resource-intensive sectors such as coal, mining, and heavy industry — sectors with declining global competitiveness and high environmental costs. Meanwhile, millions of South Africans remain locked out of economic opportunity, particularly black communities, youth, and women. If climate action replicates these structural inequities — focusing narrowly on emissions reductions while failing to deliver economic justice — it will deepen rather than disrupt the status quo. We need a new growth model rooted in decarbonisation, but equally in dignity, ownership, and transformation. This model must be anchored by an industrial policy that aligns with the country's climate commitments. Decarbonisation is not just about cleaner energy — it's about changing who owns, controls, and benefits from the new economy. READ | South Africa's NDC identifies key sectors — energy, transport, agriculture, and waste — that are central to reducing emissions. These sectors are also strategic levers for inclusive growth. Take the energy sector, for example. South Africa's power sector is undergoing a historic transition, with renewable energy expected to play a dominant role in the future energy mix. This transition is being driven by global capital and domestic policy, but unless actively shaped by the state, it risks replicating past injustices. So far, the rollout of renewable energy has been dominated by large private players, with limited local ownership, minimal community benefit, and modest success in localisation. The Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), while commendable in securing private investment, has not delivered the scale of transformation or job creation initially envisioned. If left unchecked, the energy transition could become yet another missed opportunity for real empowerment. What is needed is a proactive industrial policy that directs climate-aligned investment into sectors and projects that create decent work, build local supply chains, and ensure black ownership and participation at scale. Government has the tools to do this: policy mandates, procurement rules, blended finance instruments, and public development finance institutions can all be used to crowd in private capital while setting strong transformation conditions. Public-private partnerships must be designed not around cost alone, but around value — economic, social, and environmental. This is especially true in sectors like green manufacturing, transport electrification, regenerative agriculture, and circular economy industries. These sectors offer the potential to create hundreds of thousands of jobs while also reducing emissions and enhancing resilience. But they need strategic investment, skills development, and incubation support — especially for black entrepreneurs, small and medium enterprises, and township and rural-based businesses. READ | OPINION | Climate-proofing homes, infrastructure key to reduce insurance risks At the heart of this transition lies the imperative to redefine Black Economic Empowerment (BEE). For too long, BEE has been implemented through narrow equity deals that benefit a small elite, without challenging the underlying ownership patterns of the economy. The climate transition offers a chance to broaden and deepen empowerment. Imagine rural communities owning shares in solar farms on communal land, or township-based enterprises producing components for electric vehicles and energy storage. These are not pipe dreams — they are achievable, if we design for them. Emphasis is often placed on integrating black beneficiaries or designated groups in existing market structures within South Africa's finance-led Minerals-Energy-Complex (MEC). This integration mostly occurs in carbon intensive sectors that have concentrated markets. It is important to move beyond this approach and equally focus on enhancing designated groups economic participation in new or emerging sectors. For example, strengthening targeted support interventions for black-owned manufacturers in the renewable energy and hydrogen sectors. Identify existing market entry barriers for these entrepreneurs and use both competition and policy interventions to address them. Climate finance — both domestic and international — must be leveraged to support this new growth path. South Africa has already secured pledges through the Just Energy Transition Partnership (JETP), but these funds must be deployed in ways that support inclusive, transformative outcomes. This means building project pipelines that reflect community needs and ownership, investing in human capital, and ensuring transparency and participation in how funds are allocated. This finance should not be based on conventional finance risk assessments that create barriers for black-owned enterprises aiming to undertake economic activities which support long-term industrial development. It must be concessional and include grants, low-interest loans and co-investment instruments. But finance alone is not enough. This transition requires vision, coordination, and leadership. The state must take a central role — not in crowding out the private sector, but in setting the direction, shaping markets, and ensuring that the benefits of the transition are widely shared. Labour, civil society, and communities must be active partners in this process, not passive recipients. This is what a 'just transition' truly means — not just protecting existing jobs, but creating new, better ones; not just managing change, but using it to build a fairer society. South Africa's NDC gives us the scaffolding to start this transformation. But scaffolding alone does not build the house. If implemented with ambition and clarity of purpose, the NDC can become the foundation for a new, inclusive economy - one that is low-carbon, high-employment, and profoundly just. The question before us is not whether we transition — but how, and for whom. Lebogang Mulaisi is the executive manager for policy and research at the Presidential Climate Commission. Her work focuses on labour market dynamics, industrial policy and climate justice. Dr Khwezi Mabasa is the economic and social policy lead at Friedrich Ebert Stiftung South Africa and a part-time sociology lecturer at the University of Pretoria. His work focuses on labour studies, political economy and racial capitalism.
