Latest news with #DavidMasondo
The Citizen
29-05-2025
- Business
- The Citizen
What the strong rand means for inflation and monetary policy in 2025
A stronger currency makes South African export products less competitive which leads to reduced manufacturing and agricultural revenue generation. South African economic conditions in May 2025 received their influence from the rand's rising market value. The recent increase of the rand to 18.05 against the US dollar marked its highest point in five months and brought market participants and investors to express their interest and optimism. Deputy Finance Minister David Masondo announced that the government will introduce new inflation targeting methods while currency strength continues to rise. Individuals who are new to global currency markets now ask: What is forex trading and what is its relation to recent economic developments? Foreign exchange trading also known as forex trading functions as an activity that involves currency trading for profit generation through rate fluctuations. Traders evaluate currency pair value movements by studying economic and political influences on currency markets. The economic strength of South Africa depends on its external trade because the value of the rand affects both local prices and market attitudes. A strong currency tends to decrease the price of foreign imports and domestic materials thus reducing domestic inflation. A stronger currency makes South African export products less competitive which leads to reduced manufacturing and agricultural revenue generation. The South African Reserve Bank (SARB) sets its inflation target at 3% to 6% as its monetary policy goal. The consumer price index held steady within the target band in February 2025 at 3.2% according to March 2025 data. The central bank maintains optimism because of stable economic conditions although multiple obstacles persist. During the present situation SARB has chosen to keep its key interest rate at 7.5% due to international market instability alongside currency market changes. The central bank takes a conservative position to achieve price stability while supporting the economy which shows through this monetary policy choice. Global economic conditions play a significant role in shaping how monetary policy authorities operate their decisions. The economic conditions of major countries and price changes in commodities together with geopolitical tensions create effects throughout emerging markets starting with South Africa. The strong South African rand protects against imported price increases but makes it challenging for policy makers to boost economic growth through export promotion. The choice between controlling inflation by increasing interest rates becomes challenging because it would boost foreign capital inflows and strengthen the rand while potentially harming domestic businesses and employment. The South African Reserve Bank (SARB) under Governor Lesetja Kganyago shows signs of moving toward a more restricted inflation target range within the 3–6% range. The exact terms of this potential change remain hidden, but such a modification would help South Africa match international best practices by setting clear and narrow inflation targets. The market reacted favorably to these hints because they demonstrated the government's dedication to establishing long-term economic stability. The future path contains multiple obstacles that need to be overcome. The South African economy faces multiple structural problems because it deals with elevated joblessness as well as poorly performing state-owned enterprises and stagnant private sector funding. Experts predict that economic growth will amount to 1.7% during 2025 due to domestic obstacles and worldwide market challenges. The current strong rand fails to boost consumer confidence and public finances remain strained. The current rand strength creates mixed effects for monetary policy implementation. The SARB has more flexibility to keep interest rates stable due to cheaper imports from inflation reduction. Excessive currency strength results in negative impacts on export industries which produce unfavorable trade outcomes that ultimately reduce GDP growth. The SARB faces an undesirable situation because inflation stays low while the economy demonstrates potential stagnation. Foreign capital flow behavior remains in a state of unpredictability. The rand's appreciation indicates investor optimism, but such gains could easily reverse due to international disturbances. Emerging markets tend to experience capital flight because investors tend to move to safe developed market assets during periods of market uncertainty. The SARB must take emergency measures if either domestic policy errors or worldwide economic crises cause a rapid weakening of the currency. The energy supply challenges of South Africa significantly affect the economy. Early 2025 has seen reduced load-shedding instances but domestic production continues to face reliability challenges due to power issues. Business usage of expensive power sources beyond the national grid during power outages would increase both production costs and inflation rates. The future performance of the rand depends on both national policy decisions and changes in worldwide economic conditions. Oil prices together with US monetary policy decisions and Chinese commodity demand patterns and local political events will determine the currency's performance. A period of stronger rand benefits South Africa when the country executes reforms that promote productivity growth and attract investments and build modernized infrastructure. The powerful rand creates a special chance for South African development throughout 2025. A strong rand provides both lower inflation rates and greater flexibility for monetary policy and indicates positive investor views about South Africa's upcoming direction. The benefits of the strong rand come with specific trade-offs. Exporters face obstacles while economic growth remains subdued, and the worldwide economic situation remains unpredictable. The upcoming period will evaluate the SARB's skill to achieve appropriate currency support while protecting the real economy. Proper management during this period offers a critical opportunity to create lasting financial and economic stability for South Africa.
Reuters
21-05-2025
- Business
- Reuters
South Africa inflation rises slightly to 2.8% y/y in April
JOHANNESBURG, May 21 (Reuters) - South Africa's headline consumer inflation rose marginally to 2.8% year on year in April from 2.7% in March (ZACPIY=ECI), opens new tab, data from the statistics agency showed on Wednesday. In month-on-month terms inflation was at 0.3% in April, compared with 0.4% in March (ZACPI=ECI), opens new tab. Economists polled by Reuters had forecast annual inflation would remain steady at 2.7%, below the central bank's 3% to 6% target range. Deputy Finance Minister David Masondo said last week that a new inflation target could be announced soon, leading to speculation that it could feature in Wednesday's budget presentation. The prospect of a lower inflation target has lifted the rand , with economists saying a lower target would reduce the likelihood of further interest rate cuts. The next monetary policy announcement by the South African Reserve Bank is due on May 29.
Business Recorder
16-05-2025
- Business
- Business Recorder
South African rand eases from five-month high
JOHANNESBURG: South Africa's rand eased from its strongest level in five months on Friday, a dayafter a minister said that a new inflation-targeting plan was imminent. At 1425 GMT, the rand traded at 18.095 against the dollar , about 0.4% weaker than its previous close. It hit 17.9925 per dollar in the morning session for the first time since mid-December. Markets welcomed Deputy Finance Minister David Masondo's comments at an investor conference on Thursday that anannouncement would be made 'very soon' about South Africa's inflation-targeting regime. The central bank's current inflation target is a 3-6% range and its governor Lesetja Kganyago has for years argued for a lower target. 'With little data on the economic front, markets' attention will likely remain on international geopolitics,' said AndreCilliers, currency strategist at TreasuryONE. South African rand recoups losses, power cuts in focus President Cyril Ramaphosa is scheduled to meet his U.S. counterpart Donald Trump next week in a bid to reset strained ties. Ramaphosa's spokesperson Vincent Magwenya told the broadcaster SABC late on Thursday that the visit would be short and would not involve a large delegation. On the stock market, the Top-40 index was up 0.2%. South Africa's benchmark 2030 government bond was marginally stronger, with the yield down 0.5 basis point to 8.865%.
Daily Maverick
15-05-2025
- Business
- Daily Maverick
State still owns the infrastructure tracks while private investors line up at the station
For years, clogged ports, crippled freight corridors and an ailing rail network have choked the economy. Now, the state is opening up the door for private sector participation with one hand still on the latch. South Africa's long-delayed transport reforms are finally leaving the station in a stop-start slog along tracks groaning under decades of decay. 'For at least 15 years, our economy has not grown at a rapid enough pace to enable rising incomes and increase employment,' Deputy Minister of Finance David Masondo said at RMB's Think Summit 2025. Low growth, he added, has starved the state of resources to invest in critical infrastructure like roads, rail, water pipes and ports. 'There is significant evidence, in our own work as National Treasury, that the constraints on growth in South Africa are structural,' Masondo said. 'They require far-reaching reform of our network industries and change in the structure of our economy to increase potential growth.' And it looks like the logistics logjam, at least, is starting to crack. Unbundling Transnet Phase II of Operation Vulindlela, the state's flagship reform drive, is where the gears are finally grinding into motion. Masondo pointed to electricity as the poster child of what's possible when state monopolies are disbanded, saying that liberalising the electricity sector had unlocked 'trillions of rands' in new investments. 'A similar process is unfolding in the logistics sector, where we are on the cusp of introducing open access to the freight rail network to allow private rail operators to compete with Transnet,' he said. This is a model already playing out across other essential sectors. 'At a national level, we already have a high level of private sector investment. More than 60% of the 100 billion-odd worth of national water infrastructure projects that we currently are implementing are financed by the private sector,' said Dr Sean Phillips, director-general of the Department of Water and Sanitation. Private sector collaboration also plays a critical role in electricity transmission. 'The reality is that all the infrastructure that we build is delivered by the private sector. That's just the way it is. As an entity we don't manufacture, we don't do construction; it's all done by the private sector,' said Segomoco Scheppers, CEO of National Transmission Company of South Africa. In December 2024, Transnet published its final Network Statement, a document that sets the rules of the game for private sector involvement in the rail industry. The state-owned freight transports and logistics company is also being unbundled, separating the infrastructure manager from operations, mimicking Eskom's structural reforms. An independent Transport Economic Regulator (TER) is being established with a mandate to oversee the regulation of the entire transport sector and oversee open access and regulate tariffs. The network will, however, remain state-owned, said Minister of Transport Barbara Creecy. In 2024, Transnet reported a loss of R7.3-billion despite a revenue increase of 11.6% to R76.7-billion. (Graph: Transnet Annual Financial Statements 2024) Concessions, co-financing or BOT? But how, exactly, will the state pull in private cash without losing control? The answer, according to Creecy, is a 'menu' of models. 'There's an appetite to come back to South Africa,' she said, pointing to the cost advantage rail has over trucks. But investors shouldn't expect a free-for-all auction. 'I think the comparable model could be Sanral, where there was … a 30-year concession,' said Creecy. 'Obviously, concessionaires will have to charge tariffs that are determined by the regulator.' That's just one option on the table. Creecy described a buffet of possible models: Build-Operate-Transfer (BOT) schemes, co-financing deals via the Budget Facility for Infrastructure, or public-private partnerships (PPPs). The first test of investor appetite is already on the table. On 23 March, Transnet released a Request for Information (RFI) on five key rail and port corridors. This is a fishing exercise to gauge private interests, with Requests for Proposals (RFPs) expected by August. 'In June we hope to issue an RFI for passenger rail that will include operational areas such as signaling, depots and rolling stock as well as high speed rail corridors. This information will be used by Prasa to issue RFPs in October this year,' said Creecy. Nobody is expecting shovels in the ground tomorrow. Creecy admitted that it could take 18 months to two years to reach financial close on the RFPs. How does this affect you? When freight can't move by rail, it clogs the roads and your wallet feels it first. South Africa's creaking rail network has pushed more goods on to trucks, jacking up the cost of commodities like groceries and petrol. If the state's gamble to open the rails to private players work, it could bring down prices, take pressure off the road, and equate to more competitive exports. If it doesn't? South Africans will keep footing the bill in higher prices, fewer jobs and a stalled economy. No more 'bailouts' 'The National Treasury is not going to give bailouts to SOEs [state-owned enterprises any more,' Creecy said plainly. 'So, it means that you've got to apply through the budget facility for infrastructure on a project basis. And obviously, those facilities, it's some kind of low-cost loan.' In the meantime, short-term patch-up projects like collaborations between Transnet and private sector operators are being greenlit to get the worst of the network's bottlenecks unclogged. New regulations now allow private firms to collaborate with Transnet to repair and upgrade infrastructure. '[This is] to support cooperation between Transnet and the private sector in undertaking short-term interventions to address challenges while the longer-term reforms take effect,' Masondo noted. As the state scrambles to patch potholes in its logistics arteries, the private sector (and the economy) are still waiting for the trains to arrive. DM
IOL News
25-04-2025
- Business
- IOL News
David Masondo's mission: Running the 2025 Comrades Marathon to support Early Childhood Development
Deputy Finance Minister David Masondo aims to raise R25 000 for Early Childhood Development for the 2025 Comrades Marathon. Image: Supplied As the countdown to the 2025 Comrades Marathon begins, Deputy Finance Minister David Masondo is preparing to run the 2025 Comrades Marathon in support of Early Childhood Development (ECD). With a commitment to raising both funds and awareness for ECD, Masondo is running under the banner of Community Chest Durban and Pietermaritzburg. Masondo, who is running his seventh Comrades this year, considers ECD a pivotal investment in the future of South Africa. 'The first few years of a child's life lay the foundation for lifelong learning, health, and well-being. Yet, too many children in South Africa, particularly in underserved communities, lack access to quality ECD services,' he said. Having set an ambitious fundraising goal of R25 000, Masondo has just begun his campaign with an initial R300 already raised. He said all proceeds from this initiative will be directed towards educational, nutritional, and holistic care efforts for young children in under-resourced communities. Masondo stated that the Comrades Marathon is not just a test of stamina; it is also an opportunity to lead by example, demonstrating that personal action can make a real difference, even in positions of national responsibility. 'Early Childhood Development is one of the most powerful investments we can make in the future of our country. The first few years of a child's life lay the foundation for lifelong learning, health, and well-being. Yet, too many children in South Africa, particularly in underserved communities, lack access to quality ECD services,' he said. He believes that we can help break the cycle of poverty, improve educational outcomes, and build a more equitable society by raising awareness and supporting organisations that are working to address these issues. 'My decision to run this year's Comrades Marathon in support of ECD is my way of using this platform to shine a light on a critical area that often doesn't get the attention it deserves,' he said. In addition, Masondo stated that his Comrades' training is progressing well. 'This will be my seventh Comrades Marathon, so I know what to expect, but it is never easy. It requires consistency, mental focus, and a lot of early mornings.' The deputy minister said running for this cause keeps him motivated. 'Knowing that each step I take is helping to raise awareness and support for young children gives the journey even more meaning. I am looking forward to race day.' Gordon McDonald, executive director of the Community Chest, said the Comrades Marathon is a strong international brand and is ideally placed to highlight the plight of our vulnerable community members and the charities working to assist the poorest of the poor. McDonald said that it is an honour for Community Chest to have the deputy finance minister leading by example. 'Being in a position of responsibility to our nation, it is gratifying to note that he is also personally making a difference. With every step that he takes as he aims to complete 89.98km in the ultimate human race, he simultaneously cares for over 7 845 under-resourced children in KZN,' he said. According to McDonald, Masondo's fundraising endeavours will reach 65 ECD centres, supported by the Community Chest, in Pietermaritzburg and Durban. 'Every cent raised goes to help under-resourced children under the age of five, to ensure they receive the right nutrition, mental stimulation, and social and emotional development to prepare them for a successful future,' he said. McDonald thanked Masondo for "running with his heart" and supporting young children during the most crucial years of their development. 'His efforts will not only raise funds but increase the awareness of the work done by Community Chest to empower and enhance needy communities,' he said. The charity invited Comrades Marathon runners to join the deputy minister by signing up on Race4Charity for Community Chest. This year's down run from Pietermaritzburg to Durban on Sunday, June 8, will be slightly longer, covering 89.98km. Deputy Finance Minister David Masondo. Image: Supplied
