And welcome back to the latest instalment of your favourite Weekly Rand Review.

It was a relatively thin week of economic data, with local investors' focus firmly set on the inflation results due on Wednesday to gauge the success of SARBs interest hiking agenda in attempting to tame the price pressures consumers and businesses are evidently experiencing.

The price growth in South Africa is being stoked by power cuts, currency weakness, and logistical network constraints that are sapping the country’s economic growth prospects...

…all of which, still, have no definitive path to rectification.

Inflation results were the order of the day over the last week, as countries from across the globe hoped to follow in the footsteps of the US, who delivered positive inflation readings a week earlier.

Let’s get into it.

Key Moments (17-21 Apr 2023)

Here's what made the headlines last week:

• Local Inflation Woes - On Wednesday, Statistics SA released its latest data results for consumer price inflation in South Africa, which showed an increase in February, as prices for food and beverages continue to soar.
• Business and Retail Dip - Local business confidence and retail sales both took a knock, according to reports in the week, adding to the narrative that SA is likely already in the midst of a mild technical recession.
• De Ruyter To Testify - After over a month since his interview with the eNCA, a date has finally been confirmed for former Eskom CEO Andre De Ruyter to appear before Parliament to unpack his claims of corruption at the state’s power utility.
• European Inflation Improves - Inflation results from the EU and UK were also released in the week, showing signs of improvement; however, the UK is lagging behind most European Nations, with inflation still in the double-digits.

After a rare stint in the green in the previous week, the Rand got going on Monday at R18.06/$, level on its previous close.

However, in what’s become something of a theme in recent weeks, the local unit was set on the back foot early as Eskom announced that Stage 5 loadshedding would be implemented until further notice, owing to additional breakdowns at several plants.

By lunchtime, the Rand was already back above R18.15/$ and continued to climb to the week’s high of R18.33/$ by the evening.

The latest developments in the ongoing saga between the ruling party and former Eskom CEO Andre De Ruyter took a new turn, too, as a date has now been confirmed for Mr. De Ruyter to appear before Parliament…

…with the expectation that he will need to provide evidence of the allegations he made over a month ago in an exclusive interview with the eNCA.

To recap: De Ruyter mentioned that there were senior politicians involved in corruption, including links to cartels that were essentially bleeding the power utility dry. The date has been set for the 26th of April, 2023 (this Wednesday). Remarkably, when asked about the identities of the officials, President Cyril Ramphosa said that he had not been informed as to the identity of the accused politicians …

…and that neither the national advisor, Sydney Mufamadi, nor the Minister of Public Enterprises, Pravin Gordhan, had briefed him on the issue.

Really, Mr. President?

With two senior officials within the ruling party potentially implicated in what could be South Africa’s greatest failure on record, would the leader not demand names (and heads), as they are entitled and expected to do as a head of state??

Needless to say, most onlookers were left speechless, but what is for sure is that we’re in for a few more shocks, and Wednesday’s meeting between Scopa and De Ruyter could be telling.

On Tuesday, the dollar lost ground on indicators that the US Fed may consider increasing rates in May, bringing gains for most emerging economies, along with the Rand, which dropped to the mid R18.10s ahead of the only local data release for the day, the business confidence index.

As it turned out, South African business confidence fell further in March, to 111.3 from 111.9 a month earlier.

The South African Chamber of Commerce and Industry (SACCI) also mentioned in their statement following the data release that the lagged and knock-on effects of electricity constraints on the economy and business confidence were of major concern.

Several banks echoed the sentiment, warning that the increase in operational and production costs due to loadshedding would affect employment, wage gains, and overall corporate margins….

…while inflated debt-servicing costs and lower consumer confidence would likely result in muted household consumption expenditure over the near to mid-term. Overall, a bleak outlook for local businesses.

Heading to the all-important inflation results on Wednesday, the Rand edged back above R18.30/$, with most economists predicting a drop to 6.8% from 7.0% in February.

But, as is often the case, they were wrong!

Consumer inflation in South Africa rose unexpectedly to 7.1% in March year-on-year, while the monthly increase was recorded at 1%, the most significant monthly jump since July 2022. To add to the gloom, the data revealed that food inflation peaked at 14.4% over the period, marking its highest level since March 2009! Transport costs also increased by 8.9%, while school fees ticked upward notably by 5.7%.

The already hefty (and still increasing) price tag of food items is becoming an unwelcomed trend that is inflicting huge hardship on poor and working-class Saffers…

…and the effects are clearly overspilling into the wider retail sales space, as results showed in the week.

Not long after the CPI results, Stats SA dropped another round of poor data points, showing that local retail sales decreased by 0.5% in the year to February, following in the vein of the previous week's poor mining and manufacturing output results.

The main contributors to the retail sales’ demise were general dealers and retailers in hardware, paint, and glass, while clothing and textiles experienced an increase in performance.

Another indication that the country slipped into a mild recession in Q1 this year?

As a result, markets are now pricing in higher chances that a 25 basis point hike may be incoming at the next MPC meeting in May, which would take the central bank's total to 450 basis points of tightening since November 2021. With the possibility of further rate hikes back on the cards, the Rand gained some support and dropped back into the mid-R18.10s and maintained form overnight.

The greenback weakened again on Thursday, leading to gains for the local unit, which briefly dipped below the psychological barrier of R18/$, but settled just above it with no major domestic economic data releases due on the day.

With inflation readings coming in thick and fast in the week, let’s take a quick look at some of the other readings from across the globe.

• The EU was given reason to cheer in the week as inflation was recorded at 8.3% in March, down from 9.9% a month earlier. Luxembourg, Spain, and the Netherlands recorded the lowest annual rates of inflation at sub-5% levels, while Hungary and Latia are still above 15%. The overall drop in inflation will certainly provide some relief to policymakers who have been grappling with rising inflationary pressures for over a year.
• Meanwhile, over in the UK, inflation has proven much stickier to contend with, dropping to just 10.1% from 10.4% a month earlier but still way above the projection of 9.2% provided by the Bank of England in February. Food prices were a staggering 19.1% higher in March than a year earlier, the biggest such increase since 1977! The UK's headline inflation is now the out-and-out highest in Western Europe.

With the weekend in sight, the Rand was on course for another week of minor gains, entering Friday at R18.05/$...

…but (almost inevitably), Eskom had the final say on the Rand’s performance, increasing loadshedding to Stage 6 until further notice due to more breakdowns at Tutuka, Kriel, Duvha, and Kendal power stations overnight.

That, combined with increased expectations that the US Federal Reserve will increase rates once more in May, was enough to see the Rand weaken steadily through the day and eventually close around R18.10/$...

…slightly worse off from where it began the week.

A disappointing end to a challenging week!

The Week Ahead (24-28 Apr 2023)

New week. New data. Here’s what we’ll be focusing on this week:

• SA - PPI YoY (MAR), Balance of Trade (Mar)
• EU/UK - EU Consumer Confidence Final (Apr), GDP Growth Rate YoY Flash (Q1)
• US - CB Consumer Confidence (Apr), Durable Goods Orders MoM (Mar), GDP Growth Rate QoQ Adv (Q1), PCE Price Index YoY (Mar)

A shorter trading week is incoming locally, as South Africa celebrates Freedom Day this week, but there is no shortage of data points to keep us on our toes as April draws to a close. Following the poor inflation reading, Saffers will now have to come to terms with the reality that the Reserve Bank’s hand may be forced into raising interest rates further on May 25th …

…if that were to be the case, while it may bring some good news for the Rand, it will not for consumers and businesses.

Tricky times ahead - Thankfully, our forecasting models are on hand to help you through.

Check them out, and we’ll see you next week!

Please take our Rand forecasting service for a test-drive!

This will give you access to the same charts we are to give us and our clients the likely direction of the Rand - ahead of time, enabling you to make educated and informed decision.

Simply use the link below to get access now. No charge. No card. All yours to trial for 14 days.

If you have any questions or feedback, please leave them below.

To your success~

James Paynter

P.S. Enjoyed this Weekly Rand Review? Click here to get our Weekly Rand Review in your inbox every Monday