Facilitating long awaited partnerships

South Africa printed GDP growth of -0,3% in the third quarter of 2024. The figure disappointed relative to market expectations and was mainly driven by a meaningful contraction in the agriculture sector (-28,8% over the quarter). Beyond this print, economic data in Q4 has been mixed and activity gauges have been volatile, with periods of improvement but little persistence. Credit ratings agency, Moody’s, reaffirmed South Africa’s credit rating at two notches below investments grade with a stable outlook. Transnet’s financial results highlighted a challenged operational and financial backdrop, despite progress from reforms already reflecting in the numbers. Constructively, the entity issued the final network statement, including tariffs for private sector access to it’s network. Further advances can be expected from these long-awaited reforms which will also see a restructuring of Transnet Freight Rail. Eskom published its delayed financial results with a qualified audit opinion in late December. Outstanding debt from municipalities continues to grow at a worrying pace (+28% between March 2024 and November 2024), recording at R95bn at the end of November 2024. The municipal debt intervention programme has shown little success thus far.
 

Headline inflation for the year to November 2024 printed at 2,9% from 2,8% the previous month, below expectations and the SARB’s target range of 3– 6%. 

Core inflation decreased to 3,7%. Lower fuel prices contributed to the modest yearly print, while softer food inflation, contributed to the monthly decline. Food inflation moderated further to 1,6% from 2,8% y-o-y the prior month. Similarly, producer inflation for November surprised to the downside at -0,1% relative to market expectations, with the print still in deflationary territory. The fourth quarter BER inflation expectation survey showed a decrease in average expectations for consumer inflation, stabilising close to the 4,5% midpoint.

Despite the barrage of challenges the country has faced over the last year, domestic assets delivered credible results in 2024. The FTSE/JSE All Bond Index gained a modest 0,4% in Q4, holding up against a weakening global bond market. Domestic bonds, however, delivered one of their best calendar year returns in decades with returns at 17,2%.