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South Africa Reserve Bank repo rate forecast report September 2021

97% of economists say that the South African Reserve Bank will hold the rate.

Key findings

  • All but one panellist (97%) believes that the MPC WILL hold the repo rate at the September meeting.
  • While 93% think SARB SHOULD move it, with 3% saying the rate should be an increase or decrease.
  • 62% of the panel say the slow recovery of employment rate is preventing SARB from rasing the rate.

Meet the panel

Lebohang Liepollo Pheko, Four Rivers, Managing DirectorJeff Schultz, BNP Paribas, Chief economistStan Du Plessis, COO, Stellenbosch University
Shergeran Naidoo, BankservAfrica, Stakeholder Engagement ManagerMike Schussler, Zerihun, Tshwane University of Technology, Senior Lecturer
Andrea Masia, RMB Morgan Stanley, Senior EconomistElna Moolman, Standard Bank, Head of SA macro researchHerschel Jawitz, Jawitz Properties, CEO
Christie Viljoen, PwC, Senior EconomistPieter du Preez, NKC African Economics, Senior EconomistMaarten Ackerman, Citadel, Chief Economist
Reezwana Sumad, Nedbank, AnalystPeter Worthington, Absa, Senior EconomistHugo Pienaar, BER, Chief economist
Isaah Mhlanga, Alexander Forbes, Chief EconomistKieran Stephen Siney, ETM Analytics, Co-Head of Financial MarketsElize Kruger, Carpe Diem Research Services, Independent Economist
Chiedza Madzima, Fitch Solutions, Head of Global Operational RiskSifiso Skenjana, IQbusiness, Chief EconomistDawie Roodt, Efficient Group, Chief Economist
Miyelani Mkhabela, Antswisa Transaction Advisory Services, Managing Partner and Chief EconomistJohan Coetzee, University of the Free State Senior lecturer, Department of Economics and Finance and UFS Business SchoolAdrian Saville, Gordon Institute of Business Science, Professor
Jannie Rossouw, Wits Business School, Professor Frank Blackmore, EFConsult, Chief EconomistAnnabel Bishop, Investec, Chief Economist
Sanisha Packirisamy, Momentum, EconomistPeter Attard Montalto, Intellidex, Head of Research

The September repo rate decision

All but one panellist (97%) on Finder’s South African Reserve Bank (SARB) repo rate forecast report believe that the SARB’s Monetary Policy Committee (MPC) will hold the rate when it meets in September 2021.

To that end, 93% of the panel believe this is the right decision, with only 6% saying that the rate should decrease or increase. This is a shift from the previous survey when 5% said the rate should rise and 16% thought there should be a cut.

COO of Stellenbosch University, Stan Du Plessis, says that inflation is the major factor for holding rates where they are:

"Inflationary pressure appears to be rising in the economy and there are signs of economic recovery. This suggests that the period of highly accommodating monetary policy can be phased out, but I would urge a cautious approach in that direction. I would hold off till we see further signs of economic recovery."

While stakeholder engagement manager at BankservAfrica, Shergeran Naidoo, also predicts that rate will hold, he says that SARB is in a tough spot: "Inflation is high; and therefore, they should increase rates; Growth is dismal; therefore, they should decrease rates... they are between a rock and a hard place."

Head of SA macro research at Standard Bank, Elna Moolman, doesn't believe that the situation is quite as bleak:

"We see the inflation outlook as benign enough for the SARB to continue supporting the economic recovery in a prudent manner. In our view, the SARB can and should delay interest rate hikes till 2022."

Professor at Gordon Institute of Business Science, Adrian Saville, is the lone panellist that thinks that rates should rise by 25 basis points saying, "SARB is behind the curve in terms of inflationary pressure. Also, [the] Fed is on the cusp of hiking, and this needs to be fully anticipated (preemptive)."

For EFConsult Chief Economist, Frank Blackmore, "Until real sustainable inflationary forces present themselves, policy rates should be on hold. There is too much COVID and other based uncertainty in markets to have a clear direction for prices."

What is stopping a rate rise?

The majority of the panel (62%) cite the slow recovery of employment as the driving factor behind the rate not raising this year. Other major factors cited by our panel were that inflation will be contained in 2021 (55%), accommodative US monetary policy (45%) and civil unrest (38%).

Investec chief economist, Annabel Bishop, pointed to civil unrest and the slow recovery of the employment rate.

"The setback to economic growth from the civil unrest in July will have reduced appetite for interest rate hikes this year from all but the most diehard of inflation targeters, and with inflation in any case likely to be fairly well contained next year as well – the SARB's current key forecast period in its inflation-targeting framework."

Alexander Forbes chief economist, Isaah Mhlanga, says oil prices are a big contributing factor.

"Oil prices were a big contributor to the recent rise in inflation; however, the outlook shows that oil prices will not continue to rise. The US Fed is also not in a rush to withdraw monetary policy support thus there is still room to keep policy support," he said.

Will GDP​​ expand 4.2% in 2021?

Earlier in the year, GDP was forecast to expand by 4.5% but events such as civil unrest and the cyber-attack on South Africa's ports operator forced the central bank to revise its expectations to 4.2% in 2021. The majority of our panel agree with the forecast, with 66% believing GDP will grow by 4.2%.

Those disagreeing with the statement see GDP hitting 3.63% on average. RMB Morgan Stanley senior economist, Andrea Masia, is the most bullish on the growth of South Africa's GDP saying it will expand 4.80%.

"Following the GDP data revisions and bounce back in August PMI, we expect 2021 GDP to print 4.8%," Masia said.

At the other end of the spectrum is PwC senior economist, Christie Viljoen, with a forecast of just 2.50%, but he says that there are a number of reasons why their prediction comes in well under the 4.2% forecast from SARB.

"PwC is aware that our 2.5% figure for 2021 is at the lower end of the range of forecasts currently available. For example, the SARB said in July it expects the economy to grow by 4.2% this year. However, the central bank admitted in its latest Monetary Policy Committee (MPC) statement that recent unrest, the impact thereof on the vaccine drive, a longer-than-expected lockdown, limited energy supply (i.e. electricity load-shedding) as well as policy uncertainty 'pose downside risks' to economic growth. It is likely that the major difference between the SARB's current forecasts and our own projections is that PwC has already incorporated more adverse impacts from these downside risks into our assumptions."

Somewhere between these two predictions is head of global operational risk at Fitch Solutions, Chiedza Madzima, who expects growth to be around 3.5%. However, many of her points echo that of the lower prediction from PwC:

"Growth will be driven by a recovery in private consumption and an improved external environment, which will boost demand for South Africa's commodity exports. Risks to economic growth remain weighted to the downside this year due to the uncertain outlook on COVID-19 spread, vaccination progress and the related risk of lockdown restrictions. In addition, the risk of social unrest recurrence and stuttering reform momentum will weigh on already downbeat business sentiment."

The future of the employment rate

Employment was decimated in 2020 and a recent report from PwC found that South Africa has only recovered a fraction of the jobs lost last year. Trading Economics data suggests the employment rate was at 42% in 2020 before the pandemic hit, before dropping to 36% shortly after. And the employment rate isn't expected to recover any time soon, with just 15% of the panel saying the employment rate will return to 42% by the second half of next year at the earliest.

Two large cohorts, both with 30% of the panel, say that the employment rate will hit that target in either 2023 or 2025. 15% of panellists think South Africa will achieve this target within the next few decades, while one panellist, Intellidex head of research Peter Attard Montalto, doesn't think it will ever get there.

Mulatu Zerihun, senior lecturer from Tshwane University of Technology, says that the employment rate should recover by the second half of 2022. Zerihun, who was also the only panellist who said the rate will and should be cut (by 0.5 bps), also thinks a repo cut is key to solving the issues with unemployment.

"Decrease the repo rate so that investors' and consumers' confidence may increase and hence contribute towards economic recovery. The country should maintain credible and consistent macroeconomic policies."

Kieran Stephen Siney, co-head of financial markets at ETM Analytics, says that employment should recover by 2023, with the vaccine leading the charge.

"The vaccine rollout is paramount to the economy being fully reopened, which is required for a full recovery in labour market dynamics. Therefore, it is imperative that the government continues to increase the pace of vaccinations in the months ahead. Structural reforms are also needed."

Senior lecturer at the University of the Free State, Johan Coetzee, also thinks that 2023 is attainable but cleaning up corruption is paramount.

"Root out corruption and send a strong message that corrupt behaviour will be dealt with severely. The state needs to become 'leaner and meaner' – that is, both more efficient and effective at delivering on its mandate. I do not see this happening, however, especially as local government elections loom."

Professor Jannie Rossouw of Wits Business School is one of two panellists who say the employment target is achievable by 2024. He hinged his forecast on the review of labour legislation and the replacement of BBBEE with Black Economic Skills Transfer (BEST).

Elize Kruger, an independent economist at Carpe Diem Research Services, doesn't think the unemployment rate will rebound until 2025 and the only way of doing so is through deregulation and other economic stimuli.

"The only sustainable solution to boost employment is to aggressively stimulate economic growth. Reduce restrictions on the private sector, reduce administered prices, lower data costs, reduce red tape for SMMEs and provide policy certainty. In essence, the state must provide a favourable environment for businesses to thrive and make a profit and then job creation will follow."

Those predictions are downright near term compared to those of Miyelani Mkhabela, managing partner and chief economist at Antswisa Transaction Advisory Services, and Sifiso Skenjana, the chief economist at IQbusiness, who believe that unemployment won't fully recover until 2026-2030 and 2031-2040, respectively.

For Mkhabela, getting jobs back on track will require South Africa to focus on trades.

"Rebuilding the manufacturing and agricultural/agroprocessing sector is a solution for job creation. South Africa has mineral resources to use in its material production and the metals can be used to produce materials on demand while the world is transitioning to environmentally friendly products. We see more opportunities for South Africa than crisis, the country has potential but it needs an economic strategy that will prioritise expansion, not survival."

The reason Skenjana is so pessimistic about the recovery has to do with the digital divide:

"Historically, jobs have not recovered at the same pace as the economy, and with the digital divide keeping youth further away from real economic participation, we can expect at least a decade before we are able to recover lost ground from a jobs point of view."
How long will the buying boom last?
South Africans are buying homes at a greater rate than pre-pandemic and this isn't something the panel expects to end anytime soon. However, it's fairly tight on when they see this trend ending, with 33% saying it will continue for the next 3-6 months, 30% saying the next 12 months and 30% saying it'll last longer than a year.

BNP Paribas chief economist, Jeff Schultz, who predicts 3-6 months, puts the continued growth down to the "record low-interest-rate environment."

Nedbank analyst, Reezwana Sumad, also predicts 3-6 months, suggesting the current low-interest-rate environment won't last forever.

"Higher interest rates in 2022 are likely to dampen demand for mortgages," she said.

Lebohang Liepollo Pheko, the managing director at Four Rivers, also thinks that interest rates are behind this as well as other factors, including a modest inflation rate, but she thinks that this boom could last the next 12 months:

"It is a buyers' market, interest rates are low, inflation is still modest and after many years, people who can afford to buy property feel that real estate is a safe-ish nest egg over the next couple of years, including as an investment."

CEO of Jawitz Properties, Herschel Jawitz, shares a similar sentiment, also thinking the buyers' market will go for 12 months as "low interest rate, good bank lending and property prices that are offering excellent value for buyers."

Mike Schussler from says that the market will hold longer than a year adding that "due to low-interest rates, buying should continue."

Siney agrees the market will continue on this path for longer than a year, mentioning the changing dynamics of working from home spurred by the pandemic.

"Structural shift in work dynamics with companies likely to adopt a hybrid of in-office and at-home work in the years to come," he said of his forecast.

Will the housing boom affect rentals?

Over half (54%) of our panel believe that current home buying rates are affecting the rental market in a negative way, with a further 25% saying it's having no effect and 21% unsure.

Citadel chief economist, Maarten Ackerman, is not buying the hype, saying that "the rental market remains attractive especially where first-time buyers don't have the required deposit." Efficient Group chief economist, Dawie Roodt, agrees, though for different reasons, saying it "will mostly be neutralised by falling income."

On the other side of the argument are both Peter Worthington, senior economist at Absa, and Sanisha Packirisamy, Momentum economist, who say that rental inflation is weak right now.
Image: Getty

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