Externalities

The US announced a 90-day suspension of funding for all foreign assistance, which includes aid to the President’s Emergency Plan for AIDS Relief (PEPFAR) programme. This has a meaningful impact on various healthcare initiatives across 50 countries, notably in Africa and particularly in South Africa. An emergency waiver has since been approved to allow access to HIV treatment, but many programmes are however still on hold. NERSA awarded Eskom tariff increases of 12,5%, 5,4% and 6,2% for the next three financial years relative to the 36,1%,11,8% and 9,1% the entity applied for. After a reprieve of ten months, loadshedding returned temporarily at the end of the month due to increased breakdowns.

Headline inflation for the year to December 2024 printed at 3,0% from 2,9% the previous month, below expectations and at the bottom of the SARB’s target range of 3– 6%. Core inflation decreased to 3,6%. Lower fuel prices contributed to the soft yearly print, while benign food inflation and modest housing inflation contributed to softer print relative to expectations. Food inflation recorded at 1,7% from 1,6% y-o-y the prior month. This brings headline inflation for 2024 to 4,4% relative to 6,0% recorded for 2023. Stats SA published an updated inflation basket with new items that reflect updated spending habits, including air fryers, e-hailing and power banks.
 

Producer inflation moved out of deflationary territory, printing at 0,2%, in line with market expectations. The Monetary Policy Committee (MPC) of the South African Reserve Bank (SARB) cut the bank’s key lending rate by 25bps, in line with expectations. Four members voted in favour of a cut, while two favoured a hold. The accompanying statement highlighting greater caution given global political developments and a weaker Rand.

The FTSE/JSE All Bond Index gained a modest 0,4% in January, holding up against a weakening global bond market. The property sector started the year on a weak note, recording -2,3%. The Rand appreciated by 1,1% over the month, despite volatile trading conditions.

Local equity markets had a positive start to the year, with the FTSE/JSE All Share returning 2,3%. Several trends that set the tone for returns in 2024, reversed in January. Notably, resources gained 17,9%, driven by returns from precious metals (29,1%) with noteworthy returns from gold producers and platinum stocks. Industrials (1,1%) held ground, but the paring back of interest rate expectations saw financials retrace (-2,7%).