Tensions abound

Tensions between the US and South Africa escalated in February, with President Trump issuing an executive order to suspend all US funding to South Africa. The White House cited concerns around new legislation on land policy (Expropriation Act) and the country’s International Court of Justice (ICJ) case against Israel. Towards the end of the month, the US served notices to several South African organisations, that the withdrawal of US aid, including aid to the President’s Emergency Plan for AIDS Relief (PEPFAR) programme, would become final. Amidst the headlines, US Secretary of State, Marco Rubio also announced he would not be attending G20 meetings in the country.

Government unveiled a new mining cadastral system at the Mining Indaba, including a prototype, which should improve the management of mining rights and exploration for the industry. Furthering private sector involvement, Transnet Terminal Ports Authority (TNPA) signed several terminal operator agreements with private operators at Richards Bay. National Treasury published welcome amendments to regulation that governs public-private partnerships (PPP) which should expedite progress on public-private collaboration, in particular for infrastructure investment. South Africa hopes to exit the Financial Action Task Force (FATF) grey list in 2025, having made progress on 20 out of 22 items on the FATF list. The outstanding items include enforcement of regulations, notably prosecution and penalties.

Headline inflation for the year to January 2025 printed at 3,2% from 3,0% the previous month, the first print using the new inflation basket. Core inflation decreased to 3,5%. Housing and utilities caused upward pressure, while food inflation remained benign at 1,5% from 1,7% y-o-y the prior month. Producer inflation increased in January, printing at 1,1% y-o-y, ahead of market expectations. The 2025 Budget speech was postponed to 12 March following a lack of agreement from Cabinet on certain revenue measures, notably a proposed 2% increase in VAT. The FTSE/JSE All Bond Index gained a modest 0,1% in February, with the market digesting the delay and implications of the Budget. The property sector retraced by 0,3%, perpetuating a weak start to the year. The Rand held ground over the month, depreciating by a marginal 0,1%, despite volatile trading conditions.

Local equity markets had a muted month, with the FTSE/JSE All Share flat at 0,0%. Notably, industrials gained 3,4% and financials held steady at 0,8%. Resources lost ground (-6,2%), reversing some of the previous month’s strong returns. Similarly, small cap stocks (-4,6%) and mid caps (-4,2%) underperformed large cap stocks in February.