A focus on reforms
The Medium-Term Budget Policy Statement (MTBPS) highlighted weaker fiscal metrics, a result of reduced revenues in addition to increased expenditure. Over the medium-term, additional funds were allocated for repayment of SANRAL debt, adjustments to Social Relief of Distress (SRD) grant and an early retirement programme for public sector workers. Despite the deterioration in budget figures, a primary balance was still achieved, and debt consolidation remains intact. High debt service costs remain a constraint, while risks, such as SOE support and a higher public sector wage agreement remain. No support was extended to Transnet in the MTBPS, but challenges (financial and operational) remain significant even with reforms underway. 

Progress on reforms took the spotlight over the month. The National Transmission Company of South Africa (NTCSA) was formally launched. While still a wholly owned subsidiary of Eskom, it nonetheless pushes energy reforms forward. Transnet (and port reforms) suffered a defeat as the Durban High Court ruled in favour of AP Moller Maersk, the company that contested the bidding process that saw the concession of Durban Pier 2 awarded to the Philippines port operator ICTSI. 

New visa regulations were gazetted, formalising the Remote Worker Visitors Visa and the introduction of a Points-Based System for Work Visas. 
 

Domestic assets waned against a volatile global backdrop. Interest rate sensitive assets weakened against the increase in global bond yields. The FTSE/JSE All Bond Index weakened 2,2%, also reflecting a less than encouraging MTBPS. After a period of strength, the property sector declined by 2,8%. The Rand depreciated against a stronger US dollar by 1,7%, bringing the appreciation year to date to 3,4%.

Local equity markets also lost ground over the month, with the FTSE/JSE All Share returning -0,9%. Resources bucked the trend with positive returns of 2,5% while industrials (-3,0%) and financials (-0,7%) weakened. A strong showing in precious metals was a key driver in the recovery in resources, with strong returns across companies, including Northam, Implats, Sibanya, and Amplats. Small (0,1%) and mid cap stocks (0,5%) outperformed large capitalisation stocks (-1,1%).

The announcement from the National Development and Reform Commission (NDRC) did not meet expectations in terms of scale, although investors acknowledged the remit of the entity did not extend to new spending.