Rand against the Ropes

The rand breached the R19/$ level today, hit by a toxic cocktail of load shedding and a deepening economic crisis, as well as interest rate concerns.

The Rand last traded at these levels during the height of pandemic-related market panic in April 2020, and may now be on a march to break through its worst level ever (R19.26/$).

Aggressive hikes in interest rates have also hurt the economy. While the Reserve Bank has insisted that this should help to tame inflation, the reality is also that South African interest rates need to remain competitive to protect the rand.

Investors are used to South Africa offering much higher interest rates than developed markets like the US, but following aggressive US rate hikes, that differential between the US and local rates has now shrunk, and South African rates are not that attractive anymore – which is compounded with the increased risk about the country’s economic outlook.

The rand’s latest battering comes amid growing fears that the power crisis is set to worsen, with talk of a grid collapse and a total blackout becoming more frequent among the chattering classes. South African media is rife with references to a ‘total blackout’ – a total collapse of the national energy grid. This anxiety is also reflected in the rand exchange rate, with the South African unit being one of the worst-performing emerging market currencies so far this year. There is simply no confidence left on this front, which is not a solid foundation for a currency.

On top of that, government’s support for Russia isn’t exactly helping the Rand. Pick n Pay chair Gareth Ackerman has become the latest business leader to lambast the government over its ties with Russia, warning the ANC’s support of the Eurasian military power threatened a trade agreement that allows SA exports to enter the US duty-free.

South African officials allowed a cargo plane targeted by U.S. sanctions for supporting Russia’s military efforts to land at an air force base near the capital, Pretoria, last week, a move that could further increase tensions with the United States. U.S. officials previously said the plane has been known to ship weapons for Russia’s defense forces.

The rand weakness could worsen South Africa’s worrying inflation situation, as imports like fuel will keep prices high. Food inflation currently stands at a 14-year high of 14.0%.

All of this has left the Reserve Bank in an impossible situation: interest rate hikes are harming a stricken economy, but it also has to fight inflation and protect the rand’s appeal.

In March of this year, the SARB implemented its ninth consecutive interest rate hike in this hiking cycle to bring inflation within its target range. The repo rate currently stands at a decade-long high of 7.75%. And we can expect another 25 to 50 basis points increase on the 25th of May.

The rand was trading at R20.77 to the euro and R23.91 to the pound at midday today.

So what can you do? Firstly, get rid of your debt. Prepare for another interest rate hike this month. Watch your spending. SAVE. For the rand to stabilise, a clear implementation plan is needed to solve the electricity crisis and logistical problems, and evidence that it is being put into action, so that the economy can grow and create jobs.

Stay Savvy,


Understanding the cost of dying

Leaving an inheritance after your death is something many people aspire to. However, the cost of dying and winding up your estate will reduce the inheritance your loved ones receive.

Everything you own and owe forms part of your estate at your death. You have assets like money, property, cars, furniture, timeshare, investments, and so on. You might also have liabilities like credit cards, bond accounts, personal loans, vehicle finance, clothing accounts, medical bills, and so on.

Consider the costs below to ensure that your deceased estate will have enough funds to pay the costs This will lessen the burden on your loved ones when something happens to you. Not all of the costs will apply to all estates.

Funeral, cremation or other services
At least R15 000 to R30 000 (but can be more expensive depending on requirements).

Note that you have to nominate a beneficiary on your funeral policy so that the beneficiary can receive the policy payment quickly to pay for your funeral. If you do not nominate a beneficiary, the money must be paid into the estate.

Executor’s fees
An executor is a person named in a will and appointed by the Master of the High Court to sort out the estate of the person who’s died. A direct family member can be appointed as estate representative by the Master to process estates worth less than R250 000. However, any estate with a value of more than R250 000 requires an executor to be appointed and a formal process to be followed.

Upon death the executor takes control over your assets by:
• selling or transferring them
• closing accounts
• settling debts
• distributing them to your beneficiaries

By law executor’s fees are up to 3.5% plus VAT. You can negotiate a lower fee with the executor, specifically on larger estates. If you are married in community of property (ICOP), the executor’s fee is calculated on the whole estate, not only the half deemed to belong to the deceased. Even though you might not need to pay estate duty, you still need to provide for the executor’s fee. On an estate of R2 million this alone can cost R80 500.

Estate duty
If the estate is worth less than R3.5 million, no estate duty is payable. Estates up to R30 million attract 20% estate duty and any amounts above R30 million attract 25%.

If you are married any unused portion of the primary rebate (exemption) on the first estate will roll over to the second dying’s estate. The tax exemption is up to R7 million in total (R3,5 million from the first dying spouse’s estate plus R3,5 million from the second dying spouse’s estate).

Assets left to a spouse are deductible from the estate duty calculation. There will therefore be no estate duty payable should the spouse be the only beneficiary of the estate.

Capital gains tax
This tax is payable on the gains made on assets that have to be sold or transferred to beneficiaries. No capital gains tax is paid on the first R300 000 at death. Only 40% of the balance of the gain is included in the capital gains tax calculation and this is then taxed at the deceased’s tax rate. This calculation can vary depending on who you leave the assets to as well as the asset type.

Income tax
Any income tax owed to SARS up to the date of death has to be paid. SARS will conduct an audit to ensure all the deceased’s taxes are up to date. Once this is done they will issue a tax compliance certificate, which will also allow the executor to finalise the estate.

Master’s fees
For estates worth less than R400 000, the fee is R600. Thereafter it is calculated on a sliding scale up to R7 000.

Fee on income earned by the estate
The executor can charge 6% plus VAT of the income earned after the date of death while the estate is being finalised. This includes rental income, interest, dividends and trading or farming income.

Advertising costs
Two advertisements are placed in a deceased estate. Costs depend on publications used but could be around R1 000.

Bank charges
The executor is required to open an estate bank account. Bank costs depend on the banking institution used.

Postage and petties
The executor is allowed to charge postage and petties of R260 plus VAT. Any courier charges will not form part of your postage and petties and will be charged to the estate as an additional administration cost.

Professional fees
To pay professionals to assist the executor with specific requirements, for example an accountant, conveyancer or tax consultant.

Estate agent’s commission
Can be negotiated but on average it is 7.5% of the sale of property.

Maintenance of estate assets
Any costs for maintaining assets while the estate is being wound up.

Valuation and appraisal costs
If required by the Master.

Transfer costs
Payable to a conveyancing attorney for property transfers from a deceased estate. Property transfers to beneficiaries are exempted from transfer duty payable to SARS.

Rates and taxes
Five months’ rates and taxes are payable in advance to the municipality to obtain clearance figures from the municipality involved.

Bond cancellation costs
Payable to an attorney where the bond account has to be closed and cancelled in the Deeds Office.

Claims against the estate
Hospital bills, bond, loan accounts, credit cards, clothing accounts, and so on.

Donations tax
20% on donations over R100 000 per year if the donor has not paid the donations tax at the time of death. Donations to spouses do not attract donations tax and some donations made in the event of death are excluded.

It is important that there is enough liquidity in your estate to pay for all the costs or else your plans for your estate and beneficiaries might not turn out as you think. ‘Liquidity’ means that you should have assets like cash that are available or that can be made available relatively easily to pay for the fees and taxes. This could include money in your bank account or investments.

On an average estate of R1.5 million the executor fees, together with the basic administration expenses (advertisement fees, Master’s fees, bank costs, postage and petties, and so on) would amount to R65 075. On an average estate of R2 million this will increase to R86 200.

It’s important to note that the above calculation does not include any estate taxes, property transfer costs, municipal clearance charges, bond cancellation fees, valuation charges, and so on. It also does not take into account any debt to be settled from the estate.

The easiest way to provide liquidity is through a life policy. It can also provide a sum of money that can be used to provide an income for your spouse and children.

The first step to making sure your wishes are carried out correctly is to have a will. This can also help structure your assets and liabilities and reduce some of the costs of an estate. For example, retirement funds do not form part of your estate, which saves estate duty and executor’s fees.

Let’s make sure you have enough liquidity in your estate and not make rash financial decisions that could affect you in the long term.

Stay Savvy,


The Cost of a New-born Baby

Welcoming a baby into your life can be a wonderful and joyous experience. The new arrival can even bring a more profound sense of purpose – and, inevitably, a lot of extra bills.

“Many young couples discover that the cost of caring for a baby is much higher than they expected,” says Shafeeka Anthony, marketing manager of JustMoney.co.za. “Informing yourself about the financial implications before you fall pregnant can help you differentiate between expenses that you can’t avoid and products and services that are well marketed but that you don’t need.”

On average, South African parents spend an estimated R100 000 a year to raise a child, says Madikana Kekana, head of customer experience at life insurers MiWayLife. A nursery can cost R5 000 or more for furniture, a baby-changing station, and related equipment.

“Feeding equipment will vary in cost, from bottles and sterilisers to bottle warmers and formula. Parents are looking at up to R5 500 to cover their baby’s feeding needs,” says Kekana.

First-time parents can expect to pay at least R10 000 for the essentials, notes Saul Salzman, managing director of Dis-Chem, which owns Baby City. These include a receiving blanket, clothing, nappies and a diaper bag, wipes, bottles, pacifiers, formula or a breast pump, a cot and bedding, a changing table, a pram and a travel seat.

As your baby grows, additional expenses are needed, such as child-proofing your home and selecting an appropriate car seat. Parents returning to work and requiring the support of a nanny, au pair, or crèche can expect bills of R33 500 to R70 000 a year.

Tips when planning for a baby:

  1.  Assess your current financial situation: Determine your total annual income and weigh this up against your expenses. Checking your bank statements is a good starting point to determine where your money goes.
  2. Prepare a baby budget: List all the services and products you will need and start planning how best to source them at a reasonable price. Check where you can cut back on expenses.
  3. Check your employment contract: Find out which parental benefits your company offers. South African employees are entitled to four consecutive months of unpaid parental leave. You’re also eligible for a maternity benefit of up to 60% of your salary if you’ve contributed to the Unemployment Insurance Fund (UIF).
  4. Maximise your medical aid: Medical treatment is expensive, so belonging to a medical scheme is an essential part of your financial planning. Check what’s covered for the birth and related medical experts. Keep costs down by giving birth in a hospital part of the scheme network and using specialists who also form part of this network.
  5. Get gap cover: This helps cover shortfalls in your medical aid – for example if you require a specialist outside your medical scheme’s network or a doctor whose bills are higher than the scheme’s rates. There are generally waiting periods for benefits, so apply sooner rather than later.
  6. Start saving: It’s always advisable to build up an emergency savings fund to cover your costs for about three months. When choosing a savings account, compare how much interest you can earn, the costs associated with the account, and the entry amount.
  7.  Cover yourself and your baby: Make sure you have life cover and an Educator benefit, in the event of your death or disability. Knowing your child is looked after and all education fees are paid in the event of death or disability is a must. Invest in a child living lifestyle product to cover your child for any trauma related illnesses.
  8. Draw up a will: A will is a legal document that sets out instructions regarding inheritance, guardians for children under 18 years, and the executor of your estate. A will must be signed by yourself in the presence of two witnesses.
  9. Start saving for education: The sooner you start to put money aside for education, the better.
  10. Tap into support networks: Ask family members for help with babysitting and cooking. Prepare baby food and household meals in bulk and freeze them.

Stay Savvy,



New legislation requires all Financial Advisors to have a review ROA completed and signed by all clients annually. Please find the review record of advice below. Please complete, sign, and return to let me know when you wish to have your annual portfolio review done this year.

As some of you already know, I will be moving to the UK next week. This will in no way affect the quality of service you have become used to. With more than 90% of my local and offshore clients already serviced virtually, and with staff at my office in Roodepoort always available to assist any client who prefers signing face-to-face, I don’t foresee any difficulty in the transition.

I will always be available at this email address, as well as my Liberty email: jacques.momberg@liblink.co.za, and on WhatsApp. You can also email Gayleen at my office at gayleen.brits@liberty.co.za. Virtual meetings can be done on Teams, Zoom, WhatsApp or any virtual platform of your choice.

The review record of advice will also make it easier for us to schedule our portfolio reviews well in advance. As always, any queries, advances and servicing requests on your investments and policies throughout the year, will be attended to ASAP.

My move to the UK will also allow me to look at more offshore investment opportunities for my clients.

Some good news for next month: petrol prices are anticipated to come down by 87 cents per litre, while diesel could be cut by a much larger R1.40.

The price forecast is as follows:

  • Petrol 93 & 95 will drop by 87 cents per litre
  • Diesel 0.05% will drop by R1.42 per litre
  • Diesel 0.005% will drop by R1.58 per litre
  • Paraffin will drop by R1.12 per litre

The main driver behind the lower projected prices is a huge drop in the international product prices for petroleum, which are guided by global oil movements. This is being supported by a stronger rand versus the US dollar.

Have a good week and please remember to send me your completed and signed review record of advice.

Stay Savvy,


2023 – Economists’ Predictions

With 2023 in full swing already, we would like to thank you for your continued support by choosing us with your journey to financial freedom. May this year be a blessing to you and your family!

We had a look at what some of the country’s top economists predict for the year to come. To combat the negative outlook, we also added some money savvy tips.

Economic Growth

Financial services company BNP Paribas said that South Africa will likely see weak economic growth in 2023 as the country faces global headwinds and further domestic challenges.

The company estimates 2023 GDP growth to reach 0.2% – reflecting a weaker net trade and consumption outlook.

“On top of this black growth view, we expect inflation to remain sticky for longer as the lagged effect of higher wages and rebounding service prices eat into disposable incomes, forcing more action out of the SARB (South African Reserve Bank),” said BNP Paribas.

Combined with low expected growth, the group said that stagflation risks loom large in South Africa. Stagflation refers to a period of economic hardship characterized by stagnant economic growth, high unemployment, and rising prices (inflation). Stagflation can be particularly damaging as it can lead to a decline in living standards and a decrease in investment, further inhibiting long-term economic growth.

This year in South Africa will be tougher economically than 2022, said BNP Paribas. Key trading partners such as Europe and the US are also expected to face headwinds.

The long-standing energy insecurity domestically is likely to intensify – halting economic progress even more.

Labour and inflation

Like other countries across the globe, South Africa faces disinflation in 2023, particularly in the second half of the year. This is not the first warning of stagflation in South Africa. In May2022, the SARB noted that global stagflation is one of the major concerns for the economy.

The central bank said that continuous slow and inequitable growth, rising inflation, and extra pressure on key sectors of the financial system would all result from stagflation.

Jeff Schultz, said in November2022, that the Reserve Bank would unlikely slow down on rate hikes, contributing further to a rough period of stagflation.

Most economists forecast an average CPI rate of 6.0% in 2023 after 6.9% in 2022 – implying two straight years at or above the SARB’s less-desired upper 6% target bank. Until food and public transport price rises move out of the double-digit territory, inflation expectations will struggle to lower.

With high unemployment a key driver of stagflation, higher wage demands places additional pressure on the economy.

Interest Rates

Prominent economists expect the South African Reserve Bank (SARB) to increase rates twice in the first half of 2023.

In November 2022, the SARB’s Monetary Policy Committee (MPC) increased the repo rate by 0.75 basis points to 7%. It was the eighth interest rate hike in the current cycle, with a total of 350 basis points increase since the hike cycle started a year ago in November 2021.

The Reserve Bank is expected to continue increasing rates as there are still concerns about inflation.

Nedbank chief economist Nicky Weimar predicts two more 25 basis point rate hikes within the first half of 2023.


BNP Paribas forecasts more than 200 days of load shedding in 2023, mostly between stages 3 and 4 – compared to last year’s ‘norm’ of stages 1 and 2.

South Africans should expect load shedding to get worse in 2023, says Intellidex analysts Peter Attard Montalto, who forecasts stage 7 load shedding – or higher – by the middle of the year.

Estimations are that the prolonged Stage 6 load shedding wipes out approximately R4 billion from GDP each day, far surpassing the economic impact of Covid-19. Some economists estimate that the SA economy would be 8% to 10% larger if Eskom had not failed to electrify the country.

Department of Social Development

In a presentation to parliament this week, the department said that about 31% of the South African population relies on social grants – which include everything from disability to childcare.

However, there are approximately 10 million beneficiaries who depend on the grant. This means that almost 30 million of South Africa’s 60-million citizens are now welfare recipients.


Confidence in South Africa’s future has fallen after more than a decade when average economic growth failed to match the increase in population, meaning the country’s citizens have been getting poorer. The country has been afflicted by corruption scandals in recent years and regular power outages since 2014. More than 350 people died in a spate of looting and arson in July 2021. This day of looting came with a hefty R50 billion price tag. The violence reflects an economy that has been “stagnant for more than a decade,” said Gerbrandt van Heerden, an analyst at the Johannesburg-based think tank. “A lot of the unrest that South Africa has experienced this year and before are connected to a failing state.”

Data shows there is a strong correlation between economic growth and social stability and rioting and looting could become more prevalent in the next few years unless the authorities are serious about implementing reforms. Small business will likely suffer the most from frequent unrest and higher crime levels will weigh on South Africa’s ability to attract investment, he said.

The government has formally adopted five blueprints to boost gross domestic product and job creation since the ANC won the nation’s first all-race elections 27 years ago. However, most of the policies have been stalled by powerful vested interests and policy paralysis, which left Africa’s most-industrialised economy stuck in its longest downward cycle since World War II even before the coronavirus pandemic hit output.

A recent study shows that 53% of university graduates and 43% of citizens earning more than R20,000 a month may leave the country. If an increasing number of South Africa’s richest people leave the country, the number of those paying tax, which supports welfare payments to almost half of South Africans and other government services, will plunge.

Our Tips: Budget, Get rid of debt, Save and Inspect

Budget– know exactly where all your money goes, where you can adjust to save even small amounts, and how to effectively save and leave enough money for unexpected expenses and emergencies.

Get rid of debt– whether it’s an inheritance, a bonus, investment returns or winnings from a competition, any extra income should be put towards paying off debt.

Save- set aside a certain amount for savings and investments. This money can be put aside for a big goal such as a holiday or education, or it can used for a rainy day or to take care of expenses due to loss of income.

Inspect– re-evaluate their fixed monthly expenses on memberships, subscriptions, and insurance. There may be memberships and subscriptions that are being paid for but are not in use now.

Stay Savvy,


Lessons from Santa

Santa Claus knows what it takes to manage his money properly, and he certainly walks the walk. Living by the “Generosity First” rule, Santa also works year-round to meet his annual goals, so he’s a saver. He also makes a list and checks it twice, indicating he knows how to budget his money and time.

Santa has little choice but to manage his money wisely. After all, his huge operation at the North Pole requires multiple global sources of natural resources and technology. He already has his human… er, elf resources covered, but Santa still needs to pay for things like lumber and precious metals that the North Pole generally lacks.

With his own list-making principle in place, Santa doesn’t need to stress over forgetting his obligations. With centuries of experience, Santa knows that humans make mistakes with their own finances but that through habitual list-making and checking, mistakes have essentially been reduced to zero.

Sending a letter to Santa must be one of the purest traditions of the Christmas season. Every year, a child puts pen to paper and writes down his or her sincerest wishes, the ones stored deep in his or her innocent—or, in some cases, mischievous—little heart. Here are some of the cutest examples we came across.

This year and every year, as you give, save, and prepare, we wish you and your loved ones a Merry Christmas, Happy Holidays, and a Prosperous New Year! And may your letter to Santa this year be as sincere as these ones.

Stay Savvy,


New Look, New Offerings

Our updated website is now live! And with that I have some news to share: We now offer financial coaching, where we will be taking a closer look at the behavioural side of finance and how to help keep emotions from derailing long-term financial success. Whether it’s designing a plan for your retirement goals, budgeting, implementing immediate debt control or understanding your relationship with money, we want to be there to guide you.

Over the past 22 years as a financial planner, I have come to realise the importance of the psychology of money and our behaviour towards it. I have always been fascinated with how much our childhood understanding and relationship with money, the environment we grew up in, our parents’ relationship with money and what we perceive as happiness through wealth, all have an impact on our future money decisions.

Morgan Housel wrote that “doing well with money has little to do with how smart you are and a lot to do with how you behave. And behaviour is hard to teach, even to really smart people. A genius who loses control of their emotions can be a financial disaster. The opposite is also true. Ordinary people with no financial education can be wealthy if they have a handful of behavioural skills that have nothing to do with formal measures of intelligence.”

We think about and are taught about money in ways that are too much like physics (with rules and laws) and not enough like psychology (with emotions and nuance). Money is everywhere, it affects all of us, and confuses most of us. Everyone thinks about it a little differently. It offers lessons on things that apply to many areas of life, like risk, confidence, and happiness.

Few topics offer a more powerful magnifying glass that helps explain why people behave the way they do than money. It is one of the greatest shows on Earth.

We need to relook at the way we approach money. Big goals take big commitment. Doing something new or scary is always better (and more likely to happen) with a partner or a guide. That is where our financial coaching comes in. Financial coaching is a specialised type of coaching that helps clients develop financial literacy and money management skills.

The more you earn, the more you spend, the bigger the house, the car, the fancier the restaurants, the more elaborate the holidays, the higher the debt ratio. We are bombarded by “the good life” on every single media platform. We believe all those luxuries will make us happy.

Using your money to buy time and options has a lifestyle benefit few luxury goods can compete with.  More than your salary. More than the size of your house. More than the prestige of your job. Control over doing what you want, when you want to, with the people you want to, is the broadest lifestyle variable that will create true happiness.

Be nicer and less flashy. No one is impressed with your possessions as much as you are. You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration. And you’re more likely to gain those things through kindness and humility than horsepower and chrome.

We would love to be a mentor to help grow your skills, make better decisions, gain new perspectives, or provide you with the tools that can help with goal-setting and intentional living.  Whatever you want to achieve through our financial coaching sessions, we would love to guide you on your journey to financial freedom.

Stay Savvy,


Yes, we love global investment exposure

With the Limited offer Liberty Structured Global Performer V2 and the Liberty Structured Global Performer ESG V2 portfolios, you can invest Global, without fear of any currency fluctuations. Liberty is providing you with a way to access global growth and diversify your world.

The prized goal of a solid investment is to achieve the growth you seek, while minimising the risk involved. The Liberty Structured Global Performer V2 and Liberty Structured Global Performer ESG V2, available under the Evolve Investment Plan and the Evolve Investment Plan (Sinking Fund) are designed to give you just that:

  • some downside protection
  • no impact from currency fluctuations
  • global investment opportunities

The two portfolios have similarities, with the Liberty Structured Global Performer ESG V2 screening for companies that adhere to the global principles of responsible Environmental, Social and Governance management. So, if you love the idea of making the world a better place while growing your money and hate not knowing how to do it – we’ve got the solution. Or, if you love exposure to top-quality globally-rated companies but hate the admin of taking money offshore – this is the perfect solution.

These structured portfolios give investors access to some of the leading global companies in the US, European and Asian markets through exposure to the S&P 500, Eurostoxx 50, and MSCI Global Diversified ESG 100 Decrement 5% indices.

If you invest a lump sum of more than R1m, you receive a capital allocation enhancement of 1%. For investments greater than R3m, you receive 2%.

I personally love the Performer ESG V2 fund, with the MSCI Global Diversified ESG 100 Decrement 5% Index (EUR) giving returns of more than 20% last year.

It gives a minimum return of 13.50% p.a.(companies 12.10% p.a.) if the change in the value of the basket is positive at Maturity Date (after adjusting for tax). If the change in the value of the basket is greater than 13.50% p.a. (companies: 12.10% p.a.) at Maturity Date, after adjusting for tax, you receive all the growth (adjusted for tax).

If you want your capital protected, access to some of the largest and best performing companies in the US, European and Asian markets including Apple, Microsoft, Tesla, Amazon and Berkshire Hathaway, and want a Rand-denominated investment to mitigate currency fluctuations, contact us. Minimum investment amount: R250 000 (non-retirement / discretionary monies only).

These are limited offer structured products, last day to invest 2 December 2022.

Stay Savvy,


Continued Repo Rate Hikes

The South African Reserve Bank decided to increase the Repo rate (Repurchase Rate) by a further 75bps to 6.25% at its MPC meeting last Thursday. The decision was not unanimous, with two members of the MPC preferring an increase of 100bps. The decision was in line with market expectations, although some analysts had argued that the better-than-expected core inflation data for August (released last week), coupled with Stage 5/6 electricity outages should have encouraged the Bank to hike rates by only 50bps. Instead, the MPC statement highlighted the upside risks to SA inflation and made it clear that the Reserve Bank is committed to getting SA inflation firmly back inside the target range. The fact that two MPC members voted for a hike of 100bps emphasised the hawkish tone of the MPC decision. The Reserve Bank last adjusted interest rates on 21 July 2022, when they increased the Repo rate by 75bps. Since November 2021, the Repo rate has now increased by a total of 275bps. South Africa’s prime interest rate should now increase to 9.75%.

The Reserve Bank once again highlighted the upside risks to SA inflation, which is still focused on a wide range of factors, including food, fuel, and wages, but they also continued to flag concerns about the cost of electricity as well as the potential impact of further currency weakness. The Bank’s forecast for headline inflation in 2022 is unchanged at 6.5% but they revised their 2023 estimate down to 5.3% from 5.7% previously. For 2024, the Bank’s inflation forecast is fractionally lower at 4.6%, down from 4.7% previously. In that regard, it is a little odd that the MPC would highlight that the risks to SA inflation are weighted to the upside, but then revise down their inflation forecast for 2023.
It is also odd that the MPC changed their risk assessment of SA’s economic growth. Back in July, the MPC highlighted that the “risks to SA growth are weighted to the downside”. However, in the latest MPC statement the risks to SA economic growth have been revised to “neutral”, yet SA is experiencing stage 5/6 electricity outages, interest rates have risen further and global growth has weakened. This would suggest that the bank is being too complacent regarding the negative impact of aggressive rate increases on the performance of the SA economy. It is also likely that the MPC has become more beholding to global interest rate developments than the MPC statement would suggest and that “protecting the Rand” is a critical factor in the setting of SA interest rates. The Reserve Bank’s SA GDP growth estimate for 2022 was revised down slightly to 1.9% from 2.0%, while their 2023 estimate was increased fractionally from 1.3% to 1.4%. For 2024, SA GDP growth is forecast at a still modest 1.7%, up from 1.5% previously.
Overall, the latest interest rate decision needs to be viewed within a global interest rate context. It can be argued that SA should not increase interest rates aggressively considering the current weak economic environment, high food and fuel prices (which are difficult for most households to avoid), high unemployment and service delivery constraints. However, the Reserve Bank has repeatedly highlighted their desire to ensure that SA inflation is anchored around the mid-point of the inflation target, and noted that allowing SA inflation to remain above the inflation target unchallenged is unacceptable and would undermine the recent gains in getting inflation expectations lower. Without rate hikes, SA has a high risk of quickly developing a self-reinforcing upward spiral in inflation, driven by wage demands and a weaker exchange rate.
At this stage it seems reasonable to assume that the Reserve Bank is likely to continue to hike rates during the remainder of 2022 (final MPC meeting on the year is scheduled for 24 November 2024) and into early 2023. However, is also seems fair to assume that once inflationary pressures have abated more convincingly, the bank will want to pause and more clearly assess the need for any further rate hikes – especially if SA’s inflation rate is heading towards 4.5% at the end of 2023 and other major central banks are also looking to end their own rate hiking cycle.

Stay Savvy,


Shop Smart and Budget

In our previous NewsBrief, we mentioned how middle-income consumers are spending up to 80% of their monthly salary within five days of being paid. A BusinessTech survey revealed earlier this year that 76% of respondents indicated that they save less than 15% of their salary, while 35% said they don’t save any money at all.

South Africans are notoriously known for being bad savers. So, in times like these when the economics are against us, it’s even more important that we get back to tried-and-tested money basics.

Budgeting is a great way of taking control of your finances. When you budget, you know exactly where all your money goes, where you can adjust to save even small amounts, and how to effectively save and leave enough money for unexpected expenses and emergencies.

Some of the best tried-and-tested budgeting methods include:

  1. The 50/30/20 budgeting rule: This strategy operates as an easy guideline for planning your budget by allocating 50% of your net income to needs like rent, groceries, and utilities; 30% to wants such as hobbies, vacations and dining out; and 20% to financial goals (that is, savings and debt payments). The further outlines that the reason this strategy works is because an integral part of succeeding at properly executing your budget is to understand your priorities and budget according to these.
  2. The 80/20 rule: Another budgeting method is the 80/20 rule which sets aside 80% of your income to needs, wants, and debts and then 20% is strictly designated for savings.
  3. The 70/20/10 rule: An alternative to the above rule, which says 70% goes to living expenses, 20% to debt payments, and 10% to savings.

By saving money, you avoid debt, which in turn relieves stress. If you have overwhelming debt, seek help sooner rather than later, and address it while ensuring you keep your compulsive spending at bay.

Budgeting doesn’t need to be complicated, nor should it take hours out of your day. In fact, the best ways to budget are often the simplest. And the easiest to become habit-forming.

Becoming a smarter shopper is a great way to save. Due to the unexpected changes in food costs, it can be difficult to prepare healthy meals without going over the budget. A few tips on shopping smarter include:

  1. Prepare a grocery shopping list beforehand and stick to it. Ensure that you limit the time in the store and only purchase the necessities.
  2. Shop around for the best prices on the items that you need to purchase, considering the weekly store leaflets, newspaper advertisements and visiting the stores’ websites or applications.
  3. Get to know the food prices. Write down the regular prices of foods you buy often. This will help you figure out which stores have the best prices and if you are getting a good deal on sale items.
  4. Always check the “use by dates” that are on the food items to reduce early spoilage and wasted money.
  5. Use a basket instead of a cart as you will have less space and it will force you to limit your purchases to necessities.
  6. Never go shop on an empty tummy 😊

Stay Savvy,