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Ok. Got itEnergy availability at Kusile Power Station improved as overall inflation was on the rise, surpassing market expectations. Nevertheless, domestic assets were on a downward spiral due to the prevailing risk-averse sentiment.
Hope springs eternal
Incoming-economic-activity gauges suggest the emergence of a weaker backdrop in the 3rd quarter. On a positive note, another unit at Kusile Power Station was brought back online ahead of schedule, helping to improve energy availability.
After the resignation of Transnet CEO and CFO, other high-profile resignations followed in October, including that of Siza Mzimela, CEO of the embattled freight rail division. Transnet faces both operational and financial difficulties, which have escalated over recent years. On the latter, a turnaround plan was released ahead of the Medium-Term Budget Statement, which outlines the requirement and options for financial support from government that would improve the likelihood of a successful turnaround. While support for the entity could take various shapes, logistics is an imperative for the economy and therefore several difficult decisions lay ahead for policymakers.
Headline inflation for the year to September 2023 increased to 5,4% from 4,8% in the previous month, exceeding market expectations. Core inflation printed at a lower 4,5%, while food inflation trended lower to 8,0%.
Producer inflation for September also surprised to the upside at 5,1% from a figure of 4,3% in the prior month. For both sets of numbers, higher fuel prices were an influential driver. South African Reserve Bank Deputy Governor Kuben Naidoo resigned from his post in October, earlier than the official end of his term in March 2025. While a quorum is still in place with the remaining four members, even numbers open the door to a deciding vote from SARB Governor Lesetja Kganyago Kganyago. The next Monetary Policy Committee (MPC) meeting is in November.
Domestic assets retreated further in October as risk-off sentiment persisted. Local bond markets defied the pressure of higher global bond yields, with the FTSE/JSE All-bond Index gaining 1,7% in October. Despite persistent volatility, the rand appreciated by 1,5% against the US dollar, bringing the depreciation year to date to 9,6%. Local equity markets ended the month in the red, with the FTSE/JSE All Share trading down 3,4% on declines across resources (-4,3%), industrials (-4,6%) and financials (-2,2%). Monthly returns from index bellwethers Naspers (- 3,8%) and Prosus (-5,9%) mirrored losses from Chinese technology company Tencent (-5,6%). Mid- and small-cap stocks gave back some hard-won ground, with negative returns over the month. The property sector (-3,0%) had another tough month in October, brining returns to -8,2% year to date.
After a nail-biting Rugby World Cup tournament, the Springboks brought home the Webb Ellis Cup. Resilience, hard work and perseverance gave moments of joy and hope to a nation where these traits are so often required for daily life. Well done!
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