Repo Rate cut

The South African Reserve Bank’s monetary policy committee had unanimously voted to reduce the repo rate from 6.5% to 6.25%. As a result of the cut, the prime rate would fall to 9.75%. The repo rate is the benchmark interest rate at which the Reserve Bank lends money to other banks. Before Thursday, the last time the bank changed the rate was in July 2019, when it was cut by 25 basis points to 6.5%. The rate stayed unchanged at 6.5% at the MPC’s two previous meetings in September and…

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Rand is now the world’s cheapest currency – undervalued by 63%

This makes it the most under priced major currency in the world, and in a worse position than the Russian rouble and the Turkish lira, which are both undervalued by 61%. (Since 1986, The Economist has been using McDonald’s Big Mac burger prices to determine whether currencies are overvalued, or too cheap.) The Economist says the Big Mac index had become a global standard,  featured in economic textbooks and dozens of academic studies. The latest Big Mac index shows that most currencies lost ground against the dollar over the past…

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Expat Tax to become law on March 1

FROM March 1, 2020, expats working and living abroad would be liable for what is now known as “expat tax.” The move is seen as a way to compensate for the brain drain taking their taxable incomes with them. New amendments to the Income Tax Act would mean that South African tax residents working abroad will only be exempt from paying tax on the first R1 million they earn abroad. Thereafter they will be required to pay tax on any foreign earnings. The exemption currently applies to South African tax…

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Courts clamping down on credit providers and lawyers

image of SA money used in article on debt providers and lawyers who destroy the poor

It is at times such as this with stories such as these that Christmas becomes a wonderful affair. Was it the Eagles who sang about lawyers? And judge, could you include banks in the judgement as well? The Cape High Court on Friday delivered a damning judgment against credit providers for overcharging on legal fees and interest in contravention of the National Credit Act (NCA) which came into force in 2007. The case was brought by Stellenbosch University’s Law Clinic and Summit Financial Partners on behalf of several customers of…

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Inflation drops to lowest in almost 9 years

Image of South African currency

Statistics South Africa (Stats SA) reported that the consumer price inflation declined from 3.7% year-on-year (y-o-y) in October to 3.6% y-o-y in November. (The third consecutive month of deflation, with the latest reading lowest since December 2010.) Headline inflation has eased notably over the past several years, declining from the top end of the South African Reserve Bank (SARB) target (3%-6%) to below the mid-point. The latter (4.5%) is currently the central bank’s goal. Inflation expectations in the private sector and among labour unions had similarly eased to around 5%.…

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Weathering year-end financial storms

It’s the time of year when lots of seemingly unrelated elements  combine to cause the perfect financial storm. Black Friday, summer holidays, festive-season marketing, early salary payments and year-end bonuses could be a dangerous combination. According to some of South Africa’s largest debt counselors, there’s always a significant spike in inquiries about debt counseling in January and February from consumers who haven’t managed to weather the year-end spend. What typically happens is that many people are paid their December salaries early – mid-month, rather than at the end of the…

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Fitch upgrades Moz long-term default rating

Logo Fitch rating Agency

The upgrade of Mozambique’s Long-Term Foreign-Currency IDR reflects the curing of the restricted default following the completed restructuring of its sole Eurobond (MOZAM – USD726.5 million, 10.5%, maturing in 2023), which had been in default since January 2017. On 30 October 2019, the bondholders exchanged MOZAM for a new USD900 million bond, covering arrears on principal and interest of the previous bond. The terms also include a maturity extension to 2031, a coupon of 5% until 2023 and then of 9% until maturity. In addition to the new bond, Mozambique…

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African Development Bank launches US$ 2 billion 1.625% Global Benchmark due 16 September 2022

The African Development Bank (AfDB), has launched and priced a US$ 2 billion 3-year Global Benchmark bond due 16 September 2022, its first US$ benchmark of the year. Launched on September 11, the bond issue is the Bank’s second Global Benchmark of 2019, following a EUR 1 billion 10-year priced in March 2019. With this transaction, the Bank has now raised US$ 4.4 billion in 2019 to date and executed 61% of its borrowing program for the year. The transaction received strong support from investors globally, with order books reaching…

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Money market or buying a home – pro’s and cons

For many baby boomers, owning a home had been the best money investment. Nowadays, there are many variables to take into consideration, but analysts still believe that property should be considered above playing on a volatile money market. In other words, one still gets a better return on a property investment as one would over the same period on any scheme such as an investment fund. Of course, agents in various markets will convince anyone on their preferred brand of doing business, but taking everything into consideration, our parents did…

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