Sovereign Analysis / South Africa

South Africa: Conversation with central bank Deputy Governor Rashad Cassim

  • SARB responded aggressively to Covid and still has room to cut, but is now in 'wait and see' mode
  • Inflation is benign and external risks mitigated, but fiscal risk could drive FX volatility and warrants caution
  • Structural reforms are needed to lift potential growth, and we think the MTBPS on 28 October is a watershed moment
South Africa: Conversation with central bank Deputy Governor Rashad Cassim

We held a Tellimer Insights Pro client call on 14 October with Deputy Governor Rashad Cassim of the South African Reserve Bank.

Our discussion with DG Cassim came a day before President Ramaphosa released the government’s Economic Reconstruction and Recovery Plan (here), which aims to raise growth to 3% by the end of the decade, create 800,000 new jobs, unlock ZAR1tn of infrastructure funding over the next four years, provide a reliable energy supply within two years, and expand the ZAR500bn Covid stimulus package.

In our view, the recovery plan is very low on detail about how these goals will be achieved and reads more like a wish list than a bona fide reform agenda. That said, specific measures will be outlined in the upcoming medium-term budget policy statement (MTBPS) on 28 October, underlining our previous view (here and here) that the MTBPS will be a watershed moment for South Africa in which it either signals its willingness to reform via ambitious and concrete policy measures or continues to punt on difficult and increasingly necessary decisions.

While monetary policy would be much more effective if it coexisted with structural reforms and more confidence in the economy, neither has it been entirely neutered as a policy tool. The SARB has acted quickly and aggressively to limit the negative fallout from Covid, and, while the heavy lifting has likely been done, it stands ready to continue supporting the economy as the full impact of the crisis unfolds.  

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