💹 Major Currency Snapshot:
USDZAR: 18.27
EURZAR: 20.63
GBPZAR: 24.30
Introduction:
We discuss significant economic developments, including South Africa’s Operation Vulindlela, a presidential reform program focused on boosting growth, employment, and infrastructure development. Concurrently, the sources detail the potential disruptive impacts of US trade policies, particularly under a possible Trump administration, on global supply chains, African trade access via AGOA, and the volatility of currency markets, including the South African rand. This dual focus highlights the challenges posed by domestic reform efforts amidst external economic uncertainties.
Key takeaways from sources:
- South Africa’s Operation Vulindlela (OV):
- OV is a presidential reform programme in South Africa, managed by technocrats and supported by the Government of National Unity parties as the mechanism for economic growth and employment.
- Phase 1 unlocked R500-billion, primarily through energy reforms like lifting the cap on independent power production, leading to 22,500MW of mostly renewable power generation and helping address load shedding. It also resulted in a 51% reduction in data costs via spectrum auction. These achievements have been independently verified.
- Phase 2 began on May 7th, focusing on 30 reforms, notably in the digital economy and local government.
- Modelling suggests that if implemented, these reforms could help South Africa target 3.5% growth by 2029, significantly higher than current forecasts. This could result in real GDP being R399.6bn (+7.7%) higher and investment R196.7bn (+22.3%) higher by 2029 compared to the baseline.
- OV is being implemented in metros like eThekwini and Johannesburg, aiming to address local government breakdowns which harm the economy. Phase 2 is seen as a blueprint for the 2025 Budget, with plans for conditional grants to metros tied to reform commitment.
- The programme involves partnerships with businesses, with a pragmatic approach encouraging private sector investment in energy and potentially rail.
- US Economic and Monetary Policy Context:
- Trump’s trade policies have increased uncertainty about the US economic outlook.
- The Federal Reserve held interest rates steady, noting that risks of both higher inflation and unemployment have risen. Fed Chair Powell stated it is unclear whether the economy will continue growing or weaken.
- The Fed is effectively in a “wait-and-see” approach, unsure of the appropriate monetary policy response until the impact of trade policies becomes clearer. Recent strong jobs data has supported this on-hold stance.
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Sources referenced:
- Africa’s supply chains brace for Trump’s tariffs and AGOA uncertainty
- Government models 3.5% growth by 2029 as it launches 30 key reforms — here they are
- Fed sees rising risks to economy as it leaves rates unchanged
- Dollar confusion reigns amid ‘strategic uncertainty’: Mike Dolan
- Shares rise on trade deal hopes, dollar clings to post-Fed gains | Reuters