{"id":4800,"date":"2025-12-18T12:33:49","date_gmt":"2025-12-18T12:33:49","guid":{"rendered":"https:\/\/microvibenews.com\/?p=4800"},"modified":"2025-12-18T12:33:49","modified_gmt":"2025-12-18T12:33:49","slug":"why-sas-long-awaited-green-shoots-are-finally-starting-to-surface","status":"publish","type":"post","link":"https:\/\/microvibenews.com\/?p=4800","title":{"rendered":"Why SA\u2019s long-awaited green shoots are finally starting to surface"},"content":{"rendered":"<p><\/p>\n<div>\n<p><iframe loading=\"lazy\" src=\"https:\/\/iframe.iono.fm\/e\/1629678?layout=modern\" width=\"100%\" height=\"170\" frameborder=\"0\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p>You can also listen to this podcast on iono.fm here.<\/p>\n<p><strong>SIMON BROWN: <\/strong>I\u2019m chatting with Izak Odendaal. He\u2019s Old Mutual Wealth\u2019s chief investment strategist. Izak, I always appreciate the time. Let\u2019s kick off with the inflation picture as we wind down 2025. I think it\u2019s looking fairly good. We\u2019ve got a new inflation target. We have a little leeway on either side of that 3% number, but we are sitting at nice, low inflation, and hopefully that holds going forward.<\/p>\n<p><strong>IZAK ODENDAAL: <\/strong>It has been a good year on the inflation front, and I think the outlook is pretty good as well. We\u2019ve seen the rand strengthen quite a bit during the course of this year. The oil price is low. But I think importantly in the sectors that are not linked directly to the exchange rate or to energy prices you also see pretty low inflation.<\/p>\n<blockquote>\n<p>I think ultimately what the Reserve Bank wants to see is all South Africans kind of getting used to the idea of 3% inflation\u2026<\/p>\n<\/blockquote>\n<p>Because that ultimately also changes our behaviour and how we think about prices, how businesses adjust prices, how we approach wage negotiations, and so on. That is ultimately how you get down to 3% on a more sustainable basis.<\/p>\n<p>In the short term, if you look at inflation, it\u2019ll probably creep up over the next couple of months. But then it also reaches a base and starts declining again. So it\u2019s a pretty muted outlook and that is why the Reserve Bank was able to cut interest rates at its November meeting.<\/p>\n<p>Read:<br \/>Inflation dip strengthens case for January rate cut<br \/>Lower inflation target set to reshape rand\u2019s long-term path<\/p>\n<p><strong>SIMON BROWN: <\/strong>Expectations are so very, very important. I saw a headline a week or two ago about a union being insulted by a, I think a 5.3% offer. This is the perhaps the tough part of lower inflation, as you say \u2013 getting it into labour, into the consumer and our behaviour around it.<\/p>\n<p><strong>IZAK ODENDAAL: <\/strong>Yes. To be fair, I think a couple of years ago that initial offer to the union would have been seven, eight or 10%. So we\u2019ve already managed those kind of anchor points around which we negotiate these things to come down a lot, and they will continue to decline over time because it will take time for us to get used to the idea of lower inflation. We\u2019ve always had pretty high inflation, which is why we did not experience that huge shock in 2022\/23 because for us it was the fact that the petrol price went up a lot.<\/p>\n<blockquote>\n<p>That was pretty normal, whereas in Europe and America, going from very steady inflation over many decades, suddenly you\u2019ve got seven, eight, 9% inflation.<\/p>\n<\/blockquote>\n<p>For them it was a huge psychological shock and obviously had massive political ramifications across the board.<\/p>\n<p><strong>SIMON BROWN: <\/strong>To your point, it was at 40-year highs. For us it was Tuesday, in a sense. The risk perhaps is those administrative prices which are sort of beyond control. Fuel is random and oil administrative. Eskom\u2019s going to come with their increases, regardless.<\/p>\n<p><strong>IZAK ODENDAAL: <\/strong>Yes. The fuel price will always be volatile. Nobody controls that. Similarly, food prices depend on the weather. You can have good years and bad years.<\/p>\n<p>Administered prices are the bigger problem. It\u2019s ironic, because obviously the government has the inflation target, but the public sector has been the biggest culprit in not adhering to that inflation target.<\/p>\n<blockquote>\n<p>But it also becomes more difficult to justify an 8% increase when you know the inflation target is 3%.<\/p>\n<\/blockquote>\n<p>So even there I think it starts filtering into the idea that these kind of price increases that companies want around 3% \u2013 they\u2019re never going to be 3% perfectly, but need to be at least in the same ballpark.<\/p>\n<p>And in the case of Eskom specifically, hopefully within the next year or so we\u2019ll be over the worst in terms of the big increases from their side, because they\u2019re still trying to recoup costs from building Kusile and Medupi \u2013 and it\u2019s been a complete disaster. But once that\u2019s kind of \u2026, their prices should increase much more slowly.<\/p>\n<p>Read\/listen:<br \/>Was Nersa\u2019s R54bn settlement with Eskom just a smokescreen?<br \/>Nersa entered R54bn settlement to avoid court scrutiny<br \/>Business and government rebuilt momentum in 2025 \u2026 now the real growth test begins<\/p>\n<p><strong>SIMON BROWN: <\/strong>Look, we\u2019ve had 1.5% in interest-rate cuts in prime from 11.75%, which was terrifying. We are down at 10.25%. Can we anticipate perhaps a few more cuts next year from our MPC?<\/p>\n<p><strong>IZAK ODENDAAL: <\/strong>Yes, I think so. Again, it all depends on the international environment and what happens with the Fed and the dollar and all that stuff. But yes, I think in the Reserve Bank\u2019s own inflation forecast and inflation outlook there\u2019s definitely room for more rate cuts.<\/p>\n<p>I think they\u2019ll proceed quite gradually because it is still a very uncertain environment, especially internationally. But there is room.<\/p>\n<blockquote>\n<p>By the end of next year, we could definitely see another two, maybe three, 25 basis-point cuts from the Sarb if everything goes according to plan.<\/p>\n<\/blockquote>\n<p><strong>SIMON BROWN: <\/strong>And if we take it more broadly and look at the economy, we\u2019ve had Moody\u2019s keep us unchanged, we\u2019ve had an upgrade from S&amp;P, we are off the grey list. There are a lot of very small green shoots that are starting to come through. And of course, the international situation can change on a dime. But for our local economy, I get a sense that the forward look may be better than it has been in a long time.<\/p>\n<p><strong>IZAK ODENDAAL: <\/strong>Absolutely. We\u2019ve come off a very, very depressed period. There has always been a lost decade for our economy in terms of just crawling along at sub-1% growth. Now we have kind of broken through that 1% barrier if you look at the latest GDP numbers.<\/p>\n<p>But also, if you look at kind of the consensus forecast for next year, it should be above 1%. Now, 1.5% is not anything to get excited about in the international context, but again you have to look at where we come from as a country \u2013 this period of very low growth which was caused by huge political uncertainty, caused by persistent load shedding, by other infrastructure bottlenecks, caused by a fairly difficult international climate, by Covid, all those kind of things.<\/p>\n<p>So, I think if you look ahead, we\u2019ve sorted, it seems, load shedding. We are in the process of fixing logistics. You are starting to see private companies talk about their plans for operating train sets. And obviously the political climate seems to be fairly stable.<\/p>\n<p>Listen\/read:<br \/>There is a lot of good news that shows SA has turned around \u2013 Kganyago<br \/>South Africa\u2019s ratings upgraded by S&amp;P Global<br \/>South Africa is off the dirty-money grey list<\/p>\n<p>We\u2019ve seen interest rates come down. Those have obviously been very, very high over most of the last decade.<\/p>\n<p>And then, to your point, you are also starting to see ratings upgrades and international or financial markets being a lot more comfortable with the state of government finances. For a long time, there was real concern around unsustainable debt levels and the market punishing you by raising the borrowing cost of the government, which in turn makes their debt level unsustainable. So you\u2019re kind of stuck in a vicious cycle.<\/p>\n<blockquote>\n<p>But we are now breaking out of that cycle. You\u2019ve seen the bond yields come down, or the borrowing costs of the government come down quite sharply this year, and now you are in virtuous cycle territory there.<\/p>\n<\/blockquote>\n<p>As that comes down, obviously it relieves pressure on government\u2019s finances. That in turn makes the market more optimistic. The ratings agencies are more optimistic.<\/p>\n<p>So I think we\u2019re kind of climbing our way out of this hole that we\u2019ve been in for at least the last decade.<\/p>\n<p><strong>SIMON BROWN: <\/strong>Are our risks then for 2026 as a country perhaps more external? The easy one to put a pin into is the AI stocks. Or are there some real internal risks we should worry about?<\/p>\n<p><strong>IZAK ODENDAAL: <\/strong>Yes, I think specifically about the kind of market in South Africa. I think the risks are, I would say, for once mostly international, although on our domestic front obviously we\u2019ve had this massive rally in precious metal prices, and if you get a pullback there it will clearly hurt the mining stocks.<\/p>\n<p>But I think if you look beyond that, on the JSE it\u2019s not as if anything looks particularly too expensive or stretched. Yes, internationally I don\u2019t think you can say the same. I think internationally there has been a lot of excitement around artificial intelligence, and if you\u2019re seeing signs that perhaps some of that optimism is misplaced, you could see a pullback in international markets.<\/p>\n<blockquote>\n<p>I think the big thing internationally is really going to be just the state of the US economy and how the Fed reads that.<\/p>\n<\/blockquote>\n<p>If you\u2019re starting off next year and the Fed says, \u2018We are not cutting rates because we are worried about inflation, or because we\u2019re not seeing any deterioration in the economy,\u2019 \u2013 that\u2019s one set of outcomes. On the other hand, they could look at the situation and say, \u2018We need to cut rates because there is a weakening in the labour market\u2019. Then obviously that filters potentially into a weaker dollar and perhaps more upside for the gold price.<\/p>\n<p>Read\/listen:<br \/>Top South Africa fund manager sees 2026 non-resource stock rally<br \/>Santa rally for commodities<br \/>Gold climbs near record on haven flows and US rate cut bets<\/p>\n<p>So in that sense, we\u2019re kind of all waiting for them to make up their minds about how to beat the economy. And of course, all of that happens against the backdrop of Jerome Powell, the Federal Reserve chair, being replaced around May when his term expires. Then who does Trump put into the hot seat, and how does that individual take things forward?<\/p>\n<p>We know that Trump really, really wants aggressively lower interest rates in the US.<\/p>\n<p><strong>SIMON BROWN: <\/strong>I take your point. And if he does get that, that is a big one to watch.<\/p>\n<p>We\u2019ll leave it there. Izak Odendaal, wealth investment strategist at Old Mutual, I always appreciate the insights.<\/p>\n<p><em>Listen to the full MoneywebNOW podcast every weekday morning\u00a0here.\u00a0<\/em><\/p>\n<\/p><\/div>\n<p><script data-cfasync=\"false\">\n            !function(f,b,e,v,n,t,s)\n            {if(f.fbq)return;n=f.fbq=function(){n.callMethod?\n                n.callMethod.apply(n,arguments):n.queue.push(arguments)};\n                if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version='2.0';\n                n.queue=[];t=b.createElement(e);t.async=!0;\n                t.src=v;s=b.getElementsByTagName(e)[0];\n                s.parentNode.insertBefore(t,s)}(window, document,'script',\n                'https:\/\/connect.facebook.net\/en_US\/fbevents.js');\n            fbq('init', '779812924991616');\n            fbq('track', 'PageView');\n        <\/script>#SAs #longawaited #green #shoots #finally #starting #surface<\/p>\n","protected":false},"excerpt":{"rendered":"<p>You can also listen to this po&hellip; <\/p>\n","protected":false},"author":1,"featured_media":4801,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[1071,1283,4515,363,4516,156,691],"_links":{"self":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/4800"}],"collection":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4800"}],"version-history":[{"count":0,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/posts\/4800\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=\/wp\/v2\/media\/4801"}],"wp:attachment":[{"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4800"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4800"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/microvibenews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4800"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}