Millions intended to be spent on the health needs of Eastern Cape residents have gone missing from d.
ECONOMISTS are undecided as to whether outgoing South African Reserve Bank governor Tito Mboweni will cut interest rates further.
The bank's monetary policy committee is expected to announce its repo rate decision later today. This is in the wake of the MPC's decision to cut interest rates by 50 basis points last month, which took economists by surprise. The cut took the repo rate, the rate at which the central bank lends to commercial banks, to 7% and the prime rate, at which banks lend to consumers, to 10,5%.
Mboweni is expecting the domestic economy to recover, but maintains that "our recovery here is going to lag the global recovery".
Economists believe that the heart of the rate-cut debate will not be set around growth prospects but rather on food-price inflation (expected to drop), wage hikes and higher fuel prices.
"Food prices are expected to come down but high administered prices and wage settlements pose an upside risk to inflation," said Tendani Mantshimuli, Commercial Unit economist for Liberty Life.
Mantshimuli says the casting vote will largely rely on the August consumer price index figures to be released today. The CPI increased by 0,4% from May to June this year.
"The CPI number that comes out [today] will be crucial for the MPC decision and not so much growth prospects as these are improving. Although inflation is expected to continue to come down, [today's] number is likely to remain above the upper band of the target," he said.
Of the 25 economists polled by Reuters last week, 18 believe the SARB will leave interest rates unchanged "as concerns about the ailing economy abate". Seven predict a 50 basis point cut to 6,5%. Sasfin economist David Shapiro said a 50 basis point cut was "unhelpful" and recommended that a 100 basis point cut was in order.
"The South African economy is in trouble, it's tough out there, we should put inflation aside and worry about growth," said Shapiro. "Even if we bloop, we can raise the rates again."
In agreement with Shapiro's 100 basis point drop is Brait economist Collen Garrow.
Garrow speculates that the rate cuts will be split, with a 50 basis point cut today followed by another in October.
If rate cuts become a reality this will not bode well for pensioners who rely on interest-related savings for survival. Said Mantshimuli: "It's already difficult for them with the 500bps cut we've seen so far and a further cut will not help as banks will also lower interest paid on deposits accordingly."
Gill Marcus will replace Mboweni in November.