Friday, June 26, 2009
From Creamer Media in Johannesburg, I'm Amy Witherden.
South Africa's Central Bank yesterday kept its repo rate unchanged at 7,5% on concerns about stubbornly high inflation, in a move that surprised markets and angered trade unions.
Central Bank governor Tito Mboweni said that fuel and electricity price increases pose risks to the inflation outlook, while inflation remains sticky, above the 3% to 6% band. Mboweni explained that the Central Bank wants to maintain its credibility by keeping inflation at low levels.
Karen Chow, economist at market analysts ETM, explains that the Central Bank's mandate is to target and contain inflation. She says that the Bank is unlikely to cut rates further, unless data showing a significant deterioration in economic growth is seen.
Mboweni defended the Monetary Policy Committee's decision, before adding that he had failed to convince the trade unions in a recent meeting that high inflation was bad for the poor and the working class.
The decision will further anger powerful trade union and communist party allies of the ruling African National Congress, which have threatened strikes to force bigger and more rate cuts to drive the economy out of recession.
The United Nations Conference on Trade and Development reports that the global economic crisis necessitates the re-examination of existing approaches to international development.
With the release of its ‘Economic Development in Africa 2009' report, UNCTAD economic affairs officer Dr Janvier Nkurunziza stated that Africa has historically been reliant on specific economic flows, mostly economic aid and foreign direct investment. However, he noted that with the economic climate in disarray, these sources of economic support are drying up.
The report also asserts that the African continent is too fragmented to achieve transformation and competitiveness in the global economy.
Nkurunziza says that deeper regional integration would enable Africa to build more resilient economies, and a larger focus on infrastructure would allow the continent to reap the benefits of integration.
Better links between countries, ranging from paved roads to banking cooperation, are needed to spur mutual economic growth. The report further states that weak physical and institutional infrastructure is the key obstacle to increasing intra-African trade and investment.
The African National Congress has welcomed the decision by the National Energy Regulator of South Africa to increase electricity tariffs, saying that the hike is fair on light electricity users.
The increase effectively means that light users will get a 15% increase, while industry and heavy users will pay 31% extra.
Although the decision adds to the burden of households, Nersa was cautious in making the decision, the ANC said.
Nersa chairperson Collin Matjila says that the tariff increase will result in a rise in the average standard tariff from 25,24c/kwh to 33,14/kwh.
Also making headlines:
In his reply to the Parliamentary debate on the Presidency's Budget Vote, President Jacob Zuma defended his increased Cabinet as "essential".
The Congress of South Africa Trade Unions says that it is "very angry" over the Reserve Bank's rate decision.
And, Zimbabwean President Robert Mugabe attacks the West for maintaining sanctions and refusing financial aid to the crippled country.
That's a roundup of news making headlines today.