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South Africa inflation expectations drop to near four-year low

South African inflation expectations fell to an almost four-year low, providing policymakers with another reason to press ahead with their easing cycle.

Average inflation expectations two years ahead - which the central bank's monetary policy committee (MPC) uses to inform its decision-making - slipped to 4.5% in the second quarter from 4.7% previously, according to a survey released on Wednesday by the Stellenbosch-based Bureau for Economic Research.

The MPC prefers to anchor inflation expectations at the 4.5% midpoint of its target band, and is in talks with the National Treasury to adjust the goal to 3%.

The data combined with low inflation bolsters the case for the panel to again cut the key interest rate by 25 basis points to 7% when it delivers its next decision.

Forward-rate agreements, used to speculate on borrowing costs, are pricing in 18 basis points of cuts at the July 31 meeting, or a 72% chance of a 25-basis-point reduction. The contracts are pricing in a further 14 basis points of cuts in the remainder of the year, implying a 56% chance of a second 25-point reduction.

Governor Lesetja Kganyago said Tuesday that South Africa's inflation rate that's been hovering near or below the floor of the MPC's 3%-to-6% target range for eight consecutive months is creating "opportunistic disinflation" that will help policymakers to anchor price expectations at a lower level.

Kganyago is comfortable with the trajectory of South African inflation, though he said the outlook remains clouded by uncertainty stemming from geopolitical tensions, including US President Donald Trump's trade war. These risks warrant the central bank's current policy stance, which he characterised as still restrictive while being fairly close to a neutral setting that neither heats nor cools the economy.

Kganyago sees inflation-target work complete soon

A review of South Africa's inflation target by the National Treasury and the nation's central bank is close to completion, Governor Lesetja Kganyago said.

"It should be very soon that it's finalised," Kganyago said in an interview with Bloomberg Television on Tuesday on the sidelines of a European Central Bank forum in Sintra, Portugal.

"Our teams have been working very hard, they are fine-tuning the final details and they'll make their recommendations to the minister and the governor."

The central bank's inflation target, which was adopted in 2000 and hasn't been reviewed since, is currently under review by teams from the Sarb and Treasury. That technical work is nearly done and they will present recommendations soon to Kganyago and Finance Minister Enoch Godongwana, the Sarb said in its annual report on Monday.

"We have impressed on the team - there is an opportunity right now of using opportunistic inflation and the sooner we finalise that the better," Kganyago said.

South African factory mood improves slightly but is still depressed, survey shows

A gauge of South African manufacturing sentiment showed signs of improvement in June, reaching its second-highest level this year though output is still weak and logistics bottlenecks remain, a survey showed on Tuesday.

The seasonally-adjusted purchasing managers' index (PMI) sponsored by South African bank Absa rose to 48.5 points in June from 43.1 in May.

The PMI has now been below 50 for eight consecutive months, reflecting depressed factory activity in Africa's most industrialised economy.

"The June PMI results suggest that South Africa's manufacturing sector may be turning a corner, with firmer demand and easing cost pressures laying the groundwork for recovery. However, output remains weak and structural logistical challenges persist," Absa said in a statement.

The new sales order sub-index contributed to the increase in the headline PMI, rising by 7.8 points to 46.1 in June.

However the improvement in demand failed to boost production as the business activity sub-index decreased by 1.6 points to 41.9 last month.

South Africa's economy stagnated in the first quarter of 2025, partly due to a weak performance by its manufacturing sector.

DA lays criminal charges against Higher Education Minister, threatens to vote against department's budget

The Democratic Alliance (DA) on Tuesday laid criminal charges against Higher Education and Training Minister Nobuhle Nkabane for allegedly lying to Parliament about African National Congress (ANC) cadre appointments, announcing that it will vote against Nkabane's department's budget and other budgets led by what it calls "corrupt" ANC Ministers.

Last week the party gave President Cyril Ramaphosa an ultimatum to fire Human Settlements Minister Thembi Simelane, Nkabane and Member of National Assembly David Mahlobo, following the sudden removal of its own Deputy Minister of Trade, Industry and Competition Andrew Whitfield.

Ramaphosa said the reason for Whitfield's firing was that he did not obtain permission from the President to travel abroad earlier this year.

The DA said Whitfield's removal was a double standard on Ramaphosa's part, as there were still Ministers embroiled in corruption allegations serving on his Cabinet.

In retaliation, the DA laid charges against Nkabane at the Cape Town Central Police Station, for her allegedly repeated "false claims" to the Parliamentary Portfolio Committee on Higher Education and Training.

The party claimed that Nkabane lied when she stated that the panel tasked with appointing the sector education and training authorities (Seta) boards chairpersons consisted of independent people, and subsequently informed Parliament that they were not independent at all.

DA Portfolio Committee on Higher Education and Training member Karabo Khakhau claimed that Nkabane abused the name of a senior legal expert Advocate Terry Motau, claiming that he chaired her independent panel.

"Advocate Motau exposed that Minister Nkabane was not telling the truth, and since then Nkabane has publicly declared that she was wrong about Motau," Khakhau said.

The DA believes that these were lies that are part of a "calculated attempt to cover up the fraudulent appointment" of ANC-linked individuals to Seta boards.

"This is not a case of poor judgement; it is a flagrant and deliberate attempt to deceive Parliament and the South African people. Minister Nkabane has broken the law and violated her oath of office. The DA will not stand by while Ministers who lie, manipulate processes, and protect ANC cronies remain in office," Khakhau said.

She claimed that corruption in the executive had become standard practice under Ramaphosa's watch, noting the President's silence and inaction, which she said were enabling the decay.

"…he has no excuse. The evidence is clear. If he refuses to act, then he is complicit in this deception. The DA will not allow Parliament to be treated with contempt, and we will not tolerate corruption disguised as governance," Khakhau stated.

Meanwhile, the party had also filed a supplementary ethics complaint against Nkabane and announced its intention to escalate the matter to Public Protector Advocate Kholeka Gcaleka.

While the Government of National Unity (GNU) has made headway in several key areas, Business Leadership South Africa CEO Busisiwe Mavuso has voiced concern over the lack of progress on improving the economy, highlighting delays in State-owned entity reforms and political instability as key drivers behind the country's economic stagnation.

"A year ago, few would have predicted that South Africa's GNU would still be standing today, let alone delivering meaningful reforms. Yet, here we are, with visa backlogs cleared, private partnerships finally emerging at Transnet and government departments contracting with world-class IT suppliers to advance digitisation," she said in her weekly newsletter published on June 30.

Mavuso noted that the relationship between business and government under the GNU had been unlike anything experienced in recent memory.

"We've moved beyond the familiar dance of complaints and promises to genuine collaboration. Quarterly meetings with [President Cyril Ramaphosa] have produced tangible outcomes, not just photo opportunities," she said, noting that the "wins" had been substantial.

For example, the Department of Home Affairs (DHA) has eliminated the visa backlog that cost the country numerous tourists and skilled workers. Processing times that once stretched for months now take weeks.

Also, Transnet had begun inviting private operators to run port and rail concessions, which is a breakthrough that Mavuso said seemed impossible just two years ago.

Further, government's IT procurement has been modernised, allowing departments to work with best-in-class suppliers rather than being trapped by outdated tender processes.

"These aren't small administrative tweaks. They represent fundamental shifts in how government operates, creating the foundation for the digital-first public service that the DHA is now pioneering," Mavuso said.

However, she said it was important to be honest about where the GNU was falling short.

"Eskom's restructuring has hit unexpected delays in key areas and our logistics corridors still aren't receiving the focused attention they desperately need. Government and business have committed to short-term reform 'sprints' to address these bottlenecks, though the proof will be in execution," she said.

More troubling, Mavuso said, was the broader economic picture.

"Earlier this year, confidence was building. You could feel it in boardrooms and investment committee meetings. Then the global trade environment shifted dramatically," she said.

She proclaimed that the looming expiration of the current 10% tariff arrangement on July 9 could see South African exports to the US facing 30% tariffs, fundamentally altering trade flows and forcing rapid strategic adjustments.

Mavuso said business and government had been working overtime to navigate these international headwinds, engaging directly with their US counterparts as trade rules changed seemingly overnight. However, she said the situation required a stable coalition that could help South Africa deliver more value.

In this regard, she said the GNU's Achilles heel was political uncertainty. Mavuso noted that the GNU coalition partners had not established robust protocols for managing their inevitable disagreements without threatening the entire arrangement.

"The recent tensions have been particularly concerning, with threats of walkouts and the decision to boycott the national dialogue creating exactly the kind of instability that makes investors nervous.

"It is undermining the capacity to formulate and implement the urgently required policies that address our many challenges, and will undoubtedly continue to delay our ambitions for a capable State," she said.

Mavuso asserted that this fragility was having real consequences.

"Business confidence, which had been steadily improving, is now tempered by questions about policy continuity and reform momentum. When political survival takes precedence over governance, everyone loses," she warned.

Nonetheles...

President Cyril Ramaphosa on Monday stressed that Equity Equivalents are a practical Broad-Based Black Economic Empowerment (BBBEE) compliance tool for multinationals operating in South Africa, asserting that government will continue to leverage them for economic growth and job creation.

Ramaphosa wrote in his weekly letter to nation that government remains resolute that empowerment laws are essential for economic transformation in South Africa and are here to stay.

"Amongst the most salient features of our country's empowerment laws are their practicality, feasibility and responsiveness to economic conditions without deviating from the objective of redressing the economic injustices of exclusion of the past...

"The Broad-Based Black Economic Empowerment legal framework applies to all companies wishing to invest in and do business in our economy, whether they are local or foreign," Ramaphosa explained.

He pointed out that South Africa's empowerment laws are distinct as its measures are "practical and innovative".

He noted that in addition to having a pure equity participation measure, South Africa introduced the Equity Equivalent Investment Programme (EEIP), created to

accommodate multinationals whose global practices or policies prevent them from complying with the BBBEE ownership element through the "traditional" sale of equity or shares.

He further highlighted that the EEIP allows multinationals to invest in socio-economic, skills and enterprise development in South Africa without selling equity in their local subsidiaries.

Ramaphosa hit back at suggestions that the EEIP represents a circumvention of BBBEE laws and that it is a response to the conditions of a particular company or sector.

This comes as Elon Musk's Starlink hopes to operate in South Africa . However, Musk has been critical of South Africa's BBBEE laws.

Ramaphosa said all EEIP initiatives must be aligned to government's economic policies and strategic goals, noting that there is firm government-backed oversight over EEIP programmes that must be broad-based in terms of impact.

He noted that since its inception, the EEIP has encompassed a broad range of sectors and onboarded some of the world's leading multinational firms such as Hewlett-Packard, Samsung, JP Morgan, Amazon, IBM and automotive firms such as BMW, Volkswagen, Nissan and Toyota.

"By way of example, last year IT giant Microsoft announced a R1.32-billion investment over ten years in skills and supplier and 4IR research and development - under the EEIP.

"These firms have leveraged the EEIP to direct investment into local development, to incubate black, youth and women-owned businesses, and to fund skills development. This has in turn assisted government in achieving several policies and infrastructure goals," he explained.

Ramaphosa cautioned that South Africa must move away from the perception that a choice must be made between growth and transformation, and that it must also change the mindset that compliance with BBBEE is punitive or burdensome.

He added that by supporting firms with compliance they can embrace empowerment as a meaningful investment in South African's long-term economic stability.

"…this is a sound strategy that recognises that a transformed South African economy is one in which their investments are safe and guaranteed. Just as our economy has evolved since our BBBEE laws were first conceptualised, so has the playing field. The emergence of new industries, whether it is digital technology, advanced manufacturing, AI or renewable energy - means South Africa must actively position itself to attract greater foreign and domestic investment in these sectors or risk being left behind," Ramaphosa said.

He urged business, industry, labour, and all of society to support these laws, which he added are integral to undoing the injustices of the past.

South African Reserve Bank (Sarb) Governor Lesetja Kganyago reinforced his argument for adopting a lower inflation target, noting that the current goal hurts the rand and allows prices to march higher.

"Although an inflation rate of 4.5% may seem moderate, it still causes prices to double every 16 years," Kganyago said in the Sarbs's annual report published Monday. "This is hard to reconcile with our constitutional obligation to safeguard the value of the currency."

The central bank prefers to anchor inflation expectations at the midpoint of its 3% to 6% target band, which is currently under review.

Kganyago's remarks mark his latest effort to sway the debate toward lowering the goal with the central bank advocating for 3%. South African inflation rate was 2.8% in May.

The low level of inflation offers South Africa an "amazing" opportunity to adjust a framework that hasn't been revised since it was introduced in 2000, David Fowkes, a member of the bank's monetary policy committee, said earlier this month.

"The main concern with South African inflation is not our ability to hit the target," Kganyago said. "Rather, it is that our target is high compared to other countries. For this reason, despite our success in stabilising inflation, the price level is almost 20% higher than it was in 2021."

A joint Sarb and Treasury team is "almost done" with technical work on the review and will present recommendations soon to Kganyago and Finance Minister Enoch Godongwana, the Sarb said.

According to the bank's modelling, shifting to a 3% target would yield significant benefits, with inflation expectations declining quickly while "borrowing costs would fall more significantly" compared to the Sarb's baseline forecast.

The South African rand was largely flat in early trade on Friday after sharp falls a day earlier, with traders keeping an eye on a potentially disruptive dispute between President Cyril Ramaphosa and his main coalition partner.

The currency was 0.1% higher against the dollar at 17.8550 at 0947 GMT, a day after Ramaphosa, of the African National Congress (ANC), fired the deputy trade minister, from the Democratic Alliance (DA), without giving a reason.

DA spokesperson Karabo Khakhau told broadcaster Newzroom Afrika that Ramaphosa has until 1330 GMT on Saturday to either reinstate their member or remove three ANC members who the DA says are implicated in corruption.

Commerzbank analyst Volkmar Baur said in a research note this tension going into the weekend could weigh heavily on the local currency.

On Monday, investor attention will also be on May credit extension and money supply data, trade balance and budget balance data for the same month.

South Africa's benchmark 2035 government bond fell sharply in early deals, as the yield rose 12.5 basis points to 10.08%.

The Labour Party said on Friday that it has received notice from the lawyers representing the Thabo Mbeki Foundation, the Steve Biko Foundation and the Chief Albert Luthuli Foundation of their intention to intervene in the party's urgent High Court application to interdict President Cyril Ramaphosa's National Dialogue process.

Earlier this month, Ramaphosa announced that in the wake of government's engagements with various entities, there was broad agreement on the need to convene a National Dialogue, given the challenges facing the country.

He revealed that a National Convention, which will set the agenda for the National Dialogue, will be held on August 15.

The Labour Party argues that the National Dialogue is "unconstitutional, irrational, fiscally irresponsible", and excludes the working class.

The party seeks to halt all further implementation and expenditure, citing the duplication of existing democratic structures and the estimated R700-million to R800-million cost as unjustifiable in the current economic climate.

The case is set to be heard on July 1.

The Foundations are arguing that they have a direct interest in the outcome owing to their role in convening the National Dialogue.

Labour Party interim president Joseph Mathunjwa said the Foundations were the public face of what it described as a "parallel governance project".

"We already have a Parliament … a democratically elected institution with the constitutional authority to host debate, process laws, and hold the executive to account. If Parliament is functional, why create a new platform for the same purpose. This is not inclusion - it is circumvention," he argued and warned of unjustifiable public expenditure.

He further questioned the Dialogue's political neutrality, claiming that the dialogue was a "rubber stamp" for International Monetary Fund (IMF) instructions.

"This dialogue is being used to give cover to the IMF and World Bank agenda of privatising State-owned entities, facilitating private power producers, and unbundling Eskom, all under the guise of a so-called national social compact," Mathunjwa alleged.

He further accused civil society of working with government to bypass Parliament and the Constitution and of trying to delay the upcoming hearing.

"This is a textbook attempt to muddy the waters and frustrate our quest for justice. They [government] missed the deadline [to file answering papers], and now they're bringing in reinforcements to stall the process and give political cover. But we are ready," Mathunjwa warned.

"Let it be clear that the President shall not yield to threats and ultimatums, especially coming from members of the Executive that he has the prerogative to appoint in accordance with the Constitution of the Republic of South Africa."

These were the words of President Cyril Ramaphosa, on Friday, as he lashed out at Democratic Alliance (DA) leader John Steenhuisen and former Trade, Industry and Competition Deputy Minister Andrew Whitfield, following Whitfield's removal from Cabinet - a decision, Ramaphosa stressed, was the President's constitutional prerogative.

The drama unfolded on Thursday when Ramaphosa removed Whitfield from his position as Deputy Minister, to which Steenhuisen responded, demanding that the President also fire other members of Cabinet who face allegations of corruption and mismanagement, within 48 hours or face "grave consequences".

Ramaphosa acknowledged that he had dismissed Whitfield for undertaking a trip to the US without his permission, but added that he had asked Steenhuisen to provide a replacement for his approval, as the DA is entitled to that position.

"His [Whitfield's] travel to the United States was a clear violation of the rules and established practices governing the conduct of Members of the Executive. This requirement is known to all Ministers and Deputy Ministers. These rules and established practices were expressly communicated to all members of the Executive during the induction sessions at the commencement of the seventh administration," Ramaphosa stated.

He blamed Steenhuisen and Whitfield for creating "distortions" since the dismissal, resulting in the need for him to make a public statement.

Ramaphosa accused Whitfield of "deliberately" violating the Cabinet rules by not seeking his approval for the trip but acknowledged that Whitfield had sent him a letter of apology after the trip, a move that Ramaphosa took as an admission of guilt.

Ramaphosa said that he had informed Steenhuisen of his decision to dismiss Whitfield.

"In that discussion, Mr Steenhuisen informed me that Mr Whitfield had been expecting that he may be dismissed on the grounds that he had undertaken an international trip without the President's permission… During my discussion with Mr Steenhuisen, he asked me if there was precedent for the action that I intended to take in relation to Mr Whitfield. I informed him that there was indeed prior precedent," Ramaphosa stated.

He said he had pointed out to Steenhuisen that past presidents such as Nelson Mandela and Thabo Mbeki, had dismissed Ministers for the same breach of Cabinet rules in previous years.

Ramaphosa said the DA had no grounds to issue ultimatums when the President "exercises his constitutional prerogative and responsibility".

The DA, meanwhile, called the move a "calculated political assault" and described it as "a flagrant double standard".

"There is really no basis for suggestions that the dismissal of the former Deputy Minister is related to any other reason than his failure to receive permission to travel and adhere to the rules and established practices expected of members of the Executive of the Republic of South Africa," Ramaphosa argued.

While Steenhuisen had hoped to brief the DA Federal Executive of Ramaphosa's decision before it was enacted, Whitfield received a letter informing him of his removal before that meeting took place.

"While Mr Steenhuisen asked that he be allowed to brief the Democratic Alliance Federal Executive prior to the removal letter being delivered to Mr Whitfield, this would have had no bearing on my decision. It is the responsibility and the prerogative of the President to determine the timing and manner of the appointment and removal of Members of the Executive," Ramaphosa stated.

The DA will hold a press conference on the matter on Saturday and said the briefing will address the way forward for the party and the Government of National Unity.