At its latest Monetary Policy Committee meeting, the South African Reserve Bank kept the repo rate unchanged at 8.25% but two members argued for a cut of 25 bps, which is an indication of future direction. The committee revised its forecast of end-of-year inflation to 4.3% from 5.2% at present. We expect the bank will cut the repo rate by 25 bps at its September meeting and by another 25 bps in November.

SA’s May retail sales data was disappointing: sales fell 0.7% m/m. Mining and manufacturing output also declined in May. The improvement in electricity generation has helped, but it is not a solution in itself. The only way to lift the growth rate meaningfully is to bring the public sector into partnership with government to invest in infrastructure, and this is starting to happen.