# General Business Category > Business Finance Forum >  Interest rates down .5%

## QUINN

I am sure every one can now have a less stressful Christmas :Wink:  
We have reached the summit and for the next 2 years ( my opinion ) rates will be going down.
I expected a 1% drop, but far be it from me to dictate to our governor.
Is this too little to late, I believe for most the relief came to late and many over indebted consumers lost the homes.
It is not the end of the world and in 5 years your difficulties will be just a memory
 :Smile:

----------


## Dave A

.5% isn't going to kick-start anything - it just takes the screws off a turn. But it *is* some relief.

I suspect ordinarily a 1% drop would have been more appropriate for the economic climate. But at this time of year it could also have sparked an excessive Christmas shopping spree.

Let's look on the bright side. Fuel costs down and interest rate trends turned - the light at the end of the tunnel is starting to show.

----------


## Marq

I have no idea what you lot are on about.

For the first time in my life I have bucks in the bank and no debt - doing what I have been preaching to you about.

So I think the interest rate should be *increased*  :EEK!: .
Christmas is going to be bleak for me - this is not what I ordered. :Taz: 

Minority Rules.

----------


## Dave A

But now all those people and companies *with* interest bearing debt might be able to spend a bit of money on things - like going to B&B's  :Wink:

----------


## Marq

Haha :Big Grin: 

Yes Dave, I certainly hope it injects some enthusiasm to get out there because the general feeling is one of doom and gloom at the moment.

----------


## garthu

Hmmm... word is out we could anticipate a significant ineterest rate decrease, maybe as early as this week... Significant? Maybe 1%.. dunno :Smile:  but the excitement... canmt evenn spell coreeectly

----------


## Dave A

I heard that too.

Just at the moment you have to wonder whether the driving force behind this sudden eagerness to move the rate along is economic data or politics  :Whistling: 

Maybe I'm getting too cynical, but when JZ wheeled out an obviously very frail Madiba I realised there is nothing this joker won't do.

----------


## Dave A

I guess this answers my question:



> South Africa's real gross domestic product (GDP) at market prices on a quarter-on-quarter (q/q) seasonally adjusted annualised (saa) basis dropped by -1,8% in the fourth quarter of 2008 from +0,2% in the third quarter, Statistics South Africa (Stats SA) said on Tuesday. 
> 
> Non-seasonally adjusted year-on-year GDP in the fourth quarter was placed at 1,0% from a revised 3,0% (2,9%).
> 
> Non-seasonally adjusted year-on-year GDP in the fourth quarter, excluding agriculture, was placed at 0,8% from 2,7% in the third quarter.
> 
> The main contributors to the decrease in economic activity for the fourth quarter of 2008 were manufacturing (-3,5 percentage points), electricity, gas and water (-0,1 percentage points), wholesale and retail trade, hotels and restaurants and the mining and quarrying industry (0,0 percentage points).
> 
> These were counteracted by increases in finance, real estate and business services and general government (+0,6 percentage points), agriculture, forestry and fishing (0,5 percentage points), construction (0,4 percentage points) and transport storage and communications and personal services (0,2 percentage points).
> full story from M&G here


But here's the shocker.



> The killjoy in South Africa's economy is the manufacturing sector, which has just reached its worst level since 1960. 
> 
> According to data released on Tuesday, South Africa's manufacturing sector is not only in a recession, it is dropping at rates last seen before television had even been introduced into the country.
> 
> Manager of GDP at Statistics South Africa, Kedibone Mokone, confirmed that manufacturing was at a worst level since 1960.
> 
> According to Tuesday's data, manufacturing dropped a mammoth -21,8% quarter-on-quarter (q/q) seasonally adjusted annualised from the -9,4% in the third quarter and contributed -3,5 percentage points to the total q/q drop of -1,8%. Two consecutive quarters of negative growth is a recession. Manufacturing had surprised with growth of 14,3% in the second quarter.
> full story from M&G here

----------


## garthu

I think its both. Quite entertaining that reports suggest that these figures and current position almost come as a suprise  :Confused:  Further that need for action is required  :Confused:   :Confused:  The major players at the helm are clearly not in touch with whats happening on the ground as it's been quite obvious for a while that even "desperate" could be used to describe.

At a strat. meeting today there was agreement with elections we would see 2 % very soon, 1 now and another April - but politically motivated as equally as situation

----------


## Dave A

> South Africa's targeted headline consumer price index (CPI) inflation slowed to 8,1% year-on-year (y/y) in January but was above forecasts, although this was unlikely to dim expectations of an early interest rate cut. 
> 
> Statistics South Africa said on Wednesday that inflation slowed from 9,5% in December, while month-on-month inflation stood at 0,4% in January, the first month under a revised, re-weighted price basket.
> 
> This is the fifth monthly decline after the record 13,6% registered for CPIX -- the old targeted measure -- in August last year and the 13,7% for the old CPI in August.
> full story from M&G here


Although there seems to be disappointment it wasn't even lower, I think this still shows a *big* improvement in the inflation outlook. Right now we don't need to slam below 6% because we're sure to overshoot the mark if we do. 

Easing to it will do just fine. Particularly as there are bigger problems pressing right now.

----------


## garthu

Hmm our 1% this week might just have gone bang... still crossing fingures though

----------


## Dave A

> South Africa's central bank will meet next week on interest rates, more than three weeks ahead of schedule, cementing the case for an early rate cut. 
> 
> The bank said in a statement on its website it had changed meeting dates for the rest of 2009, with the monetary policy committee (MPC) meeting every month, except for July, without giving reasons for the change.
> 
> The MPC previously met every two months.
> full story from M&G here


Probably not a question as to whether to reduce rates - more to debate how much.

I'm pretty pleased to see the monthly meetings too, even if it is because of Tito and co's penchant for 0.5% changes. Let's face it - there isn't much prospect of the results of the previous month's meeting being seen in the figures presented to the next meeting.

----------


## Morticia

Do I smell a rat?  Looming elections and all that...???  :Hmmm:  :Whistling:

----------


## Dave A

Looming recession and falling inflation data more like it.

To be fair, I've seen very little evidence of party political manipulation in the actions of the MPC so far. But maybe I'm just being naive.

----------


## garthu

Agreed - which blocks my theory the cuts would used for the election race. However could say it could even be the opposite, slow. Certainly no brash moves there

----------


## duncan drennan

> Do I smell a rat?  Looming elections and all that...???


I think the MPC is acting rationally, but not so sure about Kutsong suddenly being reintegrated into Gauteng....  :Hmmm:

----------


## Dave A

Rates down another 1%  :Bananadance:

----------


## Marq

I hope it starts a recovery process cause I'm seeing a dive still on the go, :EEK!:

----------


## Dave A

It probably is only part of the solution. But at least it helps.



> As he cut the Reserve Bank's official repo rate by a full percentage point yesterday, governor Tito Mboweni said: "The world has changed radically." He warned: "Nobody must think the cure for the rapidly changing global and domestic situation is just monetary policy."
> 
> Pressed on how quickly interest rates might fall, he said South Africa needed more than monetary and fiscal stimulus. 
> 
> "There is a danger that in the current debate many countries might forget one of the critical issues confronting economic policy is structural change. It would be folly for us in South Africa to forget that we have a lot of work to do in terms of industrial policy and focus only on the financial market crisis."
> full story from Business Report here


I think Tito is right.

If you read the article, there is also some comment about the trade deficit. Clearly inflation data is not the only thing on Tito's mind at the moment.

----------


## Dave A

Are we in for another rate cut?



> The week ahead will bring a raft of economic data and probably a rate cut. On Thursday, the Reserve Bank monetary policy committee (MPC) will announce whether to make a further cut in its official repo rate - currently at 9.5 percent.
> 
> After a 5 percentage point hike between June 2006 and June last year, the bank started cutting the repo rate from its peak of 12 percent in December.
> 
> As the MPC starts its two-day meeting on Wednesday, Statistics SA will release inflation figures for last month that will indicate how long it will take before inflation falls back within the bank's target range of between 3 percent and 6 percent. 
> 
> Consumer price inflation, which has been above the target ceiling since March 2007, peaked at 13.4 percent in August. Its downward trend to 8.1 percent in January was halted when it rose to 8.6 percent in February.
> from Business Report here

----------


## Dave A

Oh yes! Another 1%  :Cool: 
However, Tito is not exactly upbeat about prospects for the economy.



> Reserve Bank Governor Tito Mboweni painted a bleak picture of the local economy and said all signs were pointing to a second quarter of contraction in the first quarter of 2009.
> 
> "The outlook for domestic economic growth remains subdued, with no indications of a quick recovery," he said in a televised statement.
> 
> "The high frequency data continue to suggest that the negative conditions recorded in the final quarter of 2008 persisted in the first quarter of 2009."
> 
> The economy shrunk by 1,8% in the fourth quarter of 2008 and weak manufacturing output numbers point to another contraction, as a global downturn hits exports.
> 
> Mboweni said consumer demand remained depressed and could be restrained further by falling house prices and weak asset markets.
> ...


I like the fact they are giving priority to the more pressing issue at the moment. Not the time for a narrow inflation-driven view right now.

----------


## QUINN

Although rates have come down considerably, Property buyers are still finding it difficult to qualify for home loans. Two years ago when rates were at current levels this was not the case.
I believe that the National Credit Act and poor economic conditions are to blame. Self employed individuals will find it even more difficult as the banks will no longer just accept a letter from your accountant as proof of income.
Now is no time to "go it alone" obtain the services of a professional in the field of property finance, mistakes you make now could sink future deals.
In my opinion we will see rates below 10% before the end of the year...... :Slayer: 
Care to comment anyone?

----------


## garthu

Down to 10% by december, like that thought alot and very possible in my opinion even though the sentiment for the next meeting seems to be negative...

Get finance advice before, absolutely, as it really has changed and there is nothing simple to it anymore... HOWEVER, I think the bank might just be turning down originator deals at the moment in favour of there own direct deals. Save comm etc. Can't be sure about this just yet, but one our deals indicated this could be occurring?? Submitting by originator MIGHT be detrimental to your deal now. (please don't take for this word, an assumption on my side)

----------


## Dave A

The medium term future for interest rates is far from clear cut.



> There are early signs the rate cutting cycle may come to a premature end. Brian Kantor, the investment strategist at Investec Private Securities, said yesterday that the Johannesburg Interbank Agreed Rate (Jibar) - the rate at which banks lend to each other - was signalling there would be no further rate cuts in the next six months.
> 
> This comes after a 1 percentage point cut in the Reserve Bank's repo rate last week - and when economists are predicting several further cuts, possibly to as low as 6 percent.
> full story from Business Report here


One problem is inflation. CPI remains stubbornly high while PPI has been falling quite rapidly.

Another is the more fundamental driver of supply and demand. If cash for interest bearing finance funding is tight, this puts upward pressure on lending rates. To some extent we're seeing that effect already if we look at current vehicle and bond rates for new deals when measured against the REPO rate.

----------


## Debbiedle

> Although rates have come down considerably, Property buyers are still finding it difficult to qualify for home loans. Two years ago when rates were at current levels this was not the case.
> I believe that the National Credit Act and poor economic conditions are to blame. Self employed individuals will find it even more difficult as the banks will no longer just accept a letter from your accountant as proof of income.
> Now is no time to "go it alone" obtain the services of a professional in the field of property finance, mistakes you make now could sink future deals.
> In my opinion we will see rates below 10% before the end of the year......
> Care to comment anyone?


Hi Quinn - what do the financial institutions want now as a proof of income from a self employed person?

...

Yup, I also think the interest rates will decline even more.

----------


## QUINN

> Down to 10% by december, like that thought alot and very possible in my opinion even though the sentiment for the next meeting seems to be negative...
> 
> Get finance advice before, absolutely, as it really has changed and there is nothing simple to it anymore... HOWEVER, I think the bank might just be turning down originator deals at the moment in favour of there own direct deals. Save comm etc. Can't be sure about this just yet, but one our deals indicated this could be occurring?? Submitting by originator MIGHT be detrimental to your deal now. (please don't take for this word, an assumption on my side)


You are right that is the case.
To many "out of work individuals" tried their hand at bond origination and now the banks are GATVOL.

if you deal with a person with many years experience in the industry and contacts built over many many ,.....many long nights it should not be a problem.
I make a point of having a personal relationship with the key people in the banks

----------


## QUINN

> Hi Quinn - what do the financial institutions want now as a proof of income from a self employed person?
> 
> ...
> 
> Yup, I also think the interest rates will decline even more.


Debbie
Your income will have to be audited. Example: Your income should be in relation to your turnover and your tax returns should match your stated income.
In addition your bookkeeper can no longer be your brother's girlfriend, the banks will only recognize accountants from registered bodies.
Not a train smash if you know what you are doing.
If any one plans to buy they should start by getting their ducks in a row.
Step 1 Appoint a good mortgage advisor

----------

Debbiedle (05-May-09)

----------


## Wukkie

Hi all 

I have just come out of the MO industry, and for the uninformed, according to the NCA all MO's need to state on registration how much comm has been made from the deal. Plus with all the court battle's with SBSA and OOBA, who knows where the industry will end up. As for the other remaining banks they have all cut rates that they pay to the MO's. so the industry will certainly get smaller. although at teh moment most banks are only condisering deals where their LTV is 85 to 90%, as if you are buying a home, you would need 10 to 15% deposit. Plus as someone self employed, why would they need to change their own requirment of 6 months of banks statement. They then look at the average income earned, and the amount spent. There is so much more to the Industry and one thinks, so many people got involved becuase it was such a low cost point to entry, which IMO has given some concern to the banks. 

I think the SA market should consider using a model as in Oz, Lower the comm % and pay out income as the loan runs. Cuts back on switching, plus we shoudl also do away with comm to estate agents. 

well that is my 2 cents worth.

----------


## QUINN

> Hi all 
> 
> I have just come out of the MO industry, and for the uninformed, according to the NCA all MO's need to state on registration how much comm has been made from the deal. Plus with all the court battle's with SBSA and OOBA, who knows where the industry will end up. As for the other remaining banks they have all cut rates that they pay to the MO's. so the industry will certainly get smaller. although at teh moment most banks are only condisering deals where their LTV is 85 to 90%, as if you are buying a home, you would need 10 to 15% deposit. Plus as someone self employed, why would they need to change their own requirment of 6 months of banks statement. They then look at the average income earned, and the amount spent. There is so much more to the Industry and one thinks, so many people got involved becuase it was such a low cost point to entry, which IMO has given some concern to the banks. 
> 
> I think the SA market should consider using a model as in Oz, Lower the comm % and pay out income as the loan runs. Cuts back on switching, plus we shoudl also do away with comm to estate agents. 
> 
> well that is my 2 cents worth.


Hi WUKKIE
I have been in the financing for 10 years and sen the good and the bad.
The banks are shooting themselves in the foot by biting the hand that feeds them.
Before MO they had mortgage centres (Unproductive staff to pay, leases and office overheads. The 2 % per deal they paid us was a small price to pay. I agree they should not have been pressed for more money. I rather ad value to my offering, the 2 % was just a bonus. 

With regard to "loan to value" this does not present a problem for the client that can afford to buy a home. As an experienced agent we can get around this.
In actual fact a new home owner has to make provision for 10 % deposit and 8% costs.

With regard to self employed people I welcome the stricter requirements, to many business owners handle their finances terribly and never keep proper books.
This makes it impossible for me as a MO to get them a home loan or to re finance, as a business finance originator it makes my job much worse and as a business broker it is impossible to value and sell that business.
In my opinion they must do away with Close Corps as it is a nightmare to arrange funding.

Switching IS THE ESSENCE of the MO business, how can you make the banks compete without the threat of losing business.
I have a real issue with paying intro comm to estate agents. If you are a purely MO then you must earn your comm. They agent gets to sell his property and the reward is there. The practice of paying EA for business was a mistake by "green" MO as they did not have the experience to ad value to the deal it was just easier to offer cash.
Now the dog is eating the owner.
I originate my own funding and offer no comm to other agents.
If they dont get funding for their sale the deal is dead in the water anyway and if they are so short sited they they deserve to loose the deal. But I guess the market will get rid of all the bad agents and MO.

Hopefully the "in it for a buck" guys will stay away when things change.
I have never had an issue with a client paying for my services  and in actual fact charged some of them exstra.

----------


## garthu

Not pay the agent... NOT PAY THE AGENT,,,, Huh... :Stick Out Tongue: 

Yup you right though. If i'm not mistaken it is in breach on code of conduct anyway. Funny no one has ever really been able to answer WHY as t how the banks/MO/agents get away with it... everyone seems to avoid the question hot rock style.

Also didn't know you did MO. We are making some hectic changes at the moment, please PM your info and also whats your current % success at mo. We may be looking at new MO's very shortly...

----------


## Wukkie

Hi Garthu

Whe you say that you are looking for new Mo's what happened to the model that your company adpoted to do their own, with a sub agreement. 

But all that a side, the Mo's and the Banks have made the problem worse for them selves. I feel that they shoudl make the MO's agents for the banks, and then at least some level of liabilty will pass onto them. 

Garthu, when you say a breach of code of conduct, is that on teh Agents side of the MO's side. If I remember the estate agenst act correctly there is only a clause that says your can't force the client to where he gets his loan from, but nothing about receiving addtional comm. Plus the banks have been doing it for years, even before the real birth of the Mo's

----------


## Wukkie

> Switching IS THE ESSENCE of the MO business, how can you make the banks compete without the threat of losing business.
> 
> I have never had an issue with a client paying for my services  and in actual fact charged some of them exstra.


Hi Quinn

As for switching, I have no problem with it, but the banks shoudl rather pay a lower intor comm and spead the comm over the bond, this way the MO will maintain client for the bank and would do switching to keep his client happy and not just to make a quick buck.

If you are doing loans for the 4 banks, I thought rasing fees where against the NCA, and I know it is not alllowed accroding to NAMO, (a toothless, blind and deaf watchdog)

----------


## garthu

Hi Wukkie.. wont discuss the MO model her  :Smile: 

On the EAAB side, they prohibit any form of kick backs. Dont remember the wording specific and aint looking for now what is generally and easily accepted is a kick back from an attorney, electrician etc is illegal. On the attorneys side I think it's part of there code as well. So why then is it acceptable that MO/banks can provide payment. One company started to pay through points, followed by an MO, there motivation was to keep in line with the law.... I just find it curious that no one questions it??? Surely good for the goose, good for the gander...

----------


## Wukkie

Hi Garth

No problem witha that, I completly understand. You never know who is out there. I see you removed your one link. sorry that I picked up on it. but th eindusrty is a very small place, As much as they think the one does not knwo what the other is doing, they do and there are only so many places where ppl can go, or land up. 

The attorney point is valid, I think it is part of their code, but nothing in NAMO for MO's.

----------


## garthu

Haha, no problem... I removed the link, not just based on that, but other reasons... this was just a reminder

Heres another interesting thing that occurred yesterday...




> Due to the current housing cycle in South Africa, there has been a significant decrease in the number of customers acquiring new properties. As a result, Absa Home Loans has taken a decision to reduce the number of attorney firms on the conveyancing panel.


I suspect this is based on discounts as opposed to service that the bank can also benefit from - but that is just assumption...

----------


## Wukkie

I would love to see what the firms are going to do. I know that SBSA used to track the attorney firms. I think the suppliers to teh market also track the frims so that they can see the time to Reg. the banks' always want the fasted turn around time, the sooner the loan is done the sooner they get income.

Well I think the market is in for a lot of changes going forward, and that is both the estate agent and the MO's.

----------


## QUINN

> Not pay the agent... NOT PAY THE AGENT,,,, Huh...
> 
> Yup you right though. If i'm not mistaken it is in breach on code of conduct anyway. Funny no one has ever really been able to answer WHY as t how the banks/MO/agents get away with it... everyone seems to avoid the question hot rock style.
> 
> Also didn't know you did MO. We are making some hectic changes at the moment, please PM your info and also whats your current % success at mo. We may be looking at new MO's very shortly...


Garth, It has to do with a conflict of interest, if I had my way I would get every buyer in SA to appoint a buyer agent to negotiate on their behalf.
How can you expect the sellers agent to look after the interest of the buyer.
This will sort out a lot of issues. I'm working hard on this so hopefully thing can still be changed while we are in the mood for change.
I can see no conflict of interest is the bank pays the MO for business introduced. This is standard procedure in in sales business.
Will send you my info. :Cool: 
By the way my success rate is 90% on deals I accept on my standard terms.
90% of clients do not qualify if we screen them properly.
Every MO and Agent I know is crying  :Helpsmilie:  about the NCA lets face it it was to easy to get credit.
If you know your " :Gunsmilie: stuff" you can prepare a client's portfolio so the NCA has no effect.

----------


## QUINN

> Hi Quinn
> 
> As for switching, I have no problem with it, but the banks shoudl rather pay a lower intor comm and spead the comm over the bond, this way the MO will maintain client for the bank and would do switching to keep his client happy and not just to make a quick buck.
> 
> If you are doing loans for the 4 banks, I thought rasing fees where against the NCA, and I know it is not alllowed accroding to NAMO, (a toothless, blind and deaf watchdog)


I agree with your first statement. But the bank needs to pay market related comm. I will not support a bank if I am not paid at least 2%.
Do the math, see what the bank makes on their home loans over 3 to 5 years.
Not to mention the term of the bond.

Raising fees are not in contravention of the NCA. bUT THAT WAS NOT WHAT i WAS TALKING ABOUT.
I ad value to every deal and here is were most MO and Agents fail.
Example: If i fix your blocked toilet and then offer to fix all you leaking taps and while we are at it lets fit that new shower head, I make 300% on the original sale. :Slap: 

NAMO........WHAT NAMO
Enough said

----------


## Darko

I can personally understand why banks are not so interested in MO's anymore. Firstly, the cost-benefit analysis of having outsourced originators as opposed to in-house employee-agents I don't believe was scoped correctly. The risk and where it lies was not transparent enough and evidently, the quick-buck MO's have ruined the reputations of those hard working MO's who actually can add value.

2% on a deal. That's very nice IMHO. With rates like that I am not surprised in the least that there was a flood of MO's into the market to make a quick buck. My brother-in-law is a case in point. 2 yrs ago (about 3 months after becoming an MO) he told me that he made R20,000 for 30 mins work which comprised of onnly completing mandatory docs which he then forwarded to the bank for approval. It should come as no surprise to anyone why the MO industry is flooded with soem quick-buck guys.

At 2%, on a R1m bond - that's R20,000 comm. Now that's approx what some in-house mortgage advisors within the bank would earn as CTC. You can not tell me that these in-house advisors would only bring in one bond per month. i.e. Surely it would be cheaper to retain in-house, or if market share is wanted then mobile / satellite advisors? Look where these great volumes of bonds have taken the banks - to the point of not having ANY cash for further homeloans, almost irerspective of your credit standing and earnings. This is very bad news for potential buyers and sellers.

Ultimately, greed is the reason for where we are now.

I am personally in favour of lowering comm for MO's as it will detract attention from the would be quick-buck guy, while keeping the good MO's honest and their hard work and volumes would still give them a good lifestyle. Quite frankly, the amount of money earned for the little work done by some MO's over the last 2 yrs was quite shocking - as I found out from 1st hand experioence. Not saying that its unfair - those were the rules and capitalism is capitalism baby - but we can't be surprised now.

I don't believe that interest rates will fall in 2010 - they will remain at their 2009 close levels for a while at best (just my opinion). SA has a major balancing act to pull in terms of interest rates. Whilst we must stimulate our own economy by reducing the rates (and bear in mind - this does NOT mean the banks will lend now, they don't have money), we also need to look at current account deficits and attracting foreign income and raising demand for ZAR. This is why we , I believe, we did not aggressively dcrease rates like the rest of the world - and rightly so I believe.

----------


## garthu

> I would get every buyer in SA to appoint a buyer agent to negotiate on their behalf.


Now that's one of the first comments i have heard in a long time that makes sense for the industry... Impressed  :Applaud:  Absolutely right having a buyer agent and seller agent negotiating the deal would really put the seller and buyer in a good seat. Could come with challenges (love to see to hot heads facing down at the negotiating table), but the theory is sound

----------


## Dave A

The subject of commissions to estate agents probably deserves its own thread. The issue is far from simple, but my quick input for now is by my understanding the estate agent is supposed to declare commissions received from other parties to the seller.

On lawyers paying comms to agents, there was a case going but I haven't heard anything on the outcome.

----------


## Dave A

Woot!



> The Monetary Policy Committee (MPC) of the South African Reserve Bank has cut the repo rate by 100 basis points, Governor Tito Mboweni said on Thursday. 
> 
> The repo rate now stands at 7,5%, while prime has been reduced to 11%.
> 
> This is the Reserve Bank's fourth rate cut this year.
> full story from M&G here


That's the second rate cut this month!

But not everyone is happy:



> Thursday's "minimal" 100 basis points repo rate cut will do little to help with economic recovery in the country, the Congress of SA Trade Unions said.
> 
> "The Monetary Policy Committee has let slip an opportunity to kick-start a national campaign to reverse the slide into recession, save jobs and open up the road to recovery," said Cosatu spokesperson Patrick Craven in a statement.
> 
> He said the trade union federation was "angry" as the cut would do little to help South Africa escape from "severe economic recession".
> full story from IOL here


Goodness gracious me, Patrick. At least the reserve bank is doing something. What is labour doing besides protesting? Reducing salary demands? Focusing on improved efficiencies?

I'm grateful that you mention the importance of business survival, though.  :Rockon: 

Could you bash on a few doors about reducing red tape and labour market rigidity while you're doing your rounds?

----------


## garthu

I think the reserve bank is spot on. Maybe the labour unions realise they not going to win with strikes and demands from employers for a while so they have to attack someone.

I think there is huge pressure on ANC this year to keep people happy specially JZ. Alot of promises made over election, like BRT etc and the people expect huge intervention from him to "save them" The reserve bank to have dropped 200 bp in one month - not to shabby. Difficult to ask more of them

To me labour always fights for the wrong cause, and wrong policies to be placed. Probably another thread for that though as opinions could get strong there  :Cool: 

Rates are important, but there is so much more to focus on right now - like banks holding the country to ransom???

----------


## Marq

> the cut would do little to help South Africa escape from "severe economic recession".


I agree.

So also not happy with the rate cut. As discussed before Poor pensioners and guys with bucks in the bank will now be feeling the cut from two angles. Low interest returns and a recession which appears to be creating higher inflation at the moment and the flow of regular business is just not there.

Think I will join a Union this year - need the exercise.

----------


## Dave A

Obviously NUMSA would like to see interest rates *well* under the inflation rate.



> The National Union of Metalworkers (Numsa) will on Monday ask all Congress of South African Trade Unions (Cosatu) affiliates to join a national rolling mass action, should the South African Reserve Bank not cut interest rates. 
> 
> Numsa office bearers were expected to present their plans to the Cosatu executive committee meeting later on Monday, Numsa general secretary Irvin Jim told a press briefing in Johannesburg.
> 
> The union would further "have a presence" at every Monetary Policy Committee (MPC) meeting until interest rates were cut to its satisfaction.
> 
> "We have Cosatu's support that the interest rates should be cut with a further 200 basis points," Jim said.
> full story from M&G here


I guess Gwede Mantashe hasn't had that chat yet.

----------


## QUINN

Article By: Michael Hamlyn
Wed, 03 Jun 2009 07:02

Lending rates do not have to be equal across the banking sector, the Democratic Alliance said on Thursday.
_Now that is a fresh approach_...

This followed the trimming by the Monetary Policy Committee of the SA Reserve Bank of the repo rate by 100 basis points to 7.5 percent.

While the DA welcomed the reduction in rates, DA MP Dion George said there was an element of disappointment that all the commercial banks had only cut their prime lending rate by 100-basis-points.

"There is no reason why lending rates should be equal across the banking sector; nor is it necessary to reduce the rate of return paid to people who hold deposits, such as pensioners and other savers.

"The banking sector now ought to demonstrate that it understands the pressures facing customers," George said.

He added that he was looking forward to seeing the report of the sub-committee set up under the leadership of Banking Association head Cas Coovadia and the SARB's Roelf du Plooy.

The committee was set up after Reserve Bank governor Tito Mboweni's recent meeting with Tom Boardman of Nedbank, Absa CEO Maria Ramos, Investec head Stephen Koseff, First Rand Bank chief Sizwe Nxasana and Standard Bank deputy CE Sim Tshabalala.

Mboweni has â on several occasions â criticised commercial banks for refusing to narrow the 3.5 percent gap between the repo and prime rates.

George said that while he was aware that commercial banks had to look at their margins, "we are in a difficult place economically".

He added that the DA would not allow the issue "to go away."

Banks, he said, should do "a little more. We're all in the same boat together". 

_We can only hope_... :Big Grin:

----------


## Dave A

That makes gov/ANC, the DA and the unions all singing the same tune. With less than 50% of the local banks' income coming from interest nowadays, I'm inclined to see this as poorly researched populist rhetoric.

Someone needs to come up with something new because this bleating isn't going to cut it. The banks are not going to give away profits without good cause. Find a useful angle, for goodness sake. 

Something like this:

On current form the economy is going to contract viciously, raising the spectre of significant bad debt and default. Small adjustments in lending rates can shift a large number of companies and individuals that are currently drifting backwards into oblivion into positive, viable territory. 

If the banks give a boost now to these marginal enterprises and individuals who are sitting just on the wrong side of zero through trimming their margin, it's an investment in a far bigger platform towards recovery and hence far better profits tomorrow.

Then back this up with figures that demonstrate the significance of easing the rate .5%.

How many businesses and individuals would be returned to profitability, or in better shape to survive to the turnaround?

Create and back up an argument that caters towards the banks' self-interest and they stand a chance of actually achieving it.

----------


## Dave A

I'm glad to see I'm not the only one who sees Cosatu's position on inflation targetting as harmful populist rhetoric.



> Two of South Africa's top economists yesterday challenged Cosatu over its role in the angry debate around inflation targeting. 
> 
> The union has opposed the Reserve Bank's 3 percent to 6 percent inflation target range and has also criticised the concept of inflation targeting. 
> 
> Iraj Abedian, the chief economist of Pan-African Investment Research, said inflation harmed the poor and he was surprised that Cosatu was not prepared to face that reality.
> 
> And Econometrix chief economist Azar Jammine said Cosatu was "remiss" for not focusing on the real issues around inflation, including poor labour productivity. 
> 
> "But that could threaten its power base," he said.
> ...

----------


## Marq

Just more sleight of hand stuff as the anc allows the communists to take over our country?

Cosatu's intention is to keep the poor, poor and the rich feeding their system. 'Redistribution of the countries wealth will carry on through these financial mechanisms, through affirmative action, bee and naive political people and structures. 

Look at the threats arising from poor service delivery. Look at the threats arising from the provincial/ municipal restructuring. Look at the threats from strengthened unions and sacp structures. They have their foot in the door and are forcing it open.  

I think our interest rates are determined by world bank, external investment influences and the gut feel of a bunch of bankers. This target inflation calculation stuff is actually non existent.

There is debate on what the inflation rate is never mind being targeted. If we dont like the number, change from CPX to CPIX. If we dont like the number then exclude or include items into the basket - then if that does not work, change the weightings and basing of the cpi basket. 

Municipal rates are excluded from the core inflation rate yet my rates have increased by 325% and nobody knows the average of that exercise. My food bill (volatile food excluded from the core inflation number - whatever that means) has increased by about 20% over the year, Electricity and water - roughly another 20%, wages over 10% and the knock on effects of these basics to run my business roughly the same increases. The unions wage demands at 12+% show they do not believe in the inflation figures either and nowhere in all the negotiations this time time round has inflation even been mentioned. SA Stats do not seem to have a clue on how to collect, what to collect or how to interpret the numbers. At the end of the day the inflation number is like an opinion - everybody has one. 

So how do you target something that does not exist?

It would appear that the changing of the guard at the reserve bank was orchestrated,  with too many smiles and back patting pictures. What is really going behind those scenes? Are cosatu's threats against the governments policies real or just posture? Could it be tantamount to treason or is there an underlying landscape of happy bedfellows just moving the deckchairs while they adjust the real furniture below decks?

Time will tell what these poltroons have done to the country. Hopefully it is not too late to realise that they may have taken you on a one way downhill spiral into new depths not yet considered. While the rest of the world comes out of their self inflicted recession, SA may just be going into a home made one, fueled by civil unrest, rising untargeted inflation and a communist threat where we may just find that we are no longer an emerging economy.

----------


## Dave A

At least inflation was down more than expected in June  :Smile: 



> South Africa's targeted consumer inflation slowed sharply to 6,9% year-on-year in June, below expectations, from 8% in May, official data showed on Wednesday. 
> 
> Statistics South Africa said headline CPI inflation stood at 0,4% on a monthly basis in June compared with 0,4% the previous month.
> 
> A Reuters poll of 17 economists forecast CPI would slow to 7,1% year-on-year and come in at 0,6% on a monthly basis.
> 
> Carmen Altenkirch, a senior economist at Nedbank, said the figure was slightly below market expectations and added to the case for further interest-rate cuts.
> full story from M&G here


I wonder if it will keep going down like this? Or will the way-above-inflation pay increases in so many sectors take its toll and wipe away the ground made so far?

----------


## Dave A

Rates may be down another .5%, but we're still in recession.

Predictions are the third quarter GDP growth may still be negative, but surely some disposable income is going to get loosened up soon with all these interest rate cuts.

----------


## Marq

I don't believe a rate cut or increase of any size at this stage is likely to do the trick of getting this economy going.

We need productivity, less hand outs, job creation and a few other things I haven't thought of, to get this scenario back on track. The gravy train and mismanagement of funds and assets has drained sa for now and new injection sources have to be found. We cannot keep saving what is not there to save and spending on cheaper borrowed funds without a proper future plan and confidence of a return. 

The goberment needs another plan to make a decent plan to plan for an upward spiral. They need to look beyond 2010 and inspire business and international trade partners. Interest rate usage is like only using a size 2 boot to wedge open a door that should be using a size 10. Overrated by glitter wand waving economists.

----------


## IanF

> The goberment needs another plan to make a decent plan to plan for an upward spiral. They need to look beyond 2010 and inspire business and international trade partners.


Marq 
Well said but the world economy needs to grow and inspire confidence as well. There are still the problems of the twin deficits of USA which has been a problem forever so maybe it isn't a problem. 
I just wish JZ would crack down more on the corruption and make examples of the traffic dofficers and their "spot" fines.

----------


## Dave A

> South Africa's targeted consumer inflation slowed to 6,4% year-on-year in August, in line with expectations, from 6,7% in July, official data showed on Tuesday. 
> 
> Statistics South Africa said headline CPI stood at 0,3% on a monthly basis in August compared with 1,1% the previous month.
> 
> A Reuters poll last week forecast CPI would slow to 6,4% year-on-year and come in at 0,3% on a monthly basis.
> 
> Mike Schussler, an economist at Economists.co.za, said the figure was a lot lower than he had expected and brought out the possibility of a rate cut.
> 
> "However, people must be a little bit careful, as I think this will be the second-last decline for CPI and inflation could head higher into the new year.
> full story from M&G here


We're getting close. But are those above-inflation pay increases going to blow the trend?

----------


## Dave A

Two stories - August PPI inflation is down 4% and our leading indicator says we're still in recession territory.

Maybe the SARB *should* have cut rates yesterday  :Frown:

----------


## Dave A

Now here's a pleasant surprise.



> The Reserve Bank unexpectedly cut its repo rate by 50 basis points to 6,5% on Thursday to help accelerate a recovery from last year's recession and as inflation slows.
> full story from M&G here


Pretty hard to pick what might have prompted the move, though.

----------


## murdock

all a .5 % decrease in the interest rate means to me is that standard bank will be increasing my service fee again  :Roll Eyes (Sarcastic):

----------


## Dave A

Pundits seem to expect a .5% rate drop at next week's Reserve Bank meeting.



> The money market is signalling a 90 percent chance of a half percentage point rate cut when the Reserve Bank's monetary policy committee (MPC) meets next week. 
> 
> And Ian Cruickshanks, the head of strategic research at Nedbank Capital, said he believed market players were correct in anticipating a cut, which would help out heavily indebted households. 
> 
> He pointed out that bank governor Gill Marcus had listed three conditions for a further cut in the central bank's repo rate from 6.5 percent, after keeping the rate on hold at the MPC meeting last month. And all three have been met.
> 
> "The first was an improvement in inflation," said Cruickshanks. "And this condition has now been met with inflation falling to 3.7 percent in July from 4.2 in June. The second was weaker growth and the second-quarter data showed the recovery had lost momentum."
> 
> Gross domestic product growth fell to 3.2 percent in the second quarter - below the 3.8 percent estimate of economists polled by Bloomberg and the 3.6 percent estimate of economists polled by Reuters - from 4.6 percent in the first.
> ...


Probably a pretty safe bet, I reckon.

----------


## wynn

A little off topic but 'Noseweek 131 September 2010' has an article on the reserve bank that will make your hair stand on end.

----------


## Dave A

As predicted:



> The South African Reserve Bank cut its repo rate by 50 basis points to 6% as expected on Thursday to give further boost to a stuttering economic recovery. 
> full story from M&G here

----------


## DaisyGirl

How can this help those people who have been scrimping and saving, living economically whilst squirreling away their savings for years and years (whilst everybody else has been accumulating debt and living off credit)?!  Their income has more than halved...

----------


## AndyD

This is the flip side of the coin. People who are living off savings interest are certainly having a hard time of it. A few years ago this looked like a reasonable way to have your hard earned money with unpredictable stock markets and high interest rates but unfortunately the landscape has changed since then.

----------


## Dave A

> How can this help those people who have been scrimping and saving, living economically whilst squirreling away their savings for years and years (whilst everybody else has been accumulating debt and living off credit)?!  Their income has more than halved...


If you consider the total interest received as disposable income, you're doing it wrong  :Wink: 

The art of living off interest from savings is to re-invest a minimum of the inflation portion of the interest received to keep your capital investment on par. The gap between interest received and the inflation rate tends to stay fairly stable at around the 2% mark.

At the end of the day interest rates are more driven by the inflation figure than heating up or cooling down the economy (although those sentiments tend to be warning signs of a change of direction).

----------


## Dave A

> The South African Reserve Bank has cut the repo rate by 50 basis points to 5,5%, governor Gill Marcus said on Thursday. 
> 
> The prime rate would now fall to nine percent.
> full story from M&G here


 :Thumbup: 

Although the banks maintaining their 3.5% margin is starting to look like a pretty big slice of the pie at these rates...  :Fence:

----------


## murdock

the problem with standard bank is the interest comes down but the admin fees still kill you.

----------


## Justloadit

> the problem with standard bank is the interest comes down but the admin fees still kill you.


That's the only way they can remain in business. Let's not forget that banks are also businesses, and I am not trying to defend them, but the money in their coffers does not belong to them. As clients we somehow always think that they are our friends, and will always be there to help us when we are financially strapped - big mistake. The bank's stock is money, they want to protect it just like any business wishing to protect their stock.

----------


## Cathy Duncan

> That's the only way they can remain in business. Let's not forget that banks are also businesses, and I am not trying to defend them, but the money in their coffers does not belong to them. As clients we somehow always think that they are our friends, and will always be there to help us when we are financially strapped - big mistake. The bank's stock is money, they want to protect it just like any business wishing to protect their stock.


I would certainly agree with you here, because this is their prime way of survival, but the thing is, they should narrow down interests equally.

----------

