Maersk gets 20 000 more containers

DANISH shipping giant Maersk Group has purchased 20 000 new containers for global distribution with the first batch of 170 expected in Port Elizabeth within a few months. The company said while it could not specify the total number of containers that would be docked locally, it expected more to come as trade between South Africa and the rest of the world was anticipated to grow significantly. Maersk trade manager for Southern Africa, Mathew Conroy, said the containers would be used mainly to service the local fruit industry as well as the retail and fishing sector. “We expect that the containers will aid the growth of fruit exports out of the country as citrus, grapes, apples and pears continue to be the key segments of the South African refrigerated exports, representing 20 percent of the export to global markets,” said Conroy, singling out the export of grapes in particular. – Sechaba ka’Nkosi THE RESERVE Bank’s monetary policy committee (MPC) would continue to closely monitor the evolution of inflation expectations and other factors that could undermine the longterm inflation outlook and stood ready to act when appropriate, governor Lesetja Kganyago said yesterday.

He announced the benchmark repo rate would be kept unchanged at 5.75 percent.

The rand was a touch softer against the dollar, coming off the session’s high after the Reserve Bank announcement. It was trading at R11.8213 against the dollar shorly after 5pm.

Kganyago said four members of the MPC favoured an unchanged stance, while two were for a 25 basis points increase.

“The deteriorating inflation outlook suggests that this unchanged stance cannot be maintained indefinitely.”

The Fed

Peter Attard Montalto, an economist at London-based Nomura International, said: “This begs the question, why not hike now, but the MPC still seems to hope the Fed (US Federal Reserve) lift-off might be later and Eskom tariff hikes smaller.”

Kganyago said growth remained fragile, constrained by electricity shortages and low business confidence, and the risk to the outlook remained on the downside.

“But this cannot be solved by monetary policy alone. Monetary policy action will need to achieve a fine balance between achieving our primary mandate of price stability and not undermining growth unduly,” he said.

Kamilla Kaplan, an economist at Investec, said with consumer price index (CPI) within the 3 percent to 6 percent target range and with the economy growing below potential, the Reserve Bank had scope to keep the benchmark repo rate unchanged.

However, there still remains the risk of an interest rate increase later in the year, possibly as early as July, based on the hawkish policy stance conveyed in the MPC statement. A rate hike, even a small one, would spell disaster for many households struggling with the debt burden and mounting cost pressures – from electricity to food to transportation.

Kaplan said: “The US monetary policy trajectory remains a key input for the Reserve Bank’s policy decision, owing to the potential effects on the rand exchange rate, and by extension, on inflation.

“By raising interest rates in parallel with the US, the Reserve Bank would seek to minimise the risk of portfolio outflows, stemming from the adjustment in portfolio exposures more toward the US.”

The US is now widely expected to tighten monetary policy in September.

Bart Stemmet, an analyst at NKC Independent Economists, said: “We expect the SA Reserve Bank to wait until September, but if the rand comes under significant pressure in coming months and the National Energy Regulator of SA grants Eskom’s application for further tariff increases, we could well see a 25 basis points hike in July.”

FNB chief

executive Jacques Cilliers said even a small rate hike would sting later in the year.

“Consumers are already absorbing much higher fuel and electricity prices, with strong likelihood of further increases in energy prices. Salary increases are also likely to be modest due to slower growth.”

The inflation print came in at 4.5 percent in April from 4 percent in March, against the economists consensus forecast of 4.6 percent. The inflation forecast of the bank has changed since its meeting in March. The bank now expects inflation to average 4.9 percent in 2015.

A temporary breach of the upper end of the inflation target band is still expected in the first quarter of 2016, with a peak seen at 6.8 percent, and falling to 6 percent by the second quarter.

Inflation

An average inflation rate of 6.1 percent is forecast for 2016. The forecast period has now been extended to the end of 2017, with an average inflation rate of 5.7 percent expected for the year.

Kganyago said the growth outlook remained weak, amid continued electricity supply constraints and low and declining levels of business confidence. Kganyago cited electricity tariff increases, high wage settlements and currency volatility as the main risks to inflation.

Growth is expected to average 2.1 percent in 2015 and 2016, and to increase to 2.7 percent in 2017. At this rate, the economcy can hardly produce the jobs required to lower unemployment running at 25 percent.