The Stears Weekly Macroeconomic Report highlights the macroeconomic trends and policy shifts shaping the African investment landscape, helping you make informed decisions in dynamic markets.
South Africa
- Foreign Exchange: The South African rand appreciated by 1.1% w/w, closing at R18.0/$ compared to last week’s R18.2/$. However, a stronger US dollar in the weeks ahead may negatively affect the rand's performance. Q4 2024 forecast: R17.2/$.
- Inflation: October’s inflation rate declined to 2.8% (September: 3.8%), marking a four-year low driven by reduced food and fuel costs. Lower living expenses are expected to boost disposable incomes and further reduce unemployment, which dropped from 33.5% in Q2 2024 to 32.1% in Q3 2024.
- Interest Rates: Reflecting the decline in inflation, the South African Reserve Bank (SARB) reduced its repo rate by 25 basis points to 7.75% on November 21, marking the second rate cut in 2024.
- Sovereign Credit Ratings: S&P Global Ratings upgraded South Africa’s outlook from stable to positive, affirming its 'BB-/B' foreign currency and 'BB/B' local currency credit ratings. This improvement is underpinned by the country's growth potential, driven by industrial sector expansion, reduced load-shedding, and ongoing economic reforms spearheaded by the Government of National Unity (GNU) coalition.
Egypt
- Foreign Exchange: The Egyptian pound weakened 0.6% w/w, depreciating from E£49.4/$ to E£49.7/$, driven by strong local demand for foreign currency. With the expected IMF funding, the pound will likely stabilise in the coming weeks. Q4 2024 forecast: E£48.9/$.
- Interest Rates: The Central Bank of Egypt (CBE) kept its benchmark interest rate unchanged at 27.25% during its November 21 meeting, marking the fifth consecutive hold as it seeks to manage persistent inflationary pressures.
- IMF Funding: Egypt has entered its fourth review under the $8 billion International Monetary Fund (IMF) Extended Fund Facility program, which could unlock approximately $1.2 billion in funding. This financial support is critical to meeting near-term fiscal obligations, especially as regional tensions impact Suez Canal revenues.
Nigeria
- Foreign Exchange: The Nigerian naira was relatively flat at the official market but weakened by 0.6% at the parallel market w/w, closing at ₦1,652.6/$ and ₦1,755/$, respectively. The naira’s depreciation was partly driven by strong dollar demand ahead of the festive season, a trend that will likely continue until year-end. Q4 2024 forecast: ₦1,621.7/$.
- Interest Rates: The Central Bank of Nigeria's (CBN) Monetary Policy Committee will convene on November 25-26. We anticipate a further rate hike of 25-50 basis points to address inflation which rose to 33.88% in October.
- Fiscal Policy: The Federal Executive Council (FEC) approved a ₦47.9 trillion ($34.2 billion) budget for 2025, representing a 66% nominal increase from ₦28.8 trillion ($36 billion) in 2024. The budget is based on:
- An exchange rate of ₦1,400/$
- An average crude oil production of 2.06 million barrels per day (mmbpd) and,
- A $75 per barrel crude oil price
- Government Borrowing: To finance the projected ₦9.2 trillion ($6.6 billion) deficit, the Nigerian Senate approved a $2.2 billion foreign borrowing plan, including a $1.7 billion Eurobond issuance and a $500 million Sukuk offering. Additional dollar liabilities will further strain Nigeria’s fiscal position, especially as the US dollar strengthens in the coming months.
Ghana
- Foreign Exchange: The Ghanaian cedi appreciated by 1.1% w/w, strengthening from ₵16.0/$ to ₵15.8/$. This was driven by the Bank of Ghana’s (BoG) dollar sales exceeding $200 million, which eased forex demand pressures. However, currency risks persist due to expectations of a stronger US dollar in the coming weeks. Q4 2024 forecast: ₵16.2/$.
- Inflation: Adverse weather conditions affecting local food production and a weaker cedi drove inflation up by 0.6 percentage points to 22.1% in October, still above the government’s year-end target of 15%.
- Interest Rates: The BoG is scheduled to meet from November 20-25. We anticipate the bank will maintain the policy rate at 27% to balance inflationary expectations and currency risks.
- National Elections: Ghana’s presidential elections are in two weeks (December 7). Political uncertainty surrounding the elections could pose economic risks in the coming months.
Kenya
- Foreign Exchange: The Kenyan shilling lost 0.2% w/w, depreciating from Kes129.4/$ to Kes129.6/$ due to bearish investor sentiment amidst ongoing IMF reforms and strong dollar demand. Q4 2024 forecast: Kes130/$.
- Interest Rates: The CBK is set to meet on December 5, and we anticipate a wait-and-see approach to interest rates due to ongoing food inflation risks and currency pressures stemming from a stronger US dollar. In October, the CBK cut the benchmark rate by 75 basis points to 12%.
- Government Borrowing: Kenya plans to draw down its $1.5 billion loan from Abu Dhabi in tranches to stay within borrowing thresholds outlined in its $3 billion IMF Extended Credit Facility program. The government is expected to access the first $750 million in 2025. This additional funding will help meet Kenya's 2025 financing needs but increase debt sustainability risks.
Key developments next week
- November 20-25: Ghana MPC Monetary Policy Committee meeting
- November 25-26: Nigeria Monetary Policy Committee meeting
- November 25-29: IMF to conclude Egypt’s fourth review under the Extended Fund Facility program
- November 29: Kenya November 2024 inflation data release
