Chaos at Transnet possible reason for slow repo rate decrease
Statistics South Africa released a report that showed a 5.5% decrease in the transportation of goods via railways, for July 2024 compared to July 2023, on Wednesday.
Transnet has struggled to provide adequate freight rail and port services in South Africa due to equipment shortages and maintenance backlogs after years of under-investment, and Chief Economist at Econometrix, Azar Jammine, says this is possibly one of the reasons why the country’s inflation rate remains high.
Last week, the South African Reserve Bank’s Monetary Policy Committee cut the repo rate by 25 basis points instead of the 50 basis points that consumers were hoping for.
“The superficial conclusion to draw from the decline in the volume of goods transported, is that this is the manifestation of the problems that Transnet had in terms of the deterioration of its rail network.
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“The deterioration in its ability to process imports and exports through South African ports, is the classical manifestation of one of the key structural impediments that is contributing towards the country experiencing a growth less than 1%.”
“This then could contribute to the shortages of goods and services that lead to higher inflation and is probably the reason why the Reserve Bank is reluctant to reduce the interest rates too fast for fear of increases in inflation. We haven’t seen that happen yet but it’s possible that it can still happen in the future”.
Furthermore, he warns of a potential supply problem, as he puts it: “The inability of the country’s businesses to procure the goods and imports that they want into production processes or for just general sale to the public".
