Real Estate Investor Magazine South Africa February 2015 | Page 10

upfront

PROPERTY ALERTS

The
Good

The
Bad

Interest rate hikes
likely on hold

Eskom woes will
last several years

A

E

s the market expects inflation
in SA to reach the lowest
level in more than two years
following a drop of almost 60%
in crude oil prices, forward-rate
agreements, used to speculate on
interest rates, show investors expect
an interest rate cut rather than a rate
increase in the first half of 2015.
While the Reserve Bank has stated
that rates will have to normalise over
time, monetary policy easing globally
and low inflation locally means this
normalisation may not require an
interest rate hike in the near future
and the Reserve Bank can keep the
benchmark interest rate unchanged,
as it has done since July 2014, when
it was raised by 25 basis points to
5.75%. Some analysts expect rates in
SA will remain unchanged through
2015, and the Reserve Bank may
even surprise us with a rate cut.
John Loos, Household and Property
Sector Strategist at FNB, notes
that as things currently stand, the
probability of further rate hiking
being postponed to a later date must
now be quite high. Nevertheless, the
FNB interest rate forecast is that
the Reserve Bank will increase the
repo rate gradually higher from the
current 5.75% to 6.5% by year-end,
taking prime rate from 9.25% to 10%.

10

November 2014 SA Real Estate Investor

skom says it can no longer
guarantee reliable electricity
supply and South Africans
must learn to live with load shedding
for the next three years as it struggles
to bring new capacity on line while
battling a maintenance backlog that
will take around 10 years to catch up.
To supply power reliably and restore
appropriate spare generation capacity,
Eskom needs at least 5,000MW of
new capacity. Unfortunately, Eskom
has lost more power capacity in
2014 than it can build over the next
two years. With breakdowns now
having taken 7,253MW out of the
system and 4,215MW of plant on
planned maintenance, not even the
entire Medupi and Kusile power
station, were they to come on line
now, will be able to close the supply
gap. Furthermore, the coal-fired
Medupi power station in Limpopo
will add just 800MW of generating
capacity when the first unit reaches
full production and this has been
postponed into later this year. Kusile,
the 4,800MW coal-powered station
in Mpumalanga, was scheduled to
start producing power by the end of
this year, but it’s first 800MW unit
will now start delivering only in the
first half of 2017. The Ingula pumped
storage scheme near Ladysmith,
which is to supply 1332MW of
power, will only come online in the
next few years.

They
Ugl
The 1% now owns
more than half of
the world's wealth

A

ccording to a report released
by the British charity Oxfam
ahead of the annual 45th
World Economic Forum meeting at
Davos, Switzerland, just 1% of the
world’s population will own more
of the global wealth than the other
99% put together by 2016. The
richest one percent’s share of global
wealth increased from 44% in 2009
to 48% in 2014, according to the
report. The average wealth per adult
in this group is $2.7-million. Of the
remaining 52% of global wealth in
2014, almost all – 46% - is owned
by the rest of the richest 20% of the
world’s population, leaving the other
80% to share just 5.5% of global
wealth with an average wealth of $3
851 per adult.
“The scale of global inequality is
quite simply staggering and despite
the issues shooting up the global
agenda, the gap between the richest
and the rest is widening fast,” says
Oxfam Executive Director, Winnie
Byanyima. As co-chair at the World
Economic Forum, she urged leaders
to take on “vested interests that
stand in the way of a fairer and
more prosperous world.” Rising
inequality will be competing with
other global crises including terrorist
threats in Europe, the worst postCold War stand-off between Russia
and the West, and rene