Unchanged interest rates bode well for Agric sector

Comment by Paul Makube, Senior Agricultural economist at FNB Agri-Business

From an agriculture perspective, unchanged rates bode well for the sector as it is grappling with a national agriculture debt in excess of R160 million. Producers, particularly in the Western Cape, the Eastern Cape and Northern Cape are still grappling with losses from the recent drought and the relatively low interest rates will alleviate pressure on profitability.

Since the MPC review in March, the rand depreciated considerably to nearly R13 against the US dollar and the international price of Brent crude oil prices have edged closer to US$80/ barrel. In addition, market expectations are that fuel prices will increase further early next month.

This is not good news for inflation which has been way below the midpoint of the SARB target of range of 3% to 6% at 3.8% during March 2018. Nonetheless, inflation is expected to remain on the low side of 5% and this combined with expectation of an improvement in the overall economy will afford the SARB to maintain rates at 6.5% but hawkish in its statement.