With rating agencies giving our economy a thumbs down, and our Minister of Finance Tito Mboweni painting a bleak picture of our economy last week, it is no surprise that there are few, if any, restaurant openings planned for the rest of the 2019/2020 summer season.
Exhibit A of Chefs Rikku O’Donnchü and Warwick King opened on Bree Street on Friday. La Chêne opened at Leeu Estates in Franschhoek two weeks ago. Cowboys & Cooks is running late in opening its planned new restaurant in De Waterkant.
Governor of the Reserve Bank, Tito Mboweni, caught the market and most economists by surprise today, by cutting the interest rate by 50 basis points, to 7 %, a positive sign that may signal a reversal of the credit crunch.
The interest rate is an indication that the recovery of the economy has not been progressing as speedily as the government would like it, given the previous interest rate cuts since December. It could also be Mboweni bowing to the pressure from trade union federation COSATU for a cut in the interest rate. Finally, the cut may be a reflection of the slow but certain decrease in the rate of inflation.
The cut in the interest rate eases the pressure on family and buusiness incomes, and should have a positive effect on tourism.
Cash-strapped South Africans are delighted that the Governor of the Reserve Bank, Tito Mboweni, decreased the interest rate by 1 % point, to 7,5 %, yesterday.
Mboweni announced the interest rate cut a day after the official announcement that South Africa is in a recession, having experienced two successive quarters of negative economic growth. The economy contracted by 6,4 % in the first quarter of 2009, Mining and Manufacturing taking the biggest knocks, at 33 % and 22 %, respectively. The category “Wholesale, retail, restaurants and hotels” had the smallest decrease, at 2,5 %, while the construction sector grew by 9 %, reports The Times.
Mboweni made his announcement against the background of a downward inflation trend, expected to average 6,9 % this year and 5,5 % in 2010, with food inflation peaking at 17 % but slowing down (Mboweni blamed a food cartel for the high food inflation); the second quarter is expected to have a lower negative growth rate compared to the first quarter; and the global downturn is showing “tentative signs” of “bottoming out”, according to Moneyweb.
The interest rate cut is the fifth since Mboweni started cutting the interest rate in December 2008. Consumers are hoping for a drop in the price of petrol next Wednesday too.
The 1 % cut in the interest rate, down to 14 %, is widely welcomed, and should be excellent news for the tourism industry.
The announcement by Reserve Bank Governor Tito Mboweni yesterday was accompanied by a warning to local politicians about the global credit crunch, and the effect that it could have on South Africa. “We are going to go through a rough patch over the next three or four years”, he said, reports BusinessReport. He did not foresee a recession for South Africa, but described the recent World Economic Forum as “a memorial service for the world economy”!
Mboweni wanted to cut the rate by 2 percentage points, he said, but stated that his committee had urged him to take a more cautious approach to the interest rate cut. A further 1 % cut in April appears likely.
The interest rate cut good news should offset the disappointing increase by 61 cents per litre in the price of petrol earlier this week.