Good morning,

On the wires…

·         Fuel prices confirmed: Cheaper petrol – and diesel hike smaller than feared

·         SA may get cheaper electricity when the sun shines

·         Hundreds of foreign pupils gone from Gauteng schools after anti-migrant protests

·         Iran executes two people accused of spying for Israel

·         Iran foreign ministry says currently no negotiations with US

·         Ex-general says he drove wife to deliver R200k to Mapisa-Nqakula after robbery

Quote of the day

“The secret of getting ahead is getting started”— Mark Twain

The indicators

Currency crackdown…

FXOne would like to thank Magwitch Securities for their contribution to the currency comment this morning.

July 2026 was another reminder that South Africa’s fortunes remain closely tied to events far beyond our borders.  Global attention remained fixed on the continuing / escalating conflict between the United States and Iran, with energy markets bearing the brunt of the uncertainty.  Concerns around disruptions to oil supply routes and volatility in the Strait of Hormuz pushed oil prices sharply higher during the month, reigniting inflation concerns across the world.  Central banks found themselves once again balancing the competing priorities of containing inflation while avoiding unnecessary damage to already fragile economic growth.

For South Africa, the immediate consequence was higher fuel prices and a renewed inflation shock.  Markets entered July expecting the South African Reserve Bank to respond with another interest rate increase after inflation accelerated on the back of rising energy costs.  Instead, the Monetary Policy Committee surprised investors by leaving the repo rate unchanged.  While the Bank acknowledged the inflationary risks associated with higher oil prices, it also highlighted concerns around slowing economic growth and weakening confidence among businesses and consumers.

The market reaction was swift.  With investors largely positioned for a rate hike, the decision to hold rates resulted in a rapid weakening of the rand.  The move reflected concerns that South Africa was offering less interest rate support for the currency at a time when global investors were already favouring the relative safety of the US dollar.  Whether the MPC ultimately proves correct will depend largely on how long the Middle East conflict continues to influence global energy prices, but July demonstrated just how sensitive currency markets remain to changes in expectations.

MARKET INFORMATION

While economics dominated the headlines, the political story of the month continued to unfold through the Madlanga Commission of Inquiry.  What began as an investigation into allegations of criminality, political interference and corruption within the criminal justice system has evolved into one of the most revealing examinations of South Africa’s law enforcement and prosecutorial institutions in recent years.  The commission has heard extensive testimony relating to alleged interference, questionable investigations, internal conflicts and apparent attempts to influence or derail sensitive cases.

During July, several high-profile testimonies and allegations raised fresh concerns about the integrity of parts of the policing, intelligence and prosecutorial environment.  While the commission’s findings are still to be made, the proceedings have reinforced a perception that key institutions have become vulnerable to political influence, factional battles and failures of governance.  Allegations remain untested until the commission reaches its conclusions, but the public airing of these issues has further eroded confidence in institutions that are fundamental to the rule of law.

From an investment perspective, this matters.  Markets and businesses can usually navigate economic uncertainty, but confidence is far harder to rebuild when questions arise about institutional integrity.  Investors need confidence that contracts will be enforced, corruption prosecuted and public institutions allowed to operate independently.  The growing sentiment emerging from the commission is not simply that individuals may have failed, but that parts of the system need a total redesign, free from political interference.

As taxpayers, we expect our public servants and public institutions to be held accountable.  After all, we are the ones paying their salaries.

On the radar…

·         USD – Trade Balance

·         USD – JOLTS Job Openings

·         USD – Atlanta Fed GDPNow

• All – US-Iran War
• USD – Factory Orders

Did you know?

France’s longest border is in South America. French Guiana is an overseas department of France, its shared border with Brazil is longer than any border France has in Europe.