Roelof Botha deplores ‘ridiculously high interest rates’

‘We should have a more growth-orientated monetary policy, and it irritates me to no end that we have the highest real interest rate in the world,’ adds the economist, as he shares insights on the latest Afrimat Construction Index.

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SIMON BROWN: I’m chatting now with Dr Roelof Botha about the Afrimat Construction Index. We have the fourth quarter [report] for 2023, and that also gives us the full year.

Roelof, we appreciate the early morning. It’s a mixed bag, but two strong areas are employment, which is hugely important to our economy, and wholesale sales of construction materials. Both of those really came through strongly and had a good quarter and a good year.

ROELOF BOTHA: Yes. As you say, it’s a mixed bag. The worst-performing indicator quarter-on-quarter was building plans passed – the value of building plans passed by the larger municipalities. That’s probably not a surprise given the ridiculously high interest rates.

I must tell you, having listened to the previous interview, it’s a pity – the narrative around interest rates. Africa seems to centre around what’s happening in the US.

The United States economy cannot be compared to South Africa’s economy. The US has virtually full employment, and we have massive unemployment – and it’s just not correct to compare the two economies with each other.

We should have a more growth-orientated monetary policy, and it irritates me (to) no end that we have the highest real interest rate in the world, and that under the watch of the current governor.


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The average real interest rate from the period when Gill Marcus was governor – she was probably the best governor of the Reserve Bank ever as far as I’m concerned – under her watch, the average real prime rate, prime minus CPI, was just above 3%. It is now close to 7%. This is crazy, and this is really hurting the economy.

But back to the Afrimat index. The best-performing indicator remains hardware retail – no, no, salaries and wages and buildings completed. But that’s from a low base. The salaries and wages in construction 8.9%, a real increase quarter on quarter. That’s not surprising, because the guys and girls that help to build stuff in South Africa take a decent break in December and they get bonuses.

SIMON BROWN: Yes. The industry just shuts down mid-December. I want to go to your point around rates, with two pieces of data; bond applications are now the lowest since February 2023, and some other data that you had in there [show that] in 2019 first-time home buyers required about a R60 000 deposit. That’s now R250 000. Both of those data sets just point to an absolute squeeze on the ability of an individual to get into the housing market.

ROELOF BOTHA: Yes. I remain absolutely flabbergasted at the South African Reserve Bank’s monetary policy. I just make the point that the South African Reserve Bank is a fantastic institution. We are way ahead of most countries as far as the adherence to the Basel II accord is concerned, but the monetary policy is just plain wrong. As you’ve indicated, first-time home buyers are just being shut out of the market.

The market is not dead and buried, but it’s ridiculous. If you look at South Africa, you can drive in any one direction for a while and you’ll see the dire need for improved and better housing.

We need to look at the housing sector to improve the mobility within the sector – for instance by giving title deeds.

The law, the overall legislation is there, but it has never been enacted in practice. So to allow that whole system of housing development, from the low end right up to the top end, to develop further we need lower interest rates. As far as I’m concerned this is a no brainer. So I’m not sure what’s going on at the MPC, the Monetary Policy Committee. They seem to ignore the second part of their mission, which is to as assist the process of economic growth and employment creation.


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SIMON BROWN: The other data point where we can see it is public and private-sector capital formation. This doesn’t directly [relate] to rates, and some of it is just the government’s ability. Both have been moving up since the pandemic, but the private sector is pretty much where it was in 2007, and government is below where it was in 2007 after peaking in 2015. This is a critical component of the economy.

ROELOF BOTHA: Yes. I must tell you that for a firm like Afrimat to perform as well as it has – forgive me for bragging a little, but Andries van Heerden is the CEO of the Year and a legendary deal maker – it has been necessary for them to diversify a little. The standout performance year on year was trade sales in construction materials.

But what is frightening is that the value of building plans passed is down 26% year on year.

And it seems to me as if the Monetary Policy Committee – sorry, I keep harking back to them – only looks at data very selectively. And that is irritating homeowners. I’ve had a look at the average mortgage bond administered by BetterBond, and on that value homeowners are now paying R4 000 – approximately R4 000 more every month since the Reserve Bank started its excessively restrictive monetary policy.

SIMON BROWN: And, to the point, we don’t have demand-side inflation because we have no demand. Let’s be clear around that. The US, sure, but not locally.

We’ll leave it there. Dr Roelof Botha, talking about the Afrimat Construction Index, I appreciate the early morning time.

William Murphy

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