SA News

News in and around South Africa. | 1 killed, 13 injured in separate KZN accidents

A taxi roll-over on a dirt road in the Ncwadi area, KwaZulu-Natal on Saturday morning has left one man dead and eleven others injured.

Meanwhile, in a separate accident in Howick also in KZN, two men were injured following a collision between a bakkie and truck on the R617.

ER24 paramedics, along with other services, arrived on the scene in Ncwadi to find a stationary taxi on the left-hand side of the road.

“One man was found lying near the vehicle while several other people were found walking around on the scene,” ER24 spokesperson Russel Meiring said on Saturday.

Upon arrival paramedics found that the taxi driver, a man in his 30s showed no sign of life and was declared dead on the scene.

The eleven other passengers that survived were treated at the scene for minor to moderate injuries.

“The patients were treated for their injuries and were thereafter transported to provincial hospitals for further care,” Meiring added.

In the second incident in Howick, ER24 paramedics, along with another service, arrived on the scene at 06:25 to find a small bakkie far off the side of the road.

“Two men, believed to be in their 30s, were found seated on the roadside,” Meiring said.

Upon completing assessment of the two men, paramedics found that they sustained minor to moderate injuries.

“The men were treated for their injuries, and the one man provided with pain-relief medication, before they were transported to nearby hospitals for further treatment,” Meiring added.

Circumstances surrounding both incidents were being investigated.

KEEP UPDATED on the latest news by subscribing to our FREE newsletter.

– FOLLOW News24 on Twitter | Bonteheuwel reeling after 17th alleged murder of 2019

The community of Bonteheuwel in Cape Town is reeling from yet another murder in the suburb after a man’s body was found in a street with a stab wound.

An eyewitness told News24 on Saturday that the deceased was “violently stabbed with a trail of blood [stretching] about 100m to where he was found”.

Western Cape police confirmed that they were investigating the murder of an 18-year-old man on Saturday.

“The circumstances surrounding the death of an 18-year-old man are being investigated after his body was discovered in Taaibos Road Bonteheuwel this morning at around 05:15 with a stab wound,” the police’s André Traut said.

“If this is a murder, which assumed, it takes Bonteheuwel’s 2019 total to 17,” Bonteheuwel councillor Angus McKenzie said on Saturday.

Traut could not confirm the amount of gang-related murders in the area, due to a moratorium on crime statistics.

ALSO READ: Three dead in separate ‘gang-related’ shootings in Cape Town

In January alone, police were investigating three separate gang-related incidents in the area in what was suspected to be a flare up of gang-related violence.

McKenzie claimed the millions spent thus far on the province’s Anti-Gang Unit had been “ineffective”.

He accused the ANC of prioritising “cheap party politics” over peace in the Bonteheuwel community ahead of the 2019 May elections.

“Those tasked to protect us seemingly don’t care that number 18 is rapidly becoming a reality rather than doing everything in their power to avoid it,” McKenzie said, referring to the next possible gang-related death.

“What more motivation is needed for the custodians of safety and security; the national police minister and the president to realise they are failing our communities,” McKenzie concluded.

He further appealed to the police ministry to deploy the army to Bonteheuwel, claiming the police had failed to fulfill their duty to provide safety.

Police Minister Bheki Cele has previously rejected calls to deploy the army to crime-ridden Cape Town streets, saying the army was not trained to deal with civilians.

READ: Cele says no to army deployment in Cape Town

He also said the rate of crime in the Western Cape had not reached the point that necessitated the deployment of the armed forces.

He told Parliament’s portfolio committee on police earlier this month that the Western Cape has received the most resources from his department since the launch of the anti-gang unit.

The DA meanwhile were campaigning for provincial police services in the run-up to the 2019 general elections.

Policing is currently a national mandate of the South African Police Services (SAPS). The setting up of a provincial police service would require a change in legislation. | WATCH: Bosasa staffers shut out of offices as panic sets in over company’s future

Workers at the beleaguered services firm African Global Operations (AGO) – formerly known as Bosasa – were shut out of their offices on Friday, as confusion over their futures continues to grow.

On Monday, AGO confirmed it had applied for voluntary liquidation after its bankers, FNB and ABSA, told the company they were closing their accounts due to “reputational risk”.

Staff arrived for work on Friday morning and parked their vehicles outside the company’s main offices in Luipaardsvlei, Krugersorp.

Some workers said they had downed tools, while others said they had been barred from entering.

It’s understood that a meeting will be held on the premises on Friday morning.

READ: Liquidator moves to secure documents, computers at Bosasa head office

A senior worker, who spoke on condition of anonymity, said the appointment of the new administrator and reports that the banks had closed Bosasa accounts had staffers worried.

“We don’t know if there is a future for us here. We are panicking and no one has explained to us what’s happening here. We have parked our vehicles on the streets because we don’t know if they are safe inside the building,” he said.

The employee said many of the workers wanted government to take over the 10 Bosasa-serviced facilities.

“We have facilities that already belong to the Department of Social Development and we demand government to take them over and insource us as workers. We have the relevant experience and we call that the department must let us continue working where we are working now.

“We don’t know what to do. We are in the dark and no one is explaining to us what is the way forward,” he said.

Of the 10 youth facilities that are managed by AGO, only one in Gauteng is privately owned, while the rest are controlled by government.

WATCH: Is this the end of Bosasa?

The employee said something else that had sparked panic was the early payment of salaries on Thursday, five days earlier than normal.

“When we received our salaries last night, we phoned each other to confirm if indeed the monies we had received were our payments.

“We don’t know why we were paid early. Some think that maybe the company is closing down,” he added.

ALSO READ: The multibillion-rand Bosasa state contracts likely to be affected by the company’s impending liquidation

Another senior employee, who also wanted to remain anonymous, said AGO’s finances were in “a mess”.

“The administrator is going to be shocked when he checks out books. It’s a mess. Nothing in our books is in order. He is going to work hard to ensure that the books are in order,” he said.

On Thursday, a Johannesburg-based insolvency practitioner told News24 that he had moved to secure documents and computers at AGO’s head offices.

The Master of the High Court in Johannesburg appointed the liquidator to oversee the winding up of the company and around 10 of its subsidiary entities.

KEEP UPDATED on the latest news by subscribing to our FREE newsletter.

– FOLLOW News24 on Twitter | LIVE: #StateCaptureInquiry delves into Mabuza’s appointment at Eskom, possible conflicts of interest

2019-02-22 11:30

The judicial commission of inquiry into state capture continues with testimony from Eskom board chairperson Jabu Mabuza, as investigators delve into alleged corruption at the power utility.

WATCH LIVE | State Capture Inquiry 

(Courtesy of SABC) 

Deputy Chief Justice Raymond Zondo


Jump to

Last Updated at 12:35


Share Icon

State capture inquiry: Eskom chairperson Jabu Mabuza to take the stand

All eyes are expected to be on Eskom board chairperson Jabu Mabuza, who is scheduled to be the first witness at the Zondo commission of inquiry into state capture on Friday as investigators delve into alleged corruption at the power utility.

Mabuza’s testimony comes after the commission’s legal team spent two days setting the scene about the alleged state capture of state-owned entities (SOEs) by shining the spotlight on Eskom.

Their work included a full gap analysis report, which sought to highlight existing reports or findings on Eskom, and statements which had been placed before the Portfolio Committee on Public Enterprises. 

The commission set down the next three weeks to focus on the power utility. 


Share Icon


Breaking some bones: The plans for SA’s reformation 

On Wednesday, before tabling his first budget vote in the National Assembly, Finance Minister Tito Mboweni cut a totally different figure than his immediate predecessors.

In 2017 Pravin Gordhan was under siege and warding off repeated attacks from then-president Jacob Zuma while attempting to pacify sceptical financial markets. The strain showed and he used the Budget platform to rally national support.

In 2018 Malusi Gigaba was visibly crestfallen, having just lost his political patron Zuma, who had been removed after a series of strategic manouevres by President Cyril Ramaphosa. He was out of his depth and knew he was on his way out. 


Share Icon


Nenegate impact was long lasting, Zondo commission hears 

National Treasury economist Catherine MacLeod told the state capture commission of inquiry that South Africans were worse off after Nhlanhla Nene’s removal as finance minister in December 2015, as a result of financial market movements caused by political uncertainty.

MacLeod was testifying before inquiry chairperson, Deputy Chief Justice Raymond Zondo, on Tuesday.

Her testimony corroborated that of National Treasury director-general Dondo Mogajane.

In a move which South Africans later dubbed Nenegate, Nene was replaced by Des van Rooyen, who was only in the post for a weekend before he was replaced by Pravin Gordhan. Gordhan is now Minister of Public Enterprises.


Share Icon


ANC accepted Bosasa millions for years 

Former ANC treasurer general Zweli Mkhize has admitted that the party accepted donations from Bosasa despite public allegations of corruption, including paying bribes for tenders shrouding the Krugersdorp-based firm.

Mkhize made the admission after being questioned about a 2014 photograph snapped at ANC headquarters, Luthuli House, that shows a Bosasa delegation including Bosasa CEO Gavin Watson and chairperson Joe Gumede with Mkhize.

Mkhize is seen handing over what appears to be a gift bag emblazoned with a picture of former presidents Nelson Mandela and Jacob Zuma with the words: “Thank you for your support to the ANC in 2014”. According to Mkhize, the picture was taken following an “introductory meeting” between Bosasa executives and himself and he could not specifically recall the photograph. 


Share Icon


I am in the dark over what went wrong at Eskom – Molefe 

Former Eskom chief executive Brian Molefe says he is in the dark about current problems faced by the power utility, which have seen the return of crippling power cuts as the company battles operational challenges.

Speaking to eNCA on Sunday morning, Molefe said he did not want to apportion blame about what could have occurred at the firm he led between April 2015 and November 2016.

In 2016, former president Jacob Zuma declared that there would be no more power cuts, following a visit to Eskom’s headquarters. 

During the interview, Molefe was asked what had gone wrong between that period and now, and he responded: “I don’t know, because since we have said that three years have passed, and the lights didn’t go off and then they went off.”


Share Icon


Des van Rooyen wants to cross-examine former Treasury DG Lungisa Fuzile 

Des van Rooyen, who was appointed finance minister by former president Jacob Zuma for a calamitous weekend in December 2015, wants to apply for leave to cross-examine former Treasury director general Lungisa Fuzile at the state capture commission of inquiry.

Van Rooyen has also indicated his interest in testifying before the commission.

But inquiry chairperson, Deputy Chief Justice Raymond Zondo, postponed the application, saying that a fresh date would have to be arranged.

“It is important that this commission be fair to all parties,” he said. 


Share Icon


The multibillion-rand Bosasa state contracts likely to be affected by the company’s impending liquidation 

Beleaguered facilities management and security company Bosasa, now known as African Global Operations (AGO), announced on Monday that the company was under voluntary liquidation.

The decision comes after the company’s main banking institution, First National Bank, communicated it would close the company’s banking facilities by 28 February, 2019.

AGO and its directors have been accused of corruption and bribery in exchange for state contracts since at least 2008. The details of this alleged corruption was exposed during testimony by former Bosasa chief operations officer Angelo Agrizzi before the state capture commission of inquiry.

Jump to

A methodology to determine which banks are systemically important within the South African context

Publish Date: 2019-02-22
Category: Media Releases

​The South African Reserve Bank proposes a methodology to determine systematically important banks in South African: invitation to comment on the discussion paper. 


Attachments: | WATCH: We ‘work nights trying to get tenders over the weekend’ – Bosasa boss Gavin Watson

A new video clip has provided a rare glimpse of elusive and infamous Bosasa boss Gavin Watson in action, berating his staff for mistakes that nearly led to the company losing an R800m tender.

Watson, who has run Bosasa since 1999, does not lead a public life. He shot to infamy in January as a result of damning testimony of grand corruption by former Bosasa chief operations officer Angelo Agrizzi before the Zondo commission of inquiry into state capture.

In the video, he can be heard talking about how he and politically connected fixer for Bosasa Sesinyi Seopela “work in the night, trying to get tenders over the weekend” and speaks of tender “networks” the company ran.

During Agrizzi’s testimony, Watson was painted as the key figure in a nearly two-decade-long scheme that involved paying numerous bribes to government officials and political leaders in exchange for lucrative government contracts.

Data from National Treasury shows that between 2004 and 2019, Bosasa netted an estimated R12bn from numerous state departments, a conservative calculation that is likely to increase.

Seopela, who is known as “Commander” in Bosasa circles, emerged as a key figure with strong political connections who was able to open doors to political leaders for the company.

Seopela has previously been approached to comment on these claims and his role at Bosasa, but did not respond.  

The video, shot during a staff “imbizo” in March 2017 at Silverstar Casino in Krugersdorp, captures Watson belittling staff.

Tears and sarcasm

He takes his “tender office” to task for mistakes in documents that nearly cost the company a lucrative contract.

At one point he tells Gina Peters, a 17-year veteran of the Bosasa trenches, not to cry.

Watson, in a sarcastic manner, berates Bosasa accounts department staff member Jacques van Zyl.

“Jacques complains that he couldn’t do the tenders, because there are so many tenders,” Watson says.

Van Zyl also featured in testimony before the state capture commission, when a video was shown of him taking a box, believed to be filled with cash, from a middleman.

News24 also previously reported that Van Zyl was instructed to deposit R276 667 cash into the business account of ANC MP Vincent Smith’s company, Euro Blitz 48, on July 14, 2015.

READ: Bosasa paid top ANC MP

“Accuracy, accuracy, accuracy! Question mark, accurate!” Watson continues in the video.  

“We then have to send people around to go and fix up your documents. If we didn’t have that network, we would have lost the tender. The tender’s R800m,” he says.

Watson then asks Bosasa chairperson Joe Gumede, seated in the crowd, if the “tender office” is accurate in its work.

“Definitely not, that’s why people shouldn’t be complaining,” Gumede retorts.

Watson then marches across the room, looking for Seopela, whom he calls “Commander”.

“Where’s Commander? The two of us (Watson and Seopela) work nights, trying to get tenders over the weekend,” he says.

Seopela is a shadowy figure shrouded in mystery. He is not on social media and no pictures of him had been published by any news agency until earlier this week when News24 revealed a picture of Seopela with a Bosasa delegation meeting former ANC treasurer general Zweli Mkhize, taken at Luthuli House in 2014.

ALSO READ: The ANC accepted Bosasa millions for years 

“Do we have to run around?” Watson asks. Seopela responds: “Yes, chief.”

The video clip is short, only two minutes, but according to Bosasa insiders, it is indicative of how Watson would conduct himself when dealing with staff.

“This is how people are treated in what is supposed to be an open forum to encourage people, an ‘imbizo’,” one Bosasa insider told News24.

“[Watson] would interject, purposefully embarrass individuals he targeted.”

The insider, who did not wish to be named, referred to Peters, who Watson told not to cry in the video.

“Gina has been an employee of Bosasa for 17 years. She has worked nights to ensure that the professionalism of the company is maintained. On weekends she is at Watson’s beck and call, having to attend to personal chores. And this is how a Christian deals with people. It’s a disgrace,” the insider said.

News24 approached Bosasa spokesperson Papa Leshabane to verify if the video was indeed indicative of the manner in which Watson spoke to staff, and to clarify details around the R800m tender mentioned.

At the time of writing, Leshabane had not responded. This article will be updated if a response is given.

On Monday, Bosasa announced the company had been placed under voluntary liquidation following a decision by its bank, FNB, to close Bosasa’s accounts at the end of February.

The process to appoint liquidators is now under way with the Master of the High Court in Johannesburg.

*Do you have a tip for our investigative journalists? Send an email to | Sasol intentionally polluted the Vaal River, SAHRC inquiry hears

An official at Sasol Secunda has accused the petrochemical giant of intentionally polluting the Vaal River.

The employee made submissions at the South African Human Rights Commission’s (SAHRC) inquiry into the contamination of the river, held at Constitutional Hill in Johannesburg.

“Sasol excretes a type zero waste which is not allowed to be landfilled at all. And if it (Sasol) wishes to do so, it will have to treat it (the waste) to be type one, to reduce harm,” he said.

Some residents in the Vaal claimed that the foul smell in the area made them sick and wanted their concerns to be attended to urgently.

The situation prompted the SAHRC to establish an inquiry to determine whether the spillage amounted to an infringement of basic human rights, and what may have caused the pollution in the first place.

READ: SANDF pulls out all the stops to tackle Vaal River contamination

The Emfuleni municipality, which is the most affected, has since been placed under administration and the mayor, Jacob Khawe, tendered his resignation in December.

Among some of the chemicals the whistleblower said Sasol continues to spill, is vanadium.

A quick Google search reveals that a person’s exposure to vanadium may affect the central nervous system, with symptoms including headaches, abdominal cramps, diarrhoea and a green colour to the tongue.

Another chemical the Sasol official testified that his company unlawfully discharges is potassium carbonate, which can cause severe irritation of the gastro-intestinal tract and result in nausea, vomiting and burns.

READ MORE: Vaal River pollution: ‘There have been challenges to compliance’, Sasol says

“Those chemicals should never be allowed into a stream, and I have been advised that some of the chemicals can cause birth defects,” the whistleblower said.

He also explained to the inquiry that he had been subjected to intimidation after he spoke out about the matter to his superiors.

“The intimidation is worsening despite the fact that I have followed proper procedures to report the irregularities to relevant authorities, I am just surprised that I am not shot in the head yet,” he continued.

These revelations come despite Sasol having appeared before the same inquiry in November and denied its involvement in the pollution of the river from its Secunda plant.

ALSO READ: Municipalities to blame for ‘contamination of Vaal River system’ – Parliament

The petrochemical giant at the time only conceded that it had struggled to interpret some compliance requirements about regulations on the discharge of waste.

Sasol also revealed that three of its incinerators were closed last year due to non-compliance.

The SAHRC’s inquiry sat for the last time on Wednesday and its chairperson Buang Jones said “all written and verbal submissions will be considered, evaluated” and added so that a final report would be compiled in three months.

Earlier on Wednesday, the water and sanitation’s Gauteng head Sibusiso Mthembu said that the South African National Defence Force’s (SANDF) intervention at the severely polluted river has received a R240m cash injection.

R900m is still needed for the intervention, a mission which is set to be completed in March 2020, to be fruitful.

The SANDF deployed soldiers, among them specialist engineers, to find solutions to the contamination of the river.

As he closed the hearing, Jones said that his team would still be taking written submission until February 28. | Cele explains why he thinks McBride is not ‘fit’ for another term at IPID

Police Minister Bheki Cele has revealed why he could not back Independent Police Investigative Directorate (IPID) head Robert McBride for another term in the job in a lengthy submission to Parliament’s Portfolio Committee on Police.

In a letter seen by News24, Cele wrote that a misconduct complaint against McBride to the Public Protector Busisiwe Mkhwebane had been referred for investigation.

“This means that the complaint, at very least, makes out a prima facie case against Mr McBride,” alleged Cele.

He was writing to the committee after McBride argued that the committee, and not Cele, had the authority to decide not to renew his five-year contract when it ends on February 28.

Comment from McBride was not immediately available, but Cele’s submission included a lengthy list of untested allegations regarding leave pay, procurement, using the services of a private investigator and abuse of authority.

The full details of the letter and the allegations it contains could be made public when the Portfolio Committee on Police meets for an update on the issue on February 22. 

Renewing term would be ‘irrational’

IPID’s job is to investigate complaints against the police ranging from shooting incidents, officers refusing to help, to allegations of large-scale impropriety by high-ranking officers.

Cele wrote: “The allegations against Mr McBride are serious and cast significant doubt on his fitness and propriety to hold office as executive director.”

He said previous court judgments had shown the importance of determining whether officials such as the National Director of Public Prosecutions are “fit and proper” to hold office.

Cele said not only was there a complaint to the Public Protector, but there was also a report by an IPID investigator, Cedrick Nkabinde, with claims against McBride and a “whistleblower” report. 

He said that although McBride “may in time” refute the allegations against him, he will have these claims hanging over him and IPID until then.

“It would, I submit, be irrational to renew Mr McBride’s term in light of these allegations which reveal prima facie evidence of misconduct.”

The letter also recommends checking whether McBride has valid security clearance given his job.

Matter set down for February 22

Cele recommends a fresh interview process for new IPID head.

“IPID’s independence and effectiveness – and the public perception of IPID’s independence and effectiveness – would be better served by appointing a new executive director.”

The submission, signed on February 18, is in line with a timeline set following a court application by McBride to challenge Cele’s authority to decide whether to extend the contract or not. 

In a draft order the parties agreed that the decision Cele had taken not to renew McBride’s term was a preliminary decision that must still be confirmed or rejected by the committee.

“It is recorded that the second respondent (the portfolio committee) intends to take a decision regarding the renewal of [McBride’s] appointment on or before 28 February,” reads the order.

The matter was postponed to the urgent court roll of the Gauteng High Court in Pretoria and is set down for February 26.

Also read: Cele must answer police committee about McBride’s job

The portfolio committee was ordered to report, via affidavit, on its progress by February 22.

McBride’s career has been riddled with legal complications ranging from an allegation of drunk driving that he was acquitted of, to “doctoring” a report on the illegal return of a group of Zimbabweans wanted by that country’s police. He was also spared from a death sentence following a bomb that detonated at a bar in Durban in 1986 when he was in the military wing of the ANC. | SA will have to produce 50% more food by 2050 or face crisis – WWF report

South Africa faces an impending food security crisis if there isn’t urgent action to correct unsustainable practices, says an environmental organisation.

According to the World Wide Fund for Nature (WWF), South Africa will have to produce 50% more food by 2050 to feed an estimated population of 73 million people.

“We need to understand that our current approach to food production is by no means benign. Both globally and in South Africa, agriculture is the largest land use and has the heaviest impact on land transformation and biodiversity loss. Soil degradation, for example, results in a net loss of arable land every year,” Agri-Food Systems: Facts and Futures report author Tatjana von Bormann told News24.

READ: Here are the SA cities facing the biggest threat from climate change

Farming in SA needs comprehensive reform in order to meet the needs of a growing population, says the 56-page report.

‘Resilient and secure food system’

The report reads: “Until a few years ago, WWF focused on the impacts of agricultural production, which are by far the most significant environmental impacts.

“However, focusing on farms only will not bring about the necessary structural transformation that is needed for a resilient and secure food system.

“If we want to achieve this shift within a complex adaptive system, we need to follow a socio-ecological approach, where the social, economic and political dimensions (the actors) are embedded within the ecological component (nature).

“This approach hinges on understanding all the possible interconnections and feedback loops so that, in intending to fix one thing, we do not create another unintended consequence.”



The report argues that, while SA has kept undernourishment below 5% since 1990, there are still significant challenges, with half the population still living below the poverty line.

“Paramount among these [challenges] are diet-related health problems, such as the growing prevalence of obesity and non-communicable diseases (NCDs), and the persistence of hunger, nutrient deficiencies and stunting,” says the report adding that women, children and the poor are most vulnerable.

Food insecurity is a global problem, despite commitments to ensure food security and poverty alleviation.


According to the UN World Food Programme (WFP), 45% of deaths of children under five can be attributed to malnutrition as an underlying cause, and two billion people worldwide suffer from vitamin or mineral deficiencies.

The WWF report cited a number of challenges to food security in SA: smallholder farmers without support; market dominance squeezing out smaller players; and the cost of healthy food as key hurdles to food security.

In addition, the impact of climate change, population increase, and food demand was likely to place serious demands on the food system.

“There will be a doubling of demand for certain products – meat and dairy included – by 2050. How will we meet this? It can’t just be about more production. We need a complete transformation to a system so that it nurtures human health and the environment,” said Von Bormann.

The WFP said that its Fill the Nutrient Gap tool was being used to engage with stakeholders on nutrition strategies in terms of market access and offers, dietary practices, nutrient intake gap of key target groups and affordability of a nutritious diet.

The organisation’s 2018 Global Nutrition Report puts stunting (chronic malnutrition) at 27.4% for South African children under five (2015 statistics).

That report also found 5.6% of children under five in SA were wasting.

The WWF said that progress in food security was not limited to the actions of any single role player.

“Progress must be cross-sectoral and made on all levels more or less simultaneously. WWF advocates that the necessary transformative change will be driven by inclusive regenerative farming, optimal water use, responsible sourcing, reducing food waste and dietary shift,” said Von Bormann.

Climate change

South African policy highlights the risk of the impact of climate change on food security.

“Climate change has the potential to reduce food  production and the availability of potable water, with  consequences for migration patterns and levels of conflict,” says the National Development Plan Executive Summary.

It adds that the effect of climate change will have a disproportionate impact on “the poor, especially women and children”.

The NDP has the goal of creating a food surplus, with one-third of supply produced by small-scale farmers.

Download the WWF report here.

A spokesperson for the Department of Agriculture, Fisheries and Forestry was not immediately available to comment on the report on Tuesday.

KEEP UPDATED on the latest news by subscribing to our FREE newsletter.

– FOLLOW News24 on Twitter

Working Paper – WP/19/01: Reaching for the (r)-stars: estimating South Africa’s neutral real interest rate

Publish Date: 2019-02-19
Category: Working Papers
Author: Lauren Kuhn, Franz Ruch, and Rudi Steinbach

The global financial crisis (GFC) saw real interest rates fall to all-time lows as central banks aimed to stimulate economic activity. The effectiveness of such low real rates depends, to a large extent, on the neutral real interest rate — popularly referred to as r-star. Monetary policy is considered expansionary when real interest rates are below r-star, and vice versa. However, the challenge arises from the fact that r-star is unobservable. This paper estimates r-star in the spirit of the popular Laubach-Williams (LW) methodology, but adapts their approach to capture the dynamics of a small open economy. This is achieved by incorporating additional drivers of the neutral rate, such as domestic net savings and investment, South Africa’s country risk premium, and the potential growth rate of our trading partners. In addition, foreign linkages like the exchange rate and international commodity prices are included to capture the impact of developments in the rest of the world on South African growth and inflation. The results suggest that South Africa’s r-star has fallen less than in advanced economies — from an average of 4.4 per cent from 2000 to 2006 to 1.9 per cent in 2017Q4.



Leave a Reply

Your email address will not be published. Required fields are marked *