Inflation Lower, Your Credit Card, Hywel on China, Trump vs Kamala, and the 2-Pot Retirement System

Green shoots sprouting in SA

Ninety One always providing us with so much good information about what is really happening behind the scenes as opposed to checking the newsfeeds. Here at their latest taking stock Nazmeera is in conversation with Rudi Dicks, Head: Project Management in the President’s Office.

Watch Nazmeera Moola, in conversation with Rudi Dicks, discuss the reforms to alleviate South Africa's economic challenges.

Also:

Watch Jeremy Gardiner (Ninety One Director) provide insight into where the world, and SA, are likely headed in the next 12 months.

Lower SA Inflation

Following my comments last week, SA inflation this week positively surprised and dropped to 4,6% in July, below consensus expectations. This is down from 5,1% in June, paving the way for the interest rate cut expected next month.  

Last week, lower mining output and weak unemployment data came out as expected, while business confidence came in slightly better than the previous month.

What did surprise positively, was South Africa’s retail trade climbing by 4,1% over a year ago in June 2024, following an upwardly revised 1,1% rise in the previous month. This marked the fourth consecutive month of increases in retail activity, with the growth rate at its strongest since July 2022.

While inflation is coming down, the consumer is spending more, showing signs of a stronger local economy.  

From our side, “in the final analysis, as long as recessions are avoided, which certainly appears intact - lower inflation and interest rates are good for markets”.

How Your Credit Card Works

Social media is full of tips on how to maximize the interest-free period on your credit card. The problem is that credit cards in South Africa work differently from those in other countries, which can lead to some confusion for credit card users.

This is what you need to know.

South African credit card providers calculate interest at a balance level, not a transactional level. This means that the 55-day interest-free period is not calculated per transaction.

In some countries, the credit card provider calculates the interest-free period as 55 days from the date of the transaction. In South Africa, it follows the billing cycle.

The interest-free 55-day period is from the time of the start of the billing period until payment is due.

Each of our retail banks in South Africa works slightly differently, amplifying the confusion, and this article via the City Press shares the detail;

Personal Finance | How your credit card really works | City Press (news24.com)

There are no smart hacks when it comes to a South African credit card except to pay in full each month.

SA’s Most Elite Credit Cards

South Africa’s most exclusive credit cards, offered by banks like Discovery, Nedbank, and Investec, demand high salary requirements, up to R2,5 million annually.

These cards provide elite benefits, including travel discounts, complimentary airport lounge access, and dedicated banking services.

The most prestigious card, Discovery Bank’s Purple Suite, costs R644 per month. While these cards offer prestige and perks, they also come with hefty monthly fees and require significant income to qualify.

The table below compares salary requirements, interest-free periods, and monthly fees for the most exclusive credit card accounts in South Africa.

For the full article via Biz News, you can read more by clicking on this link;   

Source: SA’s elite credit cards: High salaries, high perks, and high costs (biznews.com)

Hywel George on China

The Old Mutual Investment Group’s Director of Investments, Hywel George, shares his webinar on the latest developments in China.

First, he provides an overview of offshore market conditions, with an insightful view of earnings slowing down on the magnificent 7 shares on the US markets and the resulting bumpy offshore market over the past month.  

To view this webinar, click on the link below;     

The New Chinese Empire. A look at the reality of current Chinese global power | Money Matters with Hywel George (livestorm.co)

Following this webinar, he held a podcast interview via Moneyweb, which can be read or listened to via this link;

[TOP STORY] China increasingly dominant in tech and space - Moneyweb

Trump vs Harris

A month ago, Donald Trump was leading the polls for the US election, and it looked like it was his election to lose.

Now after Joe Biden's resignation, it seems Kamala Harris is quickly gaining popularity.

Old Mutual Wealth, in turn, summaries the differences in the policy proposals between them;   

Two-Pot Retirement System

The Two-Pot Retirement System does not have any effect on post-retirement funds for persons already withdrawing from their retirement savings.   

There are less than two weeks until the implementation of the Two-Pot Retirement System on 1 September.

I have included our latest update in the attachment.

From before, Gontse Tsatsi, head of Retail Clients at Old Mutual Investment Group and previously our Cape Town area manager at PWM, shares a few myths to beware of in providing more clarity around the Two-Pot system.  

To view the full article via The Citizen, click on this link. Beware of these myths about the two-pot retirement system (ampproject.org) 

At this stage, there are still two fundamental questions that still need to be addressed;

• The first is that where the withdrawals are taxable, the regulators have told us that SARS will send the various product providers the tax percentage to be deducted for each and every taxpayer in SA. This remains outstanding,

and   

• A product admin fee will be levied on withdrawals to cover the administration of the withdrawal. We have yet to receive any confirmation from the various product providers on how much this will be or how it will look.   

At the same time, it does appear that fewer South Africans are now planning to dip into their savings in the two-pot retirement system.

Old Mutual Wealth via IOL share why, which you can read by clicking on this link;  

https://www.iol.co.za/business/advice/why-are-fewer-south-africans-now-planning-to-dip-into-their-savings-in-the-two-pot-retirement-system-a87ef11d-af91-4b1b-9457-0616e2c17cd2

This link above includes a useful, easy-to-understand short video from Old Mutual Wealth’s Head of Advice, Tiaan Herselman, on the 2-pot retirement system.

This week, Old Mutual was interviewed via Newzroom Africa on their expectations of 2-pot withdrawals, with significant general resistance to the Two-Pot Retirement System from the general secretary of trade union SAFTU, Zwelinzima Vavi.

This somewhat highlights the lack of understanding of this introduction. The recording of this online interview can be viewed by clicking this link below; 

Two-pot retirement system is a scam - SAFTU (youtube.com)

 Personal News from Jurie

I wanted to inform you that I will be on a soft leave from Monday, 9th September, until Friday, 27th September. During this time, I’ll be spending quality time with my family at our family farm in the Eastern Cape. As the area has limited signal and Wi-Fi, I won’t be able to conduct meetings, and my response time to emails may be slower than usual.

If there has been a change in your financial situation since our last conversation and you’d like to schedule a meeting, please reach out before the start of September so we can arrange a time before I leave.

While I will still be checking emails occasionally, please note that my availability will be limited. For any urgent matters, feel free to send me a WhatsApp message or call me directly. If you’re unable to reach me, you can contact our office at 021 555 9300.

For administrative queries, please reach out to:

Charlene Kemper at [email protected]

Angela Paterson at [email protected]

Natasha Jonker at [email protected]

For advice-related queries, you can contact:

Heinz Nel at [email protected]

Thank you for your understanding and for respecting this time I’m spending with my family. I appreciate your patience and look forward to connecting with you upon my return.

Friday Food for Thought