South Africa Quo Vadis?
We have just witnessed a failed insurrection which is now hopefully at an end, and Ramaphosa remains as President.
From various news reports, it appears that there are wealthy and powerful people who need Zuma back in power, to derail possible investigations against themselves. They appear to have failed.
In spite of the destruction and deaths caused by this failed attempt, South Africa could emerge a lot stronger with an improved future outlook. Some politicians must feel very exposed and the Government must now, through the law, act decisively. Ramaphosa has stated that these cases would be prioritised.
Closer to the ground, the aftermath has shown the good nature of South Africans. Students in Soweto and other townships have led the way in cleaning up, organising the less educated to follow them – as well as several communities and organisations. Therefore showing a true spirit of ‘Ubuntu’ – hopefully this translates to a positive for South Africa.
In the short term the Rand and the JSE have weathered this failed insurrection quite well and are holding up their values on the back of a resource boom.
The South African Reserve Bank, where our offices are situated, has just celebrated its 100 years anniversary. It happens to be one of the better run reserve banks around the world which is why the Rand has been able to perform relatively well against other currencies, amidst political crisis!
The rating agency Moody’s, may be of the same opinion as they commented that the unrest did not affect their rating of this country, as I am sure they see the same positive situation that may result from this.
The rating agencies will however not improve our rather poor class rating anytime soon. One of the main reasons, perhaps the main reason, is that the government capitulated to the civil service unions. Instead of keeping salaries the same with no increases, per Tito’s February Budget, they have given a 11% plus other benefits!
The only way the country can rectify this is by inflation, which may put the Rand under pressure in the medium to long term.
To avoid some CGT liabilities we still advise that, for medium to long term capital investments, be offshore. Living annuities remain good investment products, as they are exempt from CGT so therefore not effected by the Rand depreciation. A lot of politicians have living annuities so they should not suffer at the hands of adverse legislation in the future!!
The future of South Africa looks shaky in the short term. But if the President and his team take the opportunity afforded by this failed attempt, then South Africa should have a much improved future, where hopefully good economic sense prevails.
The private sector has shown the community and the government how important they are at providing services and security to the people when the government fails.
The private sector and the government, now more than ever, need to work together to put our country back on a sustainable growth path. The private sector is ready, let’s hope the Government is ready too!
All the Best,
Nick Russell
Certified Financial Planner CFP®
Please note: This article does not constitute advice