It has been a quarter in which Covid has once again dominated the news feeds.  The discovery of the new Omicron variant as a result of some excellent scientific work done by South African scientists, who alerted the world to this new and more infectious variant, saw travel bans re-introduced within 48 hours. This re-appointment to the red list is going to seriously detriment tourism both to and from South Africa, as well as keep some family members apart for a longer period. Whether or not this variant is as severe as earlier variants and if hospital admissions and death rates will be lower, remains to be seen. One certainly hopes so but at this stage it is too early to predict how this variant will play out. With this in mind, we encourage all clients to utilise video and telecalls during this time, rather than attend face-to-face meetings.

The Johannesburg Stock Exchange (JSE) ended strongly at 70475. This has been underpinned by a number of companies re-instituting dividends and declaring significantly better results than 2020. One of our favourite stocks, Richemont, in particular, had an excellent set of results and this shows how much pent up demand there is even for luxury goods.

The recent municipal elections highlighted how badly the ANC is performing as administrators.  We saw a number of opposition coalitions being formed which has led to significant losses sustained by the ANC.  The subsequent in-house finger pointing has further increased divisions within the ruling party and calls for accountability have escalated along with the demand for prosecution of those accused of corruption.  It will be interesting to see if President Cyril Ramaphosa is able to make the sweeping changes desperately needed within the ANC with the current lack of support.

It is unfortunate that, at a time when we need it most, we are seeing the resignations of some high profile individuals within Government structures, such as Advocate Hermione Cronje who was head of the corruption busting investigative directorate.  Political pressures and the high unemployment rate increase the risk of further incidents of social unrest, and one sincerely hopes that over this period we do not see the constraints of supply being further exasperated.

Globally, increasing tensions between China and the United States have been a cause of concern to some investors with Beijing insisting on the de-listing of some of their Chinese companies in the United States and returning to Hong Kong. This, coupled with the prescriptive nature of the socialist government in China, has weighed heavily on tech stocks, particularly those who have business interests in China. How long the Chinese Government continues to have these profitable companies in their crosshairs for and whether or not the United States retaliate, remains to be seen.

Inflation, according to some commentators, does not seem to be as transitory as initially believed and with talk of quantitative easing measures coming to an end, as well as some central banks hinting at interest rate increases, the medium term could prove volatile.  This, coupled with global supply chain constraints, could cause an increase in the cost of transportation of goods and globally fuel prices have added to this inflationary pressure by being close to, or at, all-time highs.

Locally, during the period under review, the South African Reserve Bank increased interest rates by 0.25 basis points in an effort to address inflationary environment pressures.  There has been much commentary surrounding this philosophy and debate over whether the impact of interest rates will further negatively affect the local economy and already stretched consumers.

We have witnessed a period of unrealistic returns between crypto currencies and tech stocks who have been assisted by the incredibly fast dissemination of information.  In some instances, returns have doubled over exceptionally short periods. We have seen the meteoric rises of companies who have never generated a profit, that in our opinion is unsustainable, and are burning through investor funds in the form of start-up capital. This, together with extremely stretched valuations, could cause global markets to revert to the long term average and, as such, we believe as a team that staying invested in good companies that have a long history of sound management, who have been through difficult periods and maintained a strong balance sheet and good cash flows, is imperative.

We would like to thank our investment family for assisting us by providing their required compliance information.  We endeavour to keep this to a minimum, but will at all times ensure that we comply with the respective compulsory statutory requirements.

Our offices will be closed from mid-afternoon on Thursday, 23 December 2021 and will reopen on Monday, 3 January 2022.  As most of our investment family already know, we are contactable on our cellphone numbers in the case of emergency.

We would like to take this opportunity to wish you a safe, blessed and festive holiday season. We, as a team, look forward to embracing 2022 and the opportunities that it may bring.

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