The quarter ending November 2024 has seen an increasingly positive economic environment in South Africa with interest rates beginning to fall, inflation seemingly under control and foreign investment inflows. This can be attributed largely to an increase in global investor confidence as a result of the new Government of National Unity implementing structures to address corruption, accountability and law enforcement.
Coupled with that, we now have significantly more oversight in key positions of government in contrast to the historical ability of the ANC to run roughshod over decision making in internal politics and the running of government departments.
Unfortunately, these changes will not be seen immediately as the Special Investigating Unit is going to have its hands full for some time as they try and halt the rampant corruption that has plagued State-Owned Enterprises (SOE’s) and bring to book those involved in plundering the public purse. The National Prosecuting Authority (NPA) will have the daunting task of trying to hold those implicated in fraud and corruption accountable as well as try and recover the proceeds of crime so the funds can be returned to the affected organisations and victims who have suffered.
The Johannesburg Stock Exchange (JSE) ended the quarter at a record high of 84510 and the strong post-election returns in our South African Incorporated stocks, particularly in the banking and retail space, are encouraging to see as this was severely lacking under ANC rule. Some international pundits are touting South African equities as more stable emerging market investments than some of our contemporaries. One would sincerely hope that this, combined with the efforts of the regulator, will result in South Africa being removed from the global grey listing.
In the United States, Donald Trump’s return to power has resulted in the US market surging as it is believed his focus will be on driving the American economy and we have already seen some business decisions being made in this regard. This does pose some risk to international trade partners, particularly around his renegotiation of trade deals and he’s already indicated that the Canadian and Mexican neighbours will face 25% increases on import tariffs. It remains to be seen how he navigates relationships with the rest of the international community, as in the short term it may be beneficial but for the long term it could be detrimental as it will push the cost of production higher globally and may well result in higher tariffs being implemented on imported US goods to other trading partners.
China’s ongoing economic pressures continue with businesses reporting operational difficulties, structural challenges and a general slowdown in consumer spending. Persistent issues in the property sector with homebuyer’s concerned that developers lack financing to complete projects and that future property prices may decline, has reduced demand for property with the knock-on effect of reduced demand for resources globally. This has contributed to a sharp decline in foreign direct investment in China since 2019.
In an effort to diversify away from China, global investors have switched into more appealing emerging markets that have shown a willingness to be more adaptable and business friendly such as India, Malaysia and Vietnam. The recent stimulus package announced by the Chinese government has been met with scepticism that this “fix” will jolt the economy enough to generate sustainable growth. Businesses will closely monitor policy developments in the hope that investor confidence can be rebuilt.
Europe and the United Kingdom are not operating in an environment of political stability and it remains to be seen if the French government will survive in its existing form. The UK has seen a shift in governance with the Labour Party now in charge, who stated in their campaign that they had a plethora of options to increase taxes over the medium term in order to achieve the commitments pledged in their manifesto.
The war between Russia and Ukraine continues to cause supply chain disruptions and cost-of-living increases. It is concerning that North Korean troops have joined the Russian forces in the Ukraine, with the Biden administration almost forcing closer ties between these two countries and, to some degree, China as well. Perhaps Trump will be the catalyst to bring about a de-escalation of conflict in this arena?!
India, under the Modi administration, has fared better than most emerging market economies and during the BRICS summit held in Moscow, India intentionally indicated that this was not an anti-West collaboration but rather a focus on emerging economies working better together. It remains to be seen whether or not our South African politicians can exercise this degree of diplomacy.
Below is an indication of how the Global Bourses have fared over the last few quarters:
The below graph tracks the performance of the Rand against the US Dollar over a seven-year period:
The below graph tracks the performance of the JSE All Share Index over a seven-year period:
Cyber security and the hacking of emails remain an ever-present cause for concern as South African institutions and individuals get targeted more frequently by unscrupulous hackers. It is for this reason that we must again make you aware that in an effort to mitigate these risks, to our clients and ourselves, we have strict procedures in place such as call backs and verifications of all payments requested. We know this can be frustrating and tedious at times but these security measures are extremely necessary to combat any potential threats so they can be identified immediately and the appropriate action taken.
We would also like to thank you for your patience and co-operation when dealing with the ever-changing compliance landscape and the constant updating of your personal information. This includes complying with the continued rollout of Common Reporting Standards (CRS) globally and Anti-Money Laundering (AML) locally. We will, as always, attempt to keep these requests for information to a minimum in order to comply with the prescribed requirements.
Please note that our offices will be closed from midday on the 24 December 2024 and will reopen on Monday, 6 January 2025.
We wish you and your families all the very best for the Festive Season and a peaceful and prosperous New Year. Happy Holidays and safe travels to those who will be braving the roads during this busy time. We look forward to seeing you again in the new year.