Our politicians will do well to remember that economics drives politics and not the other way around, unless of course you are a dictatorship. Just ask Marie Antoinette what happens when you run out of bread or was it cake….
The focus is finally shifting away from politics to economics as Cyril slowly starts salvaging SA Inc. Unfortunately, with a divided ANC government held together for the sake of unity politics will continue to dominate the headlines until the election has come and gone. Then only will Cyril be in position to right the ship, and this only if he is able to cement his powerbase through a convincing electoral win. The risks are high, and the economic pressures are growing.
The Reserve bank has just downgraded the GDP growth forecast from 1.7% to a measly 1.2% for the year and you don’t need the statisticians to tell you things are bad, just ask the man in the street and corporate SA how they are feeling. Confidence has once again moved sharply lower after spiking up post Cyril’s win, which in hindsight was probably only a relief rally.
The reality of the structural issues / problems facing SA Inc have once again begun to denominate headlines, this includes but not limited to some of the following;
· Rising government debt
· Failing State Owned Enterprises (SOE)
· Unclear policies i.e. land redistribution, mining charter, national health insurance
· And the symptoms i.e. education collapse, unemployment, service delivery unrest
But we also have a lot going for ourselves; we have natural resource wealth above and below the ground that few countries can compete with, we are the gateway to an awaking giant in Africa and we finally have a President who understands globalization and the importance of playing by global financial rules i.e. ratings matter. The light at the end of tunnel is undoubtably the end of the tunnel and not an oncoming train.
For investors it is always “darkest just before dawn” with the share market now offering a buying opportunity as share prices have corrected on all the bad news.
Although the challenges may seem daunting it only requires a change in sentiment to manifest in confidence and once you have confidence you get investment, which creates jobs and grows your economy, which then addresses many of before mentioned issues and the “sun rises again”.
Don’t let the current negative sentiment trigger fear based irrational behaviour.
Mcomm, CFP®, HdipTax
T. 021-851 3746