As the developed world struggles in dealing with a second wave and a renewed surge of Covid-19 infections are we in a position where South Africa is one of the bright spots? We are certainly feeling more positive as we end September as it appears that the Zondo Commission finally grew teeth as we saw a slew of arrests of public officials and allegedly corrupt businessmen just before month end – as promised by Hermione Cronje of the NPA. Many of the individuals that were arrested appeared before the Commission and it appears that those appearances are now part of the records that the National Prosecuting Authority can rely on – get the defendants version on record before allowing the prosecution to pick it apart.
It wasn’t a good month for investments as the JSE tracked global markets lower, shedding just under 2%. The losses in the stock markets have been driven by the renewed surge of Covid-19 infections in the developed world, specifically Europe. Since the early stages of this pandemic it has been commonly accepted theory that the virus suffers in warm weather. We are starting to move into very warm summer months locally, whilst the developed economies of the northern hemisphere are starting to get colder. This may be of some relief to South African citizens in terms of being “safer” from the virus but at the same time it is disastrous for our tourism sector as we will not accept individuals coming from those “infectious” countries.
Inflation continues to be benign as the global oil price remains relatively low. This will continue to be the case until global trade reaches normally capacity again. Whilst inflation pressures are reduced, specifically at the fuel pumps it is the time to increase additional spend into investments. We won’t always be in a low inflation environment so make use of the opportunity to boost your wealth.
The Rand had an interesting month. Currency volatility was relatively low for the majority of the month except for one week where we saw significant short-term strength off the back of a possible Covid-19 vaccine, followed by a swift deterioration due to concerns over the increasing pace of infections, and possibility for renewed lockdown restrictions in Europe.
We still feel that South Africa is at the tipping point. There is value in the stock market and there are many great local businesses. This is a nation that is used to overcoming adversity. There are many possible positive contributing factors to a reinvigoration of the country. On the flipside we have had poor economic policies, a government sending out mixed messages and a government framework that leads to long periods of economic stagnation. Fix those and we are on the right track. We maintain that the low hanging fruit remains going after the individuals that have been responsible for corruption in the public and private sectors – now that would really make us smile.
Magwitch Securities
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