September 2, 2019

Have we passed the point of maximum pessimism?

The last few weeks have seen what is hopefully, a point of maximum pessimism for our political and economic future.
Land Expropriation Without Compensation, threats to the Reserve Bank’s independence,  Eskom and other SOE’s  draining whatever is left of tax-payers money after years of looting,  and now a seemingly unworkable National Health Insurance Bill, soon to be law – all evidence of  a sharp lurch to the Left by the ANC and a determination, it seems, to follow the same failed policies that have given rise to the current social and economic misery that today can be found in Zimbabwe and Venezuela.
Emigration of skilled individuals is accelerating. The JSE is tending flat to down for the 6th successive year, the Rand is sharply weaker and a Moody’s downgrade of our sovereign debt seems to almost be a certainty within the next year or or so. Many believe that due to continuing  inaction by government on the moribund economy, within a year or two we will be going begging to the International Monetary Fund,  which will force us into far-reaching austerity measures with unknowable political consequences. 

Government’s ‘remedy’ to this seems to be to force private Retirement Annuities and other private sector pension schemes to invest a portion of their assets in Government & SOE Bonds ( the last time ‘Prescribed Assets’ was introduced was  in the late 1970’s under the Apartheid regime… the impact on returns was severe).
 
There are however some green shoots:  The NPA has asked us to be patient for a while longer and then we should see some high-profile prosecutions which should serve to weaken the destabilizing influences within Government. The Zondo (and other) Commission is gathering evidence which will be ultimately used by the NPA.  We had a winter (in Gauteng at least) with virtually no load-shedding. The Public Protector is facing possible action by Parliament to remove her. There has been an acknowledgement from the Health Minister that the NHI Bill has indeed caused panic  with some attempt by the Minister to allay well-founded fears (of what would almost certainly be an impractical and unaffordable Eskom-like nightmare as currently conceptualized) through emphasising the incremental nature of the NHI roll-out and reiterating that medical aid schemes are expected to cover the NHI shortfall in services until at least 2026.  A turn-around plan for Eskom is due to be published in the next few weeks (though the long awaited appointment of a group CEO is still pending). 

Our Finance Minister released a pro-growth plan (includes less government) for discussion last week, which at least forces the rest of Government to reflect on the soundness of its policies and inaction (COSATU and even others within the ANC have however already rejected it as a right wing agenda conflicting with party policy).
Against this uncertain background, a fresh look at your overall South African risk situation, including opportunities for offshore hedging and offshore direct investment and perhaps even a re-look at the structure of  your Retirement Planning and Will, might be warranted.
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