By Adriaan Pask
WHILE the country reels from the events of the past week, civil unrest is by no means an inherently South African problem. Riots that potentially have catastrophic economic consequences are on the rise worldwide.
According to the latest Global Peace Index, which gauges independent states according to their level of peacefulness, the number of riots, strikes and anti-government demonstrations across the globe has spiked by at least 244 percent over the past 10 years. Available data also shows that more than 110 countries have experienced significant anti-government protests since 2017, while more than 25 riots have been directly linked to the Covid-19 pandemic.
Although South Africa is not the only country that has recently been affected by violent protest action, it is easy to see why investors are anxious about SA Inc during this period.
The government’s already strained fiscus was dealt another blow by the riots and looting of the past week, with businesses calling for monetary assistance and labour demanding that a basic income grant be put back on the agenda. However, there’s always a silver lining.
Although the rand weakened over the past week, this was not as a result of the violent protests, but because of the strength of the dollar. In fact, the rand has already made up losses from last week’s sell-off, reaching an intraday best of R14.33 to the dollar on July 16. The FTSE/JSE All Share Index has also been able to sustain its recovery momentum, while rand-hedges have fared well. Over and above, our local funds are in positive territory for the month-to-date and are outperforming peers across the board.
The World Bank has upgraded its economic forecast for South Africa, and now expects gross domestic product to grow by 4 percent this year, up from the 3 percent estimated in April.
The bank urged the government to hasten economic reforms and recommended policy interventions that will help drive growth and put the country back on track. Among the policy interventions the bank recommend are expanding employment tax incentives to create employment, prolonging the temporary employer/employee relief scheme, halting regulations that raise the cost of labour, and relaxing regulations for small businesses.
Adriaan Pask is the chief Investment officer of PSG Wealth.
*The views expressed here are not necessarily those of IOL or of title sites.
BUSINESS REPORT