Key Sentence:
- WHILE last week’s events rock the country, unrest is by no means an inherent problem in South Africa.
- Riots with potentially catastrophic economic consequences are increasing worldwide.
According to the latest Global Peace Index, which measures independent countries according to their level of peace, the number of riots, strikes, and anti-government demonstrations worldwide has increased by at least 244 percent in the last ten years. Available data also shows that significant anti-government protests have taken place in more than 110 countries since 2017, while more than 25 riots are directly related to the Covid-19 pandemic.
While South Africa isn’t the only country that has seen violent protests of late, it’s easy to see why investors are worried about SA Inc during this period.
The already tense budget policy was again hit by riots and robberies last week. As a result, businesses ask for cash and labor to put essential income subsidies back on the agenda. However, there is always a silver lining. Although the rand has declined over the past week, it is not the result of violent protests but rather the dollar’s strength. Last week, the rand suffered a selling loss, hitting its best domestic day on July 16 at R14.33 per dollar.
The FTSE/JSE stock index also maintains its recovery momentum, while Hedging is doing well. In addition, our local fund has been positive for this month and better than others. The World Bank has improved its economic forecast for South Africa and now expects the gross domestic product to grow by 4% from 3% in April this year.
The bank urged the government to accelerate economic reforms and recommended political interventions to boost growth and get the country back on track. The World Bank’s recommended policy interventions include:
- Expanding wage tax incentives to create jobs.
- Expanding temporary employer/team member waivers.
- Suspending regulations that increase labor costs.
- Relaxing regulations for small businesses.