Dark forces approaching?

Dark forces approaching?

Dark forces approaching?

Dark Forces | Hampshire Advisors
Greetings from one world champion to another.

I was really hoping that we could bottle the euphoria and unity generated by Saturday’s incredible game, along with the post-match interviews and picture feeds. Of course, there were those cynics who still had something to say about race, colonialism and all of the other topics used to divide our country. These individuals are trying so hard to spread their poisonous views, and it got me thinking about a presentation that I saw last week by PSG asset management’s Mikhail Motala. His presentation gave an interesting view on the good things in South Africa, that get no airtime and that are never discussed around the braaivleis fires or heaven forbid on Twitter or on Facebook.

Below is a table of the issues that we have, these get so much airtime that I am not going to discuss them in this article. We are going to focus more on the positives which receive very little airtime.

Domestic environment is challenged

Issues
Eskom
Failing municipalities
Emigration
Corruption
No confidence
No growth
Not discussed as much
Credible SARB
Inflation under control
Strong National Treasury
Healthy banking system
Health govt maturities
Limited foreign debt

Our Reserve Bank remains as a bastion of rationality and reason in a very trying political/economic environment. It is also important to note that it is not only our Reserve Bank that is under pressure from outside interference, Donald Trump in his infinite wisdom is often complaining about the restrictive policies of the US Fed.
Inflation can be a monster that drives up interest rates and causes havoc on exchange rates. Hyper inflation (as seen next door), has a huge impact on the entire population and causes economic chaos. South African inflation is absolutely under control.

Like the Reserve Bank, the National Treasury has been exemplary in their refusal to buckle under immense pressure both with regards to budgetary allocation and implementation as well as targeting irregular and unauthorised expenditure.

Our banking system is among the best in the world. Unfortunately, I often have to deal with banks in other countries and their inefficiencies and ineptitude never cease to amaze me. The health and strength of our banks was one of the main reasons why South Africans were not affected as badly as the rest of the world during the Global Financial Crisis.

Whilst our Government debt levels are higher than a few years ago, a very small percentage of our total debt is not denominated in Rands. South Africa also has the second highest debt maturity profile in the world. Both factors mean that it is a lot less likely that our debt repayments will become unmanageable.

There is this mass hysteria about “junk status” in South Africa which doesn’t really make sense because the market has already priced us as “junk”. Our bond yield are higher than Brazils, even though Brazil is already a couple of notches below “junk”.

If we see slightly more positive news flow coming through or even a more positive sentiment, South African bonds could appreciate dramatically. If this happens the Rand could also appreciate strongly, and those people on Twitter who thanked their “Oom” for the great advice of taking out as much as possible at R 15.20 to the USD may feel less euphoric. Whilst there is no doubt that there are problems in South Africa and the “dark forces” (Eskom’s latest round of load shedding hasn’t helped) love spreading rumours and bad news, don’t be surprised if a slight turn to the positive in sentiment happens and that South Africa’s market and balance sheet improve substantially.
Kind Regards

Barry Hugo | Hampshire Advisors
BARRY HUGO
CFP® CA (SA)

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