New Day is Dawning for SA
a New day dawning for South Africa
In a week that most South Africans will remember for a very long time, Jacob Zuma eventually resigned as the president of the Republic of South Africa, and Cyril Ramaphosa was inaugurated as the new president.
In a week that most South Africans will remember for a very long time, Jacob Zuma eventually resigned as the president of the Republic of South Africa, and Cyril Ramaphosa was inaugurated as the new president. Ramaphosa sent a strong anti-corruption message with raids on the Gupta compound and the arrest of key figures in corruption networks. The new president delivered an orderly State of the Nation address bearing a message of hope and a clear outreach to the investment community.
What follows is an overview of the economic impact and news of the past week:
According to the quarterly labour force survey released by Statistics South Africa on Tuesday, the unemployment rate declined to 26.7% in the fourth quarter of 2017. This comprises 5.9 million people, based on the official definition of unemployment that includes those who are not employed but actively looking for a job. Economic growth will support the prospects of these individuals.
The local markets responded positively to Zuma’s resignation and the news of an new president on Thursday, with the largest one-day jump in four years. The JSE returned 5.76% for the week, the reason being a combination of a better domestic outlook and a strong rebound in international markets. The rand strengthened to R11.62 to the USD on the back of tighter state governance and a generally weak USD. The rand also strengthened 1.80% against the pound, euro and Australian dollar.
International markets shrugged off the fear of inflation in the US and rallied, with the S&P rising 4.30%, the FTSE 100 gaining 2.85% and the Nikkei closing 1.58% in the green. Markets in continental Europe followed the rest of the world, but also priced in some better than expected growth numbers. The CAC rose 3.98%, while the Dax closed 3.15% higher.
The price of commodities is rising on a global scale and most commodities recorded a gain of between 3% and 5% in value over the past week. This is good news for SA miners, but will have a possible negative effect for consumers, as the price of Brent crude oil is increasing steadily. Brent crude oil traded at around $72 per barrel. The stronger rand should absorb most of the pain at the fuel pumps.
The Minister of Finance is expected to deliver a “tough and unpopular budget” on Wednesday. Given the R50 billion budget deficit announced in the Medium-Term Budget Framework (MTBF) in October 2017, South Africans can expect an increase in taxes. A review of the National Budget speech for the 2018/19 financial year will appear in next week’s newsletter.
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