Stay abreast of COVID-19 information and developments here
Provided by the South African National Department of Health
can we get SA back on track?
Sanlam Private Wealth
May 16, 2019
As the dust settles following the 2019 general election, it’s evident that the centre has held. Together, the ANC and the DA, which roughly occupy the middle ground on the economic ‘ideology spectrum’, have the support of close to 80% of the electorate (or at least of the two thirds of voters who turned up at the polling booths).
Although support for the ANC, which leans towards relatively more state involvement in the economy, declined in comparison to the 2014 general election, it has recovered relative to the 2016 local elections. Moreover, a scenario in which the ANC would have been forced into a potentially unstable coalition in Gauteng should it not have secured a clear majority in the province, was avoided.
As a consequence, the result has been interpreted as an expression of confidence in President Cyril Ramaphosa, including his drive to stamp out the wastage of scarce resources due to graft and the economic reform agenda he outlined in his February 2019 State of the Nation Address (SONA).
That said, market participants are acutely aware of the apparent fissures within the ANC, which may disrupt attempts at reform. Accordingly, they may reserve judgement and are likely to look out for signposts to confirm the President’s ‘mandate’, including the composition of the Cabinet when it’s announced later this month.
At the forefront of the President’s mooted reforms is a bid to encourage a surge in jobs producing fixed investment spending, including foreign direct investment – supported by a programme to bolster business confidence partly by improving the ease of doing business in South Africa and addressing governance and financial management issues at key public sector enterprises.
But, in addition to policy clarity and certainty, investors need to be assured that the lights will stay on. Accordingly, Mr Ramaphosa’s SONA alluded to a plan to split Eskom into three separate businesses – to isolate the costly and inefficient generation component of the electricity supplier, ostensibly paving the way for Eskom’s transmission business to purchase electricity from cheaper and more efficient producers, while also increasing usage of renewable energy.
The best plans are, nonetheless, likely to come to naught should South Africa not address the ever-present risk posed by its failed fiscal consolidation. The contingent liability risk lurking in the extensive guarantees issued by the government on the debt of the public sector enterprises has come home to roost, culminating in a cumulative R69 billion cash injection, if not more, by the National Treasury into Eskom over at least the next three years.
This draws attention to government spending more broadly. Even though Mr Ramaphosa is expected to drive economic reforms, the developmental state model remains central to government’s economic planning and the policy objectives of the ANC party, including fee-free education and the proposed shift towards national health insurance, preclude a sharp reduction in spending. In any event, the Treasury appears committed to a gradual decrease in the relative size of the government’s bloated wage bill, through natural attrition and voluntary retrenchment only. This suggests more revenue-generating measures are likely to be announced, while the possibility of prescribed assets is still on the table.
Moreover, the President is not in a position to ignore party policy, including the resolutions taken at the ANC’s 2017 elective conference to pursue expropriation of property without compensation and nationalisation of the South African Reserve Bank (SARB). The latter is in itself not overly concerning, although it’s likely to cause some volatility in asset prices, while the Treasury would need to compensate the Bank’s private shareholders.
A far more serious problem would, however, emerge should nationalisation of the SARB (if it occurs) adversely impact the independence of the Bank. The Bank’s mandate includes the pursuit of an appropriately low inflation target set by the Treasury, in support of long-term stability and sustainable growth. This requires the Bank to act independently without fear or favour.
Hence, while it seems fair to argue that the general election of 2019 may signal an end to South Africa’s slide into economic policy uncertainty and depressed confidence, risks linger. Meanwhile, progress is unlikely to be smooth and is likely to take time.
As the results of the 2019 general election became apparent on Friday, the rand strengthened, government bonds traded at higher prices and shares that are largely dependent on the strength of the local economy responded positively. It was a picture very similar to the one that unfolded early in the first quarter of 2018 after the election of Cyril Ramaphosa as President of the ruling party.
For this rally to sustain itself, we now need to see ‘promises’ converting into reality. As has been argued before, the journey needs to start off well. If our President misses the first ‘navigation point’ by not assembling a Cabinet that will allay sceptics’ fears that the ANC is unlikely to transform, the positive sentiment is likely to fizzle out soon. However, a good start by the President is likely to provide solid support for those who believe that South African shares are cheap and deserve a higher rating.
Sanlam Private Wealth manages a comprehensive range of multi-asset (balanced) and equity portfolios across different risk categories.
Our team of world-class professionals can design a personalised offshore investment strategy to help diversify your portfolio.
Our customised Shariah portfolios combine our investment expertise with the wisdom of an independent Shariah board comprising senior Ulama.
We collaborate with third-party providers to offer collective investments, private equity, hedge funds and structured products.
navigating the complexities
Sanlam Trustees International
are they a good investment?
The great lockdown:
one year on
Head of Equities
IHG: focus on
quality pays off
Sanlam Active UK Fund
BUDGET 2021: THE RIGHT INTENT,
BUT RISKS ABOUND
Investment Economist at Sanlam Investments
INVESTING IN 2021:
WHAT TO EXPECT
Sanlam Private Wealth
MINING: IS THE
THROUGH THE HYPE
Head of Equities
South AfricaSouth Africa Home Sanlam Investments Sanlam Private Wealth Glacier by Sanlam Sanlam BlueStar
Rest of AfricaSanlam Namibia Sanlam Mozambique Sanlam Tanzania Sanlam Uganda Sanlam Swaziland Sanlam Kenya Sanlam Zambia Sanlam Private Wealth Mauritius
GlobalGlobal Investment Solutions
Sanlam Private Wealth (Pty) Ltd, registration number 2000/023234/07, is a licensed Financial Services Provider (FSP 37473), a registered Credit Provider (NCRCP1867) and a member of the Johannesburg Stock Exchange (‘SPW’).
All reasonable steps have been taken to ensure that the information on this website is accurate. The information does not constitute financial advice as contemplated in terms of FAIS. Professional financial advice should always be sought before making an investment decision.
Participation in Sanlam Private Wealth Portfolios is a medium to long-term investment. The value of portfolios is subject to fluctuation and past performance is not a guide to future performance. Calculations are based on a lump sum investment with gross income reinvested on the ex-dividend date. The net of fee calculation assumes a 1.15% annual management charge and total trading costs of 1% (both inclusive of VAT) on the actual portfolio turnover. Actual investment performance will differ based on the fees applicable, the actual investment date and the date of reinvestment of income. A schedule of fees and maximum commissions is available upon request.
COLLECTIVE INVESTMENT SCHEMES
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium to long-term investments. Past performance is not a guide to future performance, and the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available on request from the manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved manager in collective investment schemes in securities (‘Manager’).
Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in a portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of a portfolio and an investor will differ depending on the initial fees applicable, the actual investment date, date of reinvestment of income and dividend withholding tax. Forward pricing is used.
The performance of portfolios depend on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-dividend date. Portfolios may invest in other unit trusts which levy their own fees and may result is a higher fee structure for Sanlam Private Wealth’s portfolios.
All portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No. 45 of 2002. Funds may from time to time invest in foreign countries and may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information. The manager may close any portfolio to new investors in order to ensure efficient management according to applicable mandates.
The management of portfolios may be outsourced to financial services providers authorised in terms of FAIS.
TREATING CUSTOMERS FAIRLY (TCF)
As a business, Sanlam Private Wealth is committed to the principles of TCF, practicing a specific business philosophy that is based on client-centricity and treating customers fairly. Clients can be confident that TCF is central to what Sanlam Private Wealth does and can be reassured that Sanlam Private Wealth has a holistic wealth management product offering that is tailored to clients’ needs, and service that is of a professional standard.