Latest Update: Proposed implementation date 1 September 2024.
The rationale behind the legislation is to empower more South Africans to preserve their retirement savings when changing or leaving a job, while also allowing people to access their savings component if they experience financial hardship.
Finance Minister Enoch Godongwana did not announce any major tax increases.
Taxation:
The two-pot system for retirement funds to launch in September 2024 (click here to see article)
Government reduced it real GDP growth forecast for 2023 to 0.65%.
2024 growth estimates increased to 1.3% from 1%.
Source: PSG Asset Management
Source: PSG Asset Management
The Rand has been trading at its most sustained period trading below 18 USD/ZAR since April 2023.
Source: Currency Partners
Despite high volatility, stubborn inflation, interest rate hikes and the war in Ukraine, the ALSI and MSCI (USD) grew by 5.9% and 13.9% respectively in the first half of 2023 (see graph below). This highlights the potential for growth in uncertain times, and the importance of staying invested in order to benefit from it.
Source: Bloomberg, Ninety One SA
The situation with Silicon Valley Bank and Credit Suisse has caused some concern. Please see a link to an article by Peter Conniff, Head Trader at Castlestone Asset Management for commentary (some of you are invested in Castlestone in your Offshore Funds).
Click on the link to open the article Silicon Valley Bank and Credit Suisse
Disclaimer: Castlestone cannot guarantee the content that is provided in the banking update.
Market crisis over the last 25 years
Click on image to enlarge.
Source: Nedgroup Investments
Source: Coronation Fund Managers
QUARTER 1 (Q1)
Importantly, Central Banks started to raise interest rates to curb global inflation.
The War in Ukraine triggered a negative supply shock to a global economy already struggling with supply-side shortages due to the pandemic … thereby reducing growth and further increasing inflation.
Notably, the MSCI World Index fell 5.2% in USD terms.
As mentioned before on this blog see “Staying Invested Vs Timing Markets” in times of market volatility it can be tempting to deviate from one’s investment plan but knee-jerk reactions are not the best ways to navigate the uncertainty as illustrated in the graphs below by Ninety-One.
Source: Ninety-One
What Lies Ahead for Investors in 2022 by Kevin Lings, Stanlib’s Chief Economist. Click here to read the article.
Source: Coronation
While South Africans battle through icy weather in places and a spate of Winter load shedding, the Rand has provided some positive and perhaps unexpected news. In May 2021, the Rand was the best performing Emerging Market (EM) currency, gaining 5.8% against the USD.
Let’s take a closer look, and find out why…
Your Will could leave your executor in a corner and your heirs compromised ………….. read further an article by Mauro Ghillino
When considering the effectiveness of your Will, it is critical to look beyond how well the drafting and signing of the document has been concluded. The validity of the Will is of great importance, but can prove ineffective if the Will is not executable.
All investment related taxes remained the same.
Tax breaks:
You can invest 27.5% of your total income (salary plus other income) in retirement products every tax year and receive tax relief from SARS on these contributions. Contributions that enjoy tax relief are capped at R350 000 per year.
Tax free savings accounts: the contributions limit is R36 000 per tax year and R500 000 over the individual’s live.
Rand Trends Over the Long-Term, Alison Barker – Analytics Consulting FX Solutions
#Spring #Friends #Level2 #Park #Smells
South Africa is facing an ominous debt trap, which creates a lot of anxiety about a potential ‘raid’ on formal savings to keep government going. In response, there has been much speculation in the press and social media platforms about prescribed assets – and in particular – the possibility of amending Regulation 28 of the Pension Funds Act to include provision for investment in infrastructure.
Around the world, various governments have embarked on quantitative easing (QE), coupled with support programmes to help alleviate the disastrous economic impact of the COVID-19 pandemic. However, QE manifests as support for financial markets, rather than for the ‘real economy’. Notably, QE is a tool whereby the rich get richer – from rising stock prices – in the hopes that the wealth effect will see them spend money that will trickle down into the real economy. As it stands, the real economy is in dire trouble – and business profits are falling – whilst the global financial economy is in an upswing with a stock market recovery that is in full force. Equity prices are moving upward.
The video below by James Downie from MitonOptimal provides some context around what has happened in markets in 2020 thus far. James provides some perspective on the major market influences South Africa investors have been faced with and what their impacts have been (and may continue to be).
Source: MitonOptimal
The anticipated downgrade of South Africa’s sovereign credit rating by Moody’s has now been announced. Click on the following link for an in depth comment by Nedgroup Investments on how this will impact the South African economy. “MOODY’s DOWNGRADE COMMENT“
Source: Dr Roelof Botha Economic Advisor
Why Antarctica?
My dream has always been to travel to Antarctica on an ice breaker. The vastness of the continent fascinates me. Having read numerous books on exploration to the South Pole, this continent had strong appeal. Although we crossed the Antarctic Circle, we were nowhere near the South Pole. Certainly, we did it in style when compared to Shackleton, the famed National Geographic Explorer who was the first to start these journeys.
Thoughts on the 2020 Budget – Joanne Baynham, MitonOptimal
For market watchers and investors, the biggest surprise of 2019 was arguably the generally good performance of global equities. Overall, global equity prices were supported by the accommodative stance of monetary authorities. Also, interest rates were kept low – and even cut – in some geographical jurisdictions.
I thought this Moneyweb article was an excellent summary of Finance Minister Tito Mboweni’s medium term budget policy statement, but if you can’t manage to hold your attention for the entire article, the post below from The Atlantic might explain why…
On the local front, the SA Reserve bank (SARB) cut the repo rate by 25bps to 6.5% in July. It was left unchanged in September. The domestic economy remains weak.
Average inflation was 4.3%, which was below the mid-point of the SARB target range.
The Rand traded in a volatile range – from a low of USD/ZAR 13.97 to a weakest level of USD/ZAR 15.50 in mid-August.
While Archie tries to predict when the next-door cat will stealthily appear in his garden, investors try to predict the Rand/USD exchange rate. It is difficult to say who is having more success!
On 3 September, the rand broke through the R15/USD for the first time in almost a month, lifted by positive local news. SA’s GDP rebounded by a surprise 3.1% in the second quarter, avoiding the shadow of recession.
However, predicting the performance of the Rand over the short term is notoriously difficult… and prone to significant forecast error. One factor that has remained relevant in the last 10-15 years has been the role of commodity prices. In general, if commodity prices go up, the Rand strengthens – and visa versa. This suggests that in the absence of other guiding factors, watching the performance of industrial commodity prices is key (though this does not include energy prices and precious metals such as gold). In short, industrial commodity prices moving up provides a good indication of impending Rand strength (and visa versa).
Good luck Archie!
Source: Analytics Consulting
The appearance of a yield curve inversion has market watchers spooked…
Over the past few months, there has been a great deal of anxious chatter about the possibility of a recession in the US. Arguably, much of this fear stems from what is known as the ‘yield curve inversion’. Historically, yield curve inversions foreshadow a recession.
Two interesting reads for the long weekend. I hope you find them as insightful as I did:
Trump’s trade war: even worse than you think, by Professor Barry Eichengreen
Why Technology Favors Tyranny (An article adapted from Yuval Noah Harari’s book, 21 Lessons for the 21st Century) – The Atlantic
Archie has a new designer collar!
As many analysts had expected, economic data has revealed that SA’s unemployment rate climbed to an all-time high of 29% in the second quarter of 2019.
On a more positive note, however, retail sales growth beat expectations for a second straight month in May. Retail sales are likely to get a further boost from the SA Reserve Bank, which cut the repo rate by 0.25% in July.
No wonder then, that Archie is splashing out on the high street!
The broader, global view…
Climate Change Controversy Dominates G20
While Archie shivers miserably with cold in Johannesburg, record high temperatures in Europe are again raising concerns about climate change.
Indeed, although trade has been the main focus of this year’s G20, the thorniest issue has been climate change – and what to do about it.
Following prolonged debates, the G20 eventually met French President Emmanuel Macron’s demand for a strong reference to the Paris Agreement on reducing greenhouse gas emissions –and also averted the threat of President Trump convincing Turkey and Brazil to join him in withdrawing from the Paris Agreement.
However, a statement of US objections was included….“The United States reiterates its decision to withdraw from the Paris Agreement because it disadvantages American workers and taxpayers”.
I have always loved travel, and so I am thrilled to be adding some more travel articles to my blog. I think you will find this series of travel Q&A enjoyable, but also interesting, as we delve a little into how much things cost and how the economies in various countries are developing… or not.
This first Q&A is on Iceland… and how expensive a glass of wine is!
An entertaining read to enjoy this weekend, from one of my favourite online resources. Enjoy!
Big Little Lies – Why Meryl Streep’s Sly Matriarch Works So Well – The Atlantic
With all this talk about trade wars and tariffs, Archie is concerned that he will not be getting any more toys…
There is still no clear sign of a de-escalation of US-China trade tension. To the dismay of many leaders, President Trump is still defending his tariff strategy. On the bright side, Jay Powell, Chairman of the US Federal Reserve, has signaled that the Central Bank is ready to cut interest rates if trade wars do hit the world economy. Trump is claiming that the Chinese will pay for the tariffs – which remains a highly disputed and controversial assertion. In fact, companies are expected to pass the extra costs onto the consumer.
No wonder then, that Archie is suffering from mild bouts of Trump-related anxiety.
Peter Sullivan recently celebrated a milestone birthday with his daughters in Beirut. He shares some interesting insights about his trip with us in the following article.
Before going to Beirut to celebrate my 70th birthday with my daughters, I met Lebanon’s Ambassador to South Africa. He asked what I knew of his country. “Not a lot” I confessed.
“It is smaller than the Kruger Park. Sea and beach one side, then mountains, then a valley, then higher mountains for skiing. On small west side, Israel border. All around rest of country, Syria. “You will feel you are in the Western Cape. Wine estates, green, lovely valley, mountains.”
With so much negativity in the news of late, coupled with an election year, investors have understandably been jittery. A cautious investment environment – with many unsure of the best strategy to pursue, has reflected this sentiment. With this in mind, now is a good time to revisit the basics of smart, long term investing.
In a socio economic environment characterised by volatility and deep-seated uncertainty, local investors are understandably spooked. Coupled with three years of poor returns from shares and listed property, many investors are (naturally) questioning why they should not cut their losses and switch to cash. This anxiety was exacerbated following the worst December for US equities since the Great Depression. Yet for savvy investors, there is always a silver lining to market dips.
Let’s take a closer look at the trends…
Between Load Shedding and the rain there are no good hair days for Archie…
For local investors, December capped an incredibly challenging year. It was the first time in many years that all major global asset classes produced a negative real return. Notably, emerging markets seemed to bear the brunt of the risk-off environment throughout the year – which meant that it was another very disappointing year for investors on the JSE. Tellingly, the FTSE JSE All Share Index closed 2018 with a negative total return of -9.08%.
We wish you a festive holiday season.
From all at Castle Investments.
In South Africa, low returns continue to be off-putting for investors, but the case for staying the course remains strong. On a macro level:
With the JSE All Share reaching 60 127 this morning (29/08/2018), it is valuable to revisit some basic principles that make for successful long-term investment strategies.
Indeed, it is easy to forget that in April this year the JSE All Share dropped to 54 602 (4/4/2018). This fact highlights the inherent futility of trying to time the market.
I have mentioned this in previous articles “Staying Invested Vs Timing Markets”. In short, it is always better to stick to well thought out investment strategies and to avoid emotional reactions to negative market movements.
The graph below is a powerful illustration of why time in the market is more important than trying to time the market! (click on the graph to enlarge)
Halfway through a rather turbulent political year, domestic asset classes are starting to reveal that the Ramaphosa-led government is facing significant headwinds. Although a tough budget stance managed to stave off a credit rating downgrade, there is still a long way for the local economy to go before investors can rest easy…
