Market Volatility: Violent protests are not a uniquely South African problem
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By Adriaan Pask
While the country reels from the events of the past week, civil unrest is by no means an inherently South African problem. Riots that potentially have catastrophic economic consequences are on the rise worldwide.
According to the latest Global Peace Index (GPI), which gauges independent states according to their level of peacefulness, the number of riots, strikes and anti-government demonstrations across the globe has spiked by at least 244% over the past 10 years.
Available data also shows that more than 110 countries have experienced significant anti-government protests since 2017, while over 25 riots have been directly linked to the Covid-19 pandemic.
While South Africa is not the only country that has recently been affected by violent protest action, it is easy to see why investors are anxious about SA Inc during this period.
The government’s already strained fiscus was delt another blow by the riots and looting of the past week, with businesses calling for monetary assistance, and labour demanding that a basic income grant be put back on the agenda. However, there’s always a silver lining.
Although the rand weakened over the past week, this was not as a result of the violent protests, but due to the strength of the US dollar. In fact, the rand has already made up losses from last week’s selloff, reaching an intraday best of R14.33/$ on Friday, 16 July 2021.
The FTSE/JSE All Share Index (ALSI) has also been able to sustain its recovery momentum, while rand-hedges have fared well. Over and above, our local funds are in positive territory for the month-to-date and are outperforming peers across the board.
The World Bank has upgraded its economic forecast for SA, and now expects GDP to grow by 4% in 2021, up from the 3% estimated in April 2021. The bank urged the South African Government to hasten economic reforms and recommended policy interventions that will help drive growth and put the country back on track.
Among the policy interventions the bank recommend is expanding employment tax incentives to create employment, prolonging the temporary employer/employee relief scheme; halting regulations that raise the cost of labour; and relaxing regulations for small businesses.
Adriaan Pask is the Chief Investment Officer of PSG Wealth