An interesting research topic for a young economist to investigate that would be widely read.
Remember in the depths of the Zuma years when load shedding was a thing? And the Guptas went from Back of Bakkie Computer Suppliers to State Capture? In those years we suffered our greatest rugby loss ever.
Now our economy has:
Come out of Grey Listing and we are now used to first world compliance standards. The corelation with Rugby is strong here. Why does the referee pick on us? But we accepted the decision and won in the end.
The JSE continues to reach higher peaks even if based on a Gold and Platinum boom and the World Bank does not think this is a flash in the pan (sorry). Will the precious metal windfall trickle down to the rest of the economy? It has always done so in the past.
New issues of SA Government Bonds have been oversubscribed every month since April this year, with renewed offshore demand. Yields are down to 8,86 % from their heady highs of double digits a few years ago. Your portfolios have been invested in SA Government Bonds for years, being the best risk adjusted investment available, now the rest of the world is catching on. Despite SA bonds not being on any worldwide bond index.
Bond investors are even more impressed with our new inflation target as increasing inflation is a bond dealer’s worst nightmare. Reduced inflation rates will lead to reduced interest rates which is great for you and me. Also good for SA national debt. SA debt has steadied, and the forecast is for a reduction, which will be helped with new bond issues being made at a far lower interest rate. The reduction in debt servicing costs will take some time, and it would be good to spend our tax money on meaningful items instead of paying interest. Luckily 90% of our Bonds are Rand denominated, and we have deep capital markets, far safer that having Dollar denominated debt.
The Treasury is already active in the secondary bond market, buying expensive old bonds with new funds generated from the cheaper new bonds, but the effect will take a very long time to be felt, but the trajectory is for lower government borrowing costs.
If you look at the difference between the five-year yields on our ZAR and US Dollar denominated bonds, the equivalent of hedging the currency for five years, the differential has recently dropped from five percent to four percent, showing that the market believes our new inflation and interest plan.
Standard Bank’s Political Analyst thinks the present GNU has a 65% probability of surviving in its present form. The probability of some sort of coalition is even higher. We already feel the benefit of the coalition and a continuation is great news.
Jannie Mouton has put R 7,2 billion into taking Curro Schools private. Curro was already a success story, and the structure will stay the same. Just profits will be ploughed back into the schools. Education is so vital for the future, and this is a huge tick.
Load shedding? Remember that?
And just on Friday, the first of the Rating Agencies upgraded SA debt. SA Bonds are still not quite investment grade, but when SA bonds get to investment grade, SA will return to the world bond index and funds will then start buying SA bonds in greater volumes.
The correlation? We are double Rugby World Champions and even if we play with 14 men, we seem to prevail. An example of the mongrel spirit that South African’s used to be known for and are rediscovering in spades. Could the same Rugby Spirit be found in the SA economy and its people?
We need that economist to do the research.