Google
RSS Feeds RSS | Views on ITInews | contact | terms of use | privacy 
 


Editorial Categories:

FINANCIAL SERVICES
ADVISERS & BROKERS
BANKING & BONDS
BUSINESS MANAGEMENT
COLUMNISTS
CONSUMER AFFAIRS
CRIME & FRAUD
ECONOMY & GLOBAL
EDUCATION & TRAINING
ESTATES & WILLS
HEALTHCARE INSURANCE
INDUSTRY & LEGISLATION
INSURANCE
INVESTING
LEGAL AFFAIRS
LIABILITY INSURANCE
LIFE INSURANCE
MARKETING
PEOPLE & COMPANIES
POLITICS
PROPERTY
RETIREMENT PROVISION
REVIEWS
ROAD ACCIDENT FUND
SHARES & UNIT TRUSTS
SHORT-TERM INSURANCE
TAXATION
TECHNOLOGY
VIEWS & LETTERS


Forthcoming Events:

No Upcoming Events


Available Recruitment:

No Vacancies Listed...


Save by getting insurance quotes


Your Editor, Brent WilsonInforming Consumers and Financial Advisors since 1988 | Click Here to Advertise
Car, household, life and business insurance quotes
Press Offices > Investment Companies

Citadel Investment Services
Press Office Feature : The year that was – business highs and lows in 2015

Company: Citadel Investment Services
Author:George Herman
Email:[email protected]
Posted:25 Jan 2016

 Email this article Comment on this Article  Print this article

The damage has been done and it will take years to restore confidence in the South African markets

Last year was a mediocre one for South Africa: the JSE ALSI ended 2015 only 5.13% up over the 12 months and GDP growth was well south of 2% for the full year.

In fact, we seem to have just dodged a recession rather than seen the growth we so urgently need.

Much of the impact on the South African business environment in 2015 came from changes in the international one.

China, specifically the crystallisation of lower growth and expectations for further slow growth, had a major knock-on effect on global markets, South Africa included.

Prices across the commodity complex tumbled during 2015, in part due to the stronger US dollar, but in large measure as a result of slower global demand.

As a major commodity exporter, the negative effects were sharply felt by South Africa, notably in our Balance of Payments, specifically the trade balance which saw net outflows in all but two months last year.

In addition, South Africa has been shifting trading partners from the US and Europe more towards China and Africa. Unfortunately for this country, those two regions are seeing slower growth resulting in less demand for our exports and slower growth expectations.

The one commodity with a low price which has helped South Africa has been oil. Although much of the decline took place in the latter part of 2014, the price remained low for the whole of 2015 and ended the year well below the starting price. From over $100/barrel, oil is now below $30/barrel and set to stay low for some time.

While a weak oil price can be interpreted as reflecting weak demand and therefore poor economic performance, in this instance it has resulted from a supply glut.

For oil consumers this represents a bonanza – a bit like getting a tax cut – and is underpinning economic growth. It has had an important positive impact amid a sea of gloom.

Happily, the Greek tragedy which played out in Europe last year is now behind us. Bogged down by enormous public debt, uncertainty regarding a potential default and speculation on a Grexit (Greece exiting the euro zone) impacted negatively on Europe in 2015.

However, after several months of negotiations, Greece received its third bailout in five years and fears of financial instability have receded.

Less clear-cut is the European refugee crisis which has seen an estimated one million plus migrants and refugees crossing into Europe illegally last year, four times the number in 2014. This inflow added to the political pressure in Europe and the European Union risks collapse.

Already there is talk of a Brexit – Britain leaving the EU. However, in dealing with the refugee crisis, there has been less attempt to deal with the cause than with the symptoms.

People are fleeing war and persecution in countries such as Syria, Afghanistan and Eritrea. A more permanent solution would be found in restoring peace to those countries, rather than absorbing increasing numbers of migrants into Europe.

Brazil’s economy has disappointed in recent years and is expected to have contracted by 3% last year, putting the country in a recession. Poor policies, gross government debt of 66% of GDP, high interest rates (around 14%), above-target inflation and rising unemployment have left an economy in tatters.

Consumer confidence has fallen to its lowest level in the 10 years that it has been monitored. As The Economist puts it: “It is hard to see where growth will come from. Worst of all, Ms Rousseff’s policy levers are jammed.”

The management of Brazil’s economy by the left-wing Workers’ Party (PT) of Dilma Rousseff should sound loud warning bells for South Africa. Household consumption is dropping, hampered by low confidence and high debt levels.

At the same time, public spending has surged. If this sounds like déjà vu, it is. South Africa has been plagued by similar trends and we can but hope that we do not also slip into a recession.

Of course, this list would not be complete without a reference to the musical chairs that played out in the Treasury last month.

After summarily dismissing Finance Minister Nhlanhla Nene and replacing him with the relatively unknown David van Rooyen, President Jacob Zuma was forced to back down four days later and opt for the safe hands of Pravin Gordhan to guide South Africa’s Treasury.

This served to stabilise markets, but not before R169 billion was wiped off the JSE while the rand plummeted 9%. The damage has been done and it will take years to restore confidence in the South African markets.

Investors are likely to be wary of investing in this country for some time to come. We already saw R7 billion in portfolio outflow in the two weeks after the announcement.

This after the massive R24 billion outflow in Q3 2015, when investments held by South Africans globally were worth more than foreigners’ investments in SA for the first time since record keeping began almost 60 years ago.

We ended 2015 on far shakier ground than we started it.

George Herman is Head of South African Portfolios, Citadel

Comments:
There are no comments at this stage. Be the first to comment!
Please Login To Comment On an Article - Click here To Login

ITInews invites comments at the foot of each of its articles in which readers can respond freely - anonymously if they wish - to various topical issues and industry debates. However, comments submitted by readers that are defamatory or deemed, by the editors, to be racist or obscene will be deleted from the database. Furthermore, ITInews's editor would like to caution potential posters on its websites that while it welcomes robust debate, it will not hesitate to make the IP addresses of the authors of such defamatory statements available to the authorities, in the event of a court order compelling them to do so.



Get car, home, life and business insurance quotes in 3 easy steps


Citadel Investment Services


Join us today

More from Citadel Investment Services
Addressing queries regarding Citadel and the Panama Papers
There are legitimate uses for offshore companies and trusts
Buying time for SA
'we should stop ... bailing out state entities'
Four ways to lose your money
... especially when greed or fear gets in the way
Bleak 2016 for markets in wake of Nene’s removal
More concerning is that Zuma did not give any reasons for Nene’s removal
Public benefit organisations must guard against economic volatility with reserve policies
A duty to be responsible stewards of public funding and trust
Budget speech communication to be spiced up at Citadel
We plan to delve deeper into those issues that may have an impact on client's investment decisions
Citadel ups prize money for journalism award
Role of media to inform and educate people about financial issues is now more crucial than ever

Join ITInews in supporting Helpnet.org.za

Archived Articles featuring this company ...


Insurance Quotes


Car Insurance Quotes
Household Insurance Quotes
Business Insurance Quotes
Funeral Insurance Quotes
Life Insurance Quotes

Read the InsuranceQuotes Blog
ITM Website Design Cape Town
Copyright © 2005 - 2015 ITInews Online Publications (Pty) Ltd. All rights reserved Insurance Times & Investments Online and ITInews. ..::ISSN 1995-1256::.. No part of the materials including graphics or logos, available in this Web site may be copied, photocopied, reproduced, translated or reduced to any electronic medium or machine-readable form, in whole or in part, without specific permission from ITInews Online Publications (Pty) Ltd. Distribution for commercial purposes is prohibited.