As 2019 draws to a close it’s time to look back on the year. Investors with exposure to offshore equities were well rewarded with an astonishing return of 26.5% (in rand), but of course this was fuelled by the weakening of the rand /dollar exchange rate from R13.34 to the dollar at the end of January to its current level of R14.75 to the dollar. The next best performing asset class with a reasonably good return of 9% was bonds, followed by SA equities at 7.3%, cash at 6.4%, and for a 2nd year in a row, listed property trailed at 3.5% (much better than the -25% of 2018]. All in all it has been a positive year for investment returns, despite a lot of uncertainty and widespread negativity.
The rating agencies Standard and Poors and Fitch both downgraded South Africa to junk status two years ago. Only Moody’s kept SA’s rating just above junk status and on 1 November 2019, they made no change, but revised the outlook to negative. This was largely expected by analysts following the release of the government’s Medium-Term Budgetary Policy Statement on the 30th October. Over the next few months, unless government either implements growth-orientated policies or takes hard decisions to bring down debt levels, it is likely that there will be a full downgrade to junk status. The markets have largely priced in this risk, meaning they are trading at levels as if SA had already been downgraded and therefore when it actually happens the effect should be small.
Many people are concerned that skilled South Africans are leaving the country in droves, choosing to relocate to countries such as the UK, the US, Canada, Australia and New Zealand. This issue is widely discussed in the media and socially and is often accepted as fact. The reality is that these anecdotally based conclusions are not borne out by official figures, which show no increase in emigration rates. There is also no evidence to indicate that the white population is shrinking. This apparently deeply ingrained negativity has the potential to do more harm that the actual problems facing this country.
Thank you for entrusting us with your financial planning needs this year. Please be assured of our continuing commitment to provide you with the highest levels of professional advice and service in the years ahead.
Accrue’s offices will be closed from 17 December, re-opening on 9 January, so please make contact if you need assistance before we close.
Best wishes for a happy and peaceful festive season from the entire Accrue team.