Wednesday, September 12, 2018

Why are South Africans feeling so glum at the moment?

Portfolio manager, Wayne McCurrie of First National Bank – Wealth and Investments, has commented on the current sentiment in South Africa, and the current negative perception around its future amid a struggling economy, and growing politicking ahead of the general elections next year.
In an opinion piece published by Moneyweb, McCurrie highlighted how South Africans are rated last on a Misperception Index – a global survey which examined the gap between people’s perception and reality in 38 countries.
South Africans, more than any other country, tend to believe that things are much worse than they are, when compared against the actual statistical reality.
“In other words, the average South African is a grumpy person that must cheer up a little,” said McCurrie. “Things are not as bad as we perceive them to be! Maybe put it in another way: South Africans like a bad news story about South Africa as this seems to fuel our negative perception gap about South Africa.”
“Sometimes we need to look at the reality of South Africa. We all know the bad news,” he said.
In his opinion piece, McCurrie said he would instead take a ‘glass half full’ approach by mentioning ‘some of the good news’ namely:
  • Inflation averaged 14% from 1970 to 1993. Since then it has averaged around 6%.
  • Overdraft interest rates averaged 17% from 1983 to 1999 and have averaged 13% since then, with the current level at 10%.
  • The rand is a structurally weak and very volatile currency and will remain so for the foreseeable future. However, the average depreciation (against the USD) has been far worse in the past – it fell 220% in the 1980s, and 130% in the 90s.
  • House prices are up 43% since 2010.
  • Household net wealth to disposable income is up.
  • Using the average balanced fund unit trust return (including global assets but before fees and tax), investment returns since 2000 has been 343%.
McCurrie said that following the election of Cyril Ramaphosa at ANC elective conference last year, “the ‘glass half full’ people ruled”. “Excessive optimism abounded,” he said.
He said that the ‘glass half empty’ people and views were banished.
“I suppose it was unrealistic to think that everything could change in an instant. Now however the opposite seems true. Now we are somehow worse off that what we were before the ANC elective conference.”
McCurrie attributed “the glum feeling” permeating South Africa to the following:
  • The elephant in the room – Land Expropriation Without Compensation.
  • President Trump and trade wars and tariffs.
  • Excessive optimism as a base.
  • A small downturn in commodity prices.
  • A (again relatively small) depreciation in the rand.
  • First quarter GDP number  – it fell by 2.2%, the largest quarter-on-quarter decline since the first quarter of 2009.
“The moment something gets its own acronym it is important; LEWC – Land Expropriation Without Compensation,” said McCurrie . “This is probably the biggest driver of the negative feeling now and will (unfortunately) remain so until there are definitive rules set for what LEWC is.
“Again, unfortunately I think we are going to wait until next year’s election before this is finalised. It is a very important, popular and powerful electioneering slogan,” McCurrie said.
Read the full piece at Moneyweb, here

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