The road to recovery

The ongoing Covid-19 pandemic has had a severe impact on the world at large and, in particular, on South Africans who have had to endure stringent lockdown measures, income loss resulting from businesses closing, job losses, income reductions, reduced working hours, illness, and loss of life. Those who have contracted Covid-19 have faced a long road to recovery as the aftereffects of the virus tend to linger, sometimes for up to six months. South Africans who had savings have had to dip into them, and for those who did not have savings have found themselves in dire straits – some not able to pay for their houses and some not even able to meet their basic living expenses. The psychological impact on South Africans has likely also been severe.

Although interest rates are at an all-time low, improvement in business confidence is required for job creation, as well as substantial investment by business and government to kickstart the South African economy and put it back on the road to recovery. The road to recovery will be long and slow, as the contraction of 7,5% in GDP since the start of Covid-19 needs to be recouped. Treasury forecasts that SA’s nominal GDP growth is unlikely to exceed the SA government’s debt growth until at least 2024. The prospect of a continually rising debt to GDP ratio raises concerns about the debt level of the SA government and the contribution government can make to improve business confidence and ultimately stimulate job creation. A coherent plan on how to deal with Eskom and State-Owned Entities (SOE’s) is required from Government, as well as a strong message relating to the control of expenditure, as the current economic environment is not sustainable. Load shedding needs to be curtailed as it was a major constraint in Q1 GDP growth. More clarity on government policy is required, given the factionalism within the ruling party. The annual inflation rate in SA ticked up to 3,2% in January 2021 from 3,1% in December 2020 and was in line with market expectation, but still close to the lower band of the SARB’s target range of 3-6%.

There is, however, an optimism in the world economy and an anticipated recovery due to vaccine rollouts in America and European countries, and even in South Africa, where the government is taking measures to obtain vaccine for health workers.

Vaccine development sees the start of a new economic cycle. The South African equity market has benefited from an improving emerging market outlook and interest shown by investors who are still seeing emerging market equities as relatively cheap when compared to developed countries’ equity markets.

Commodity prices are surging since the news that vaccines have been developed and the price of metals has reached an all-time high, resulting in the share price of South African mining companies increasing significantly. In South Africa, the FTSE/JSE Africa All Share Index (JALSH) increased to 11,85% since the beginning of 2021 and the one-year return is 25,32%. The 52-week Index range is from a low of 37 177.92 to a high of 67 736.96, which confirms the recovery and growth of the economy arising from optimism about the perceived benefit associated with the vaccine development.

At Finbond Group Limited, we care about your financial wellbeing and your future. That is why we offer some of the best fixedterm deposit interest rates available. We believe that if you spend your money wisely and save, you should be rewarded with interest. Simple and straightforward. With your money growing, you will be able to build on your financial wellbeing for the future and for the future of your loved ones, so that you can face the future with certainty and confidence.

Be prepared and save for your financial future. Simple as that. God bless you all.

Contact Finbond Group Limited today at 0860 44 22 11 or SMS “SILVER” to 30635 and one of our consultants will phone you right back. Or visit our website at: www.finbondgroup.com www.finbondgroup.com •