Three quarters of 2021 have gone and so has most of the South African share market performance for the year. On the political front we are seeing some action being taken against corrupt officials, with multiple senior officials of the Department of Health being suspended for their involvement in the Digital Vibes saga. Over in Argentina, more than 40% of Argentines live below the poverty line, which is not very different from South Africa, but it is difficult to imagine that Argentina was once amongst the wealthiest countries in the world. Their fate is what happens when a country repeatedly defaults on its government bonds; elects a socialist government; and has an inflation rate that is out of control. The Argentinian peso has lost 56% of its value against the US$ since the beginning of this year (see graph).
Investing in equities is a long-term game and we are currently seeing lots of volatility in the markets. One of the problems investors face, is the lack of alternative investment opportunities. Cash can provide you with short-term protection, but over the longer term you lose money because you earn interest at a lower rate than the inflation rate (see graph). The only longer-term solution is to invest in companies that will make our lives better in the future, and in a currency that will protect you against inflation.
South Africa has its own set of problems, as we all know. No country can be prosperous with the highest measurable unemployment rate in the world (see graph). If South Africa were a company, the solution would be to start at the top and fire all the directors (ministers) who do not have the proper qualifications and experience. This, unfortunately, would create a huge power vacuum because no successful businessman would want to be a politician. But, for once, we are in a better position than many larger economies. In the UK they cannot get petrol to the stations, causing a chaotic transport situation and soaring gas prices. In the USA the container ship backlog is causing a disruption in the supply chain and shops are running out of goods. In northern China they have rolling power and water disruptions, following our lead.
It is said that humanity as a whole is more prosperous than it was a century ago. We live longer, healthier lives and should be happier. But happiness is a byproduct of our needs. If you have little and need little, you will be happy. If you have lots but need more, you will be unhappy.