Let us take a moment to celebrate some of the things happening in SA today, starting with the postponement of the budget presentation. At first glance you could think that this is a negative but it turns out that the Minister of Finance wanted to push through a 2% increase in the VAT rate to fund things like an above-inflation increase in public sector wages and social grants. If the ANC still had a 51% majority, this would have happened but the miracle of the GNU stopped them in their tracks. This is a win for SA and a sign of true democracy where things have to be agreed upon and not just bullied through. Make no mistake, they will get the money somewhere else and the lion’s share will come from taxing the people with a job and/or assets.
Another reason to celebrate our country is the performance of our equity market and our currency. There has been a lot of political mud-slinging by the USA against South Africa and we will probably feel the effects thereof in due course, but for now the JSE All Share index is performing well. It has to be highlighted that although the SA index is outperforming the US markets, the sectors driving this outperformance has got very little to do with our internal economy, but rather with external sources. The stellar performers are gold-mining companies like Goldfields, up 46% year to date; and Naspers, up 16.5% year to date due to its large holdings in the Chinese tech company Tencent. Gold is at record levels and our mining companies benefit from this run in the metal. Just to put things in perspective: the Resources sector contributed nothing in 2024 so it is playing catchup; and the star performers of 2024, like banks and retailers, are giving back some of their outperformance.
We can also take a moment to give a slow clap for the rand. It has actually strengthened against the dollar, pound and euro so far this year. We should note that a fair value for the rand is closer to R17/$ but international investors demand quite a large insurance premium when it comes to investing in the African uncertainty. Staying on the topic of purchasing power, did you know that you can buy a Big Mac burger for 54% cheaper in SA than the USA? So living in South Africa can be like the Cape Town weather: when the south-easter picks up you have to batten down the hatches and hold on to your hat because there will be some damage, but when it stops blowing, there is nothing like the joy of watching the sun setting over the Atlantic on a balmy summer evening or sipping a Chenin among the vines of the Stellenbosch mountains.
