News from Davos.

Every year, a World Economic Forum is held in Davos, Switzerland. This is where all the important, rich people come together for what we would call an indaba. A lot of networking and, of course, lots of talk happen there. We are not sure how much of the talk actually leads to action, but we do know that the world watches and the world listens to the rhetoric.

It was reported in Business Day last week that our finance minister, Malusi Gigaba, made a comment regarding our debt problem to the effect that the country would feel some pain this year. Perhaps the pain he was referring to could include a hike in the VAT rate, which would not be a good strategy politically but with the surge in confidence after the election of Cyril Ramaphosa, the time might be right to help plug our budget deficit.

The other interesting piece of news was that the MD of the International Monetary Fund, Christine Lagarde, told Cyril Ramaphosa during a meeting on Thursday that SA needed to rebuild business confidence and clean out the rot. We believe Mr Ramaphosa will be doing exactly that, but because our economy is in such a poor state it might take longer than many people think.

In the interim we are enjoying a very strong rand below R12/$ and shares are doing well. We might even see interest rates drop if Moody’s will keep us at investment grade after the February budget speech. So, enjoy this positive energy but remember that markets are forward-looking and what you see in the price now, already reflects all the positive news of the future.

Image Source: World Economic Forum
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