The Synopsis On Steinhoff

Undoubtedly by now, you would have heard we've been junked again. S&P have pushed us down one notch to BB whilst Moody's have put a negative outlook on our Baa3 rating.

A testimony to the idiocy and cupidity of a captured nation falling for snake-oil claims. Whilst we bask in the lies of these purveyors of poverty they continue to pour extravagant sums of our money into schemes requiring a lot of risk — for something that, myth-making aside, may never yield into investor confidence and certainty that we so desperately need!

The immediate impact is that South Africa will be removed from the Barclays Government Bond index, triggering what we estimate to be about R50bn of bond sales. We remain a part of the Citibank World Govt Bond Index by the Moody's rating. One further downgrade from Moody's will trigger the avalanche of bond sales.

Inexplicably the rand continues to support depressing our nation. Left to its own devices, its far more likely to impede progress than to advance it. Mr Zuma: "Are we broken?"

Being aware of the factors affecting the rand is critical. Currency strength talks to the supposed health of a countries monetary position and makes it susceptible to sudden and volatile changes. Looking longer term, SA needs a ratings upgrade! Not another downgrade.

The government needs to be currency and debt attentive. Generally, Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields. The below link provides - South Africa Government Debt To GDP - was last updated on November of 2017.

www.tradingeconomics.com/south-africa/government-debt-to-gdp

Whilst Mr Zuma clings to the conch in the short term, the predominantly rand hedged market in South Africa, clearly benefits a few. However, rand depreciation myopia is not 20/20 vision South Africa needs as a prescription! South Africa needs to attract foreign investment for economic growth. Policy change leading to economic growth, reindustrialisation and employment growth are the keys to South Africa's future! For this to occur, it is essential that government, business, and the people of South Africa recognise their obligations and social goal of making this process a success. The privatisation of "DODO" state-owned companies is an area that could be looked at. The proceeds could be used to pay off much of SA's debt which would help raise the growth potential and the economic prospects for all South Africans.

It is time for a clear vision and strong leadership in South Africa! Until Mr Zuma decides to capitulate, we continue to be rand biased. Exploiting the benefits of global diversification when long term capital preservation is a priority.

On the lighter side, the SA Flags above were created by my daughter Georgia Thom for this communique! Is this the start of her graphic art career? Proud dad. Any advice on how much I should pay her for artwork?

Our integrated wealthcare approach is based on your personal priorities and aspirations. This process is designed to give you a clear course of action for pursuing your goals that span various time horizons and life stages to empower you to do extraordinary things with your wealth, both now and in the future.

Regards,

Shane Thom, CFP^® GTP(SA)™
Managing Partner: Integrated Wealthcare Advisor