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March 2021 economic update

The JSE All Share Index, S&P 500 and FTSE all ended the month higher.

Autumn is here with colder days and longer nights ushering in winter. South Africans may also have to brace themselves for tighter lockdown restrictions as the third wave of the Covid-19 pandemic could hit South Africa in the coming months. Along with this, there are questions about Eskom’s ability to provide the country with reliable energy over this period.

  • February saw optimism that South Africans along with the rest of the world would start to receive the Covid-19 vaccine and was to start the AstraZeneca vaccine rollout of 1 million doses. Due to questions being raised as to the effectiveness of the vaccine the rollout was scrapped against WHO guidelines and recommendations. The reason was that the vaccine was no match for the South African Covid-19 variant. The small study that took place mostly included young people who were unlikely to have fallen ill with severe disease and excluded elderly people above 60, who are more at risk. A million doses of the vaccine were then sold to the African Union. We are led to believe that South Africa has secured 9 million doses of the Johnson&Johnson vaccine and 20 million doses of the Pfizer vaccine. There are plans to have 40 million people vaccinated by the end of 2021 to achieve herd immunity. The plans for the rollout of the vaccine seem vague at best.
  • 2021 is going to be a dark year for South Africans if one does not own a generator, and load shedding is expected to continue until 2024 with an electricity shortfall of 4,000 MW for the next five years. The stability of South Africa’s electricity supply is concerning investors, disrupting production, and negatively affecting the national economy.
  • World GDP is expected to fall by at least -3,5% for 2021 leaving millions of people in poverty, followed by a growth of 4,20% for 2022, as more people start to travel again and are able to once again go out to entertainment venues as the Covid-19 vaccine rollout increases throughout the world. The South African economy, already in dire straits before the Covid-19 lockdown is said to have decreased by 7,20% for 2020.
  • With tax collection also severely impacted by the coronavirus in 2020, controlling the ongoing fiscal deterioration could remain very challenging for the coming years. Fortunately for South Africans, we have not had any shock tax announcements for 2021 in the recent budget speech.
  • The US Fed raised its forecast for 2021 GDP to increase to 6,5% before cooling off in later years. President Joe Biden recently approved the “America Rescue Plan”, which is one of the largest in history providing $1,400 (approximately R21,000) direct payments to most Americans and should help kick start the American economy to the amount of $1,9 trillion. Another proposed $3 trillion “Build Back Better” green energy and infrastructure plan is also on the cards, but will this be enough to reignite the world economy on its own?
  • The rand remained fairly constant for March hovering at around R15.00 to the USD as emerging markets benefited from a rise in global sentiment. The JSE also ended higher as global markets cheered better than expected US jobless claims for the first time during the pandemic, adding evidence that the US economy is recovering.
  • The Nasdaq closed 1,24 % last week on expectations of what is to be the fastest economic growth since 1984.
  • Brent crude oil went up by around 4% due to the Suez Canal blockage taking longer than expected to clear.
  • Bitcoin rose in the wake of Visa announcing support for the cryptocurrency USD Coin (USDC) whose value is pegged against the USD.
  • One-month index movements:
    • JSE All Share Index: 0.52%
    • S&P 500 (US): 4.24%
    • FTSE (UK): 3.55 %

ADVISOR PROFILE

Michael Haldane

Global & Local Investment Advisors

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