With growing tensions caused by the Hawks’ allegations against Finance Minister Pravin Gordhan, everyone is uncertain about South Africa’s economic outlook.
What would happen if Pravin Gordhan is accused and found guilty?
American multinational banking firm, Goldman Sachs, said in an internal newsletter that the downgrade of South Africa’s economy is unavoidable and would most probably happen by latest December this year. This would inevitably result in the rand plumeting to R17 against the dollar. It would also lead to higher unemployment rates and inflation and interest rates spiking. As an investor, it is therefore critical to consider a variable interest rate option.
The rand hit its lowest mark for the last five weeks, however, this is not all doom and gloom for South Africa. Although the rand seems to be fluctuating, markets in general are still stable, especially when looking at the JSE All Share Index and the Top 40.
How should investors position themselves against these fluctuations?
Investors should pay close attention to what they are investing in, as well as the divesification of their portfolios. It is important to not always be reactive, but rather have an accredited financial advisor helping you to be proactive to ensure the effect on your portfolio is minimized should commodities such as gold or the rand change drastically.
Trends regarding saving when times are tough
Contrary to popular belief, it seems that South Africans tend to spend even more money on alcohol and eating out during economic difficulties. This is a dangerous trend and it is important to remember that you need to pay yourself first- this means saving and investing first, then paying bills and debt, and only then spending money on unnecessary luxuries.