Dear Clients
We trust that you and your families are safe during this time of unrest and uncertainty.
Over the past few days we’ve seen a doomsday reel of rampant looting, burning property and general anarchy. Even the most ardent optimist could be forgiven for feeling down in the dumps right now. We may be familiar with this dance on the brink of disaster, but a year and a half into a global pandemic, our personal resources are low. Standing on the precipice, we are thoroughly worn out by the vertigo, and sickened by the feeling of wasteful loss and hopelessness. So where to from here?
The markets and your investments
On Monday 12 July, the markets moved, as they always do. A Business Day headline read: “JSE firms while SA burns”. At the close of day, the JSE all share was up 1.37% on the day, and up 24.6% on the prior year.
On Monday 12 July, the Rand moved, as it always does. At 7pm, it was down 1.64% against the US Dollar, to R14.40. On the 12 of July last year, the Rand averaged R16.81 to the dollar, meaning that it is currently 16.7% stronger than it was this time last year.
On Monday, 12 July, mobs across Gauteng and KZN looted over 470 stores. Despite this, the share prices of Shoprite and Spar were marginally up on the day, while those of Pick n Pay and Woolworths were only marginally down.
Today, 13 July, at the time of writing, the Rand has weakened a little further and the JSE all share is bumping along without major movements. What does this mean for your investments? Thus far, it means that the events of the past few days have had little to no impact on your investment values.
This is not who we are as South Africans. This is not us.
Although the mayhem was triggered by Zuma’s arrest, consensus is that Zuma is no longer entirely central to this story. Protest action and destruction of property has been incited by those wishing to destabilise the ANC leadership, while opportunistic criminals have taken advantage of the lack of law and order.
It is not clear to what extent the violence has been centrally or deliberately planned, with some describing the looters as “puppets in a grim political show”. Others have pointed to unemployment rates in South Africa, saying that this is the result of longer-term frustrations and a level of desperation that has been exacerbated by the pandemic.
The Economist today published an article that helps ground this view, saying,
“recognising the grim conditions for many South Africans does not excuse rampant criminality… Over the past few days most unemployed people were probably looking for work, rather than raiding shops. What can be said is that the thousands of South Africans stealing from businesses run and staffed by their countrymen are following the example set by the ruling ANC under Mr Zuma.”
With the SANDF having been deployed yesterday to support the restoration of law and order, we’re not yet sure when we’ll find firm ground. The low-key reaction of the markets means that there’s a view that this lawlessness is short-term, and that the debris left in its wake can be cleaned up.
Right at this very moment, Jacob Zuma is behind bars. Few people believed that this reality would ever manifest. Our constitution has been upheld, and the separation of judicial and political powers remains intact.
Our collective trauma resulting from these recent protests should not be underestimated, but there is some consolation in knowing that South Africa is not entirely alone. Countries around the globe – both developed and emerging markets – are struggling in the wake of the pandemic and are experiencing unrest driven by divergent political ideologies.
The scenes of the US Capitol attack on 06 January this year – where Trump supporters were seen wearing animal skins and seeking to murder the then-Vice President – are just one such example. A BBC News headline from the 26th of January reads: “Netherlands: Third night of anti-lockdown riots bring violence and looting,” and is accompanied by a video of mobs destroying public property in a city street. An Australian news headline from 10 May reads: “Violent scenes in Melbourne’s CBD as coronavirus protesters are detained”.
We are particularly saddened by the scenes of destruction in Empangeni and other parts of Zululand. Our condolences go out to those of you who have been directly impacted by the destruction caused by the protests and looting.
Our advice to you at this moment is the same as it was in March last year: stay calm and resist the temptation to withdraw funds or change your asset allocation. Concentrate on the health of yourselves and your families, we will attend to the health of your investments.
Kind regards
The Team at HMA