Political analyst, Daniel Silke, briefly reminded us of what we have endured over the past 24 months. And beyond the pandemic, worrisome events are having an impact on financial systems and investments.
The pandemic that ended with a war
In just five weeks the world changed (again) with unprovoked attack by a nuclear superpower on Ukraine, says Daniel. Russia is currently the most sanctioned country in the world, and this will have far-reaching impacts in all quarters of the globe. Our world is shaped by supply, and two of its main exporters of wheat, fertilisers and maize are Russia and Ukraine. As a result, we are likely to see a drop in GDP in the UK and Eurozone, and higher inflation, sending those economies into stagflation, but a recession is unlikely, says Daniel.
In China, an increase in COVID cases and a shutdown in Shanghai have led to a localisation of supply in many countries, until now, deeply reliant on Chinese imports. Daniel predicts supply localisation will be a reality following a slowdown in global trade. ‘Bringing business back home’ is positive, but not easy to do, especially in South Africa where our energy crisis and deficient infrastructure dominate concerns regarding low growth forecasts.
In the US, inflation has hit a 40-year high. Even before the Russia-Ukraine war, four potential interest rate hikes were predicted by the Fed, leaving US citizens feeling fragile, especially in light of the COVID relief being stopped. However, the housing market is improving.
Tough challenges in South Africa
President Ramaphosa came to power on a slim majority with two critical issues to solve:
- Dealing with the senior members of his party who continue to oppose his presidency; and
- Eradicating the patronage networks and corruption.
Both issues are almost impossible to grapple with – and he’s only been the President for one term. Currently, the nation awaits NPA action for those fingered in the Zondo Commission as responsible for state capture.
The factional tension in the ANC also slows much-needed progress and takes attention away from critical issues such as slow GDP growth (the National Treasury forecasts below 2% in 2023) and ever-worsening unemployment. And GDP growth requires a reliable energy source and stable transport and infrastructure.
According to President Ramaphosa, the private sector holds many of the solutions and job creation opportunities to enable us to reduce the unemployment rate which currently is at 35%. The good news is that our exports have increased in light of global supply uncertainty. However, while export values have been on the rise, export volumes have not. We need a more stable national transport and logistics system to support our desired export volumes.
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