This past Friday morning, residents of St Francis and surrounds braved the chilly morning and headed to The Links to attend a breakfast discussion hosted by PW Harvey & Co and Ninety One. Jeremy Gardiner provided some insight into relevant topics ranging from COVID to inflation to the War in Ukraine.
Ninety One is a leading active, global investment manager aiming to provide long-term investment returns for local and international clients. Jeremy Gardiner has been with the company for 27 years and is one of the Directors. He is a regular voice in the media. He is responsible for commenting on current affairs in the economic and investment markets.
PW Harvey & Co is an independent financial service provider based in Gqeberha. It provides financial advice to local and international clients and businesses and has been in the industry for over 125 years. Director Gavin Harvey and the 35 staff members advise on a broad range of financial matters, including local and foreign investments, accounting, estates and tax for their clients. They are one of two Category II Licenced FSPs in the Eastern Cape.
The talk was structured around prevalent topics relating to South Africa and the rest of the world. 2022 was meant to be a so-called “boring year”, which is precisely what we needed as a developing country. So far, it has been anything but boring with a possible World War 3 on the horizon, Chinese lockdowns, rising inflation rates and interest rates. As the new norm in today’s world, the first area touched on was COVID and its effect on local and foreign markets. Here in SA, we have felt the knock of COVID in our tourism industry.
In contrast, the world’s biggest exporter, China, has felt the effect of the hard lockdowns still being enforced today. This has had a significant impact on the supply of goods around the world. In turn, the high inflation rates we are currently experiencing. It comes as no shock that our inflation rate has hit 7%, but it is not something only South Africans are experiencing, as US and UK inflation has just hit a 40-year high of 9%. The price hike we are experiencing is not “our fault” as it is imported inflation caused by high fuel and food costs.
So, the question is why now, when the average South African citizen is struggling to afford the high cost of living, would the interest rates be raised even further – stretching our pockets to the extreme? Jeremy provides the answer, the hike has been put in place to combat the high inflation rate by reducing volume in the market from spenders.
Looking at a more global perspective, both US and UK leaders are facing scrutiny at the moment, with both experiencing plummeting popularity rates. Elon Musk is still making billions and is now knocking on the door of the $200billion club (to which he would be the only member). The elephant of the room was also addressed. Why Ukraine? This war will not end any time soon as Putin does not look like he will pull out anytime soon and is now receiving the backing of Iran and China.
While the West is still providing Ukraine with weapons and machinery, Russia will continue to fight for a Moscow-friendly government and a hold on Ukraine’s oil and wheat supplies. In addition, Russia is feeling the pain of being “removed from the World”, with over 300 companies pulling out of the country, Russian credit cards being declined outside of the country and a steadily dropping GDP. Turning to the West, the UK is facing political uncertainty and low consumer sentiment, and BOJO is facing the possibility of a move from No10 Downing Street.
China is also feeling the pressures of hard lockdowns and strict rules and regulations imposed on the citizens. In addition, the traffic jam in the Chinese harbour due to their zero Covid policy is causing a lot of pressure on South Africa as we import a lot of our goods from China.
“We are engaged in a battle for the soul of this country, and we must not be defeated”, Cyril Rhamaphosa. The cleansing of our country after years of corruption under the Gupta and Zuma rule is a long and ongoing process that needs to continue.
Believe it or not, there is a silver lining to the load shedding we are experiencing. Eskom has its back to the wall, which has led them to seek reprieve in the private sector, which should reduce the need for outages after a few years of input. The mood in South Africa at the moment is negative. Still, we shouldn’t be thinking that we are at the edge of the abyss. If we are to just cast our minds back to 2015/2016, the peak of the Zuma years, and think how far we have come and remember that we at least are not experiencing an inflation rate of over 70% like Turkey!
The main takeaway from Jeremy’s talk at the beautiful Links was the following: The Political Noise is very high at the moment, and we need to try and avoid it. So put on your headphones, block it out, play more golf, and DON’T PANIC!
At PW Harvey, it’s all about your financial plan, and we have been helping people reach their goals through sound financial advice for over 125 years. So let us help you and your family navigate this uncertain time with the peace of mind that you are our number one priority.