Volume 21 Issue 2 – March 2023 

There is nothing like a dream to create the future. – Victor Hugo


The cabinet reshuffle announced by President Ramaphosa was  disappointing as, yet again, ANC party political interests were  put ahead of the country. Another opportunity to bring in new  ministers not clouded by state capture involvement was passed  up and while there have been changes made there were no  significant changes to portfolio responsibilities. ANC party  heavyweights all retained the portfolios they had. Some of the opponents of the president were removed, notably Lindiwe  Sisulu, and some such as Nkosasana Dlamini-Zuma, have  assumed lesser portfolios. A new post of minister of electricity  was created with the specific task of addressing the  load shedding crisis the country is facing. Apart from that  specific challenge, the appointed minister is also going to have  to manage the dynamics between minerals and energy minister  Mantashe and department of public enterprises minister  Gordhan, both of whom have responsibilities linked to Eskom.  That in itself is not an easy task. The country also has a new  deputy president with ANC deputy president Paul Mashatile being appointed in place of David Mabuza who stepped  down. President Ramaphosa did make the point that with only a year to go to national elections, continuity was important. The  2024 elections are going to be a real challenge for the ANC. As  the country deals with the worst load shedding experience and  service delivery falters it appears more likely that the ANC is  going to lose its majority support level next year. That brings  the prospect of a coalition government into focus and as we  have seen at a local government level, they do not work well in  South Africa.  

Finance Minister Godongwana delivered the budget speech in  February and it was largely accepted as a reasonable budget.  Fiscal consolidation and reduction of national debt were a key  part of the budget. Revenue collection for the current year is well ahead of the Medium Term Budget projections and this is  a result of a tax bonanza from the mining sector and well as  significantly increased tax collection efficiency by SARS. SARS is one of the few entities compromised by state capture  that has recovered its operational capacity. A notable feature  of the budget was the proposed plan for the government to take over  a significant portion of Eskom’s debt in order to make it a more  viable operating entity. Load shedding was referenced as a  significant constraint to economic growth and tax relief  proposals for business and households to deploy solar energy were tabled. There were no increases in tax rates which was welcomed. 

South Africa has been placed on the Financial Action Task  Force grey list which means that it is going to place additional  administrative burdens on doing business and financial  transactions into and out of South Africa. The reason for the  greylisting is that the controls applied in South Africa against money laundering and corruption amongst other things, were  found to be deficient. The FATF did acknowledge that South  Africa had made significant progress in overcoming the  identified shortcomings but that more needed to be done. The  country can be removed from the FATF grey list but it is going to take improved compliance with the requirements and it could  take at least 2 years to be removed. This came just before the 

2022 4th quarter GDP contraction of 1.3% was announced.  Load shedding was a significant contributor to the contraction in  economic growth and many companies are stating what the  costs of load shedding are to their businesses, both directly and  indirectly. There are many headwinds facing the economy. The  Rand has weakened quite considerably this year but it is not just  about problems in SA as there are global issues that are having  an effect as well. 

US inflation numbers have remained higher than market  watchers were hoping for. The US Federal Reserve Chairperson  has said that US interest rates will have to go up further to help  bring the inflation levels down. That has boosted the US Dollar  against many currencies but has spooked the markets as the  prospect of higher rates for a longer period of time was not what  the markets wanted. This has also impacted commodity prices.  The oil price appears to have stabilised at around 80 US Dollars  per barrel and there is still no end to the conflict in Ukraine in  sight. Global markets retreated in February after the strong start  to the year. It is not just in the USA that inflation remains at  elevated levels as inflation numbers in Europe and the UK are  still very high and inflation in Japan has risen to 4.3% which is  the highest inflation there since 1981. The prospect of a global  recession resulting from higher interest rates and a slowdown in  economic growth is still a concern. US employment numbers  remain very high and consumer spending is still strong which is  not indicative of an economic downturn. The US housing  market is showing signs of weakness and housing is a key component of the wealth effect in the USA. Higher interest rates for longer are going to have an effect on growth at some stage.

Twinoaks Investment Management (Pty) Ltd (Twinoaks) is an FSB approved Discretionary Financial Service Provider – No 849. This document is not and should not  be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. Twinoaks has based this document on information obtained  from sources it believes to be reliable but which it has not independently verified. For any further information concerning this publication, please contact Twinoaks.