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The Acorn Brief – November 2021

The Acorn Brief – November 2021

Volume 19 Issue 10 November 2021

The healthiest competition occurs when average people win by putting in above average effort. Colin Powell.



The local government elections have been concluded and a clear message has been sent to the bigger political parties as both the DA and more specifically the ANC, lost support. The EFF maintained its level of support but the big winners were the smaller parties and the independents representing community forums. A low voter turnout is also a measure of votersdiscontent with the established political parties. The most significant outcome as far as it affects the country, was the loss of support that the ANC experienced. Measured on a national basis the support it received fell to well below 50%. If this were extrapolated into a national election it means that the ANC would be voted out of power and would have to enter into a coalition to continue being involved in running the country. Given the poor performance, at all levels of government, by the ANC over the past 11 years, this setback for the party can only be a good thing for country. There are 66 municipalities that will require some form of coalition in order to enable them to function. The history of coalitions at local government level in South Africa is not good as party politics and self interest has prevailed over service delivery. The message that voters have sent is that service delivery must be prioritised if political parties want support from voters at elections. Looking forward, the impact of the outcome of the elections on the ANC is significant. Noises are already being made by the Zuma aligned RET faction that party leader Cyril Ramaphosa must be held accountable for the party’s drop in support. This will no doubt embolden them ahead of the ANC’s national elective conference in 2023 and Ramaphosa’s leadership will be challenged. The fact that the ANC has lost so much support in these elections is a good thing for the country as the party’s absolute control of all forms of government in most parts of the country, has been broken. This means that unless they start putting the country and its people ahead of narrow party interests, they will quite possibly be voted out of power in the 2024 national elections. This gives party and country president Ramaphosa the opportunity to embark on the reforms needed to improve service delivery and improve the capacity of government. This is needed in order to create an environment that is more conducive to economic growth and job creation. It will mean that he will have to deal with internal ANC party friction much more decisively so that it does not override the responsibility of leading the country to a better future. He will have to show that he has what it takes to do so.

Most markets around the world were much improved in October after a poor performance in September. All of the major markets in the developed world had a positive month with the US markets hitting new highs and an improvement in markets in Europe and the UK. Markets in the East were also stronger and China recovered a bit but is still well down for the year. Some emerging markets were weaker but the JSE had a good month as mining stocks and some of the big duallisted shares recovered. Banks and property shares fell during the month. Energy prices around the world continued to remain at very high levels as natural gas shortages pushed prices higher and the oil price reached a level of USD 84 per barrel. Some commodities were weaker as demand from China slowed down in line with a slowdown in economic activity there. There are 3 areas of concern that market commentators are focussed on at present. The first is the slowdown in economic activity in China and the ongoing debt problems being experienced by large Chinese property developers. The second one is that inflation may not be transitory and the third is that the US Federal Reserve has stated that they will begin tapering the asset purchases which effectively means that they will start withdrawing the monetary support they have been providing for the markets.

Any one of these issues or a combination of them have the potential to cause disruptions in the financial markets. Energy prices and supply chain disruptions are adding to inflationary pressures. In the USA inflation is over 4% and is well above the US Fed target of 2%. The supply chain disruptions and the impact they have on prices as a result of a shortage of goods will pass in time. There are however definite indications of wage cost increases as employers find that there are not the required numbers of skilled workers to fill vacant positions. If inflation does continue on an upward trajectory, then interest rates will rise and that will cause issues given the levels of debt that have arisen as a result of the low costs of borrowing. The US Fed tapering its asset purchases will also start putting some pressure on markets as the liquidity this has provided reduces. The slowdown in China must be watched as it also has the potential to cause disruptions.

South Africa has once again endured significant load shedding which does not help economic activity. Significant new renewable energy projects are now on the cards but will take time. Voters have said the country must be put first. Do it CR.


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.