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22 Jun 2016
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22 June 2016

According to Ryan McCaughey, South Africa’s GDP growth is well below its real growth rate over the past ten years of 2.28%. Last week’s first quarter release of -1.24% y/y (year-on year) highlighted another poor quarter for the country. He said the lower GDP was primarily driven by the mining industry (-18.1%) and the agricultural sector (-6.5% q/q) which contracted for the fifth consecutive quarter. It is clear that the South African economy has lost momentum over the past few years partially due to electricity shortages, protracted strikes in the mining and manufacturing sectors, a drop in consumer and business confidence, and lastly the lack of policy clarity in key industrial sectors.

I believe that the risk for South Africa to be downgraded during December is putting a lot of stress on Business SA, Labour SA and the South African Government to work together to address the above mentioned. Their joint efforts have averted further downgrade up to now and if they keep on working together they may avert a downgrade to junk status during December 2016.

Let us hope that the outcome of the Brexit vote this week will not cause further global economic instability and volatility and that 2016 will be a turning point for South African equities.

Friendly greetings

Andre Delport  

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