By browsing our website, you accept the use of cookies. Our use of cookies is explained in our privacy policy.
Click the PRODUCTS & SERVICES button on the left to expand it again.
Ok. Got itPresident Ramaphosa unveiled a R500 billion fiscal stimulus package aimed at providing immediate relief for the most vulnerable through social grants. Read more in our latest market review.
Level four
After an extended lockdown of 35 days, South Africa moved to level 4 restrictions at the start of May. This marks the first step in government’s risk-adjusted approach to ease the restriction of movement and will see around a third of the country’s workforce return to work and an expanded number of sectors become operational. While the country’s curve has surely been helped by the quarantine measures, the Covid-19 infection rate continues to increase as testing is expanded. This therefore marks the first step in what is likely to be a long journey given the progression of the disease thus far.
President Ramaphosa unveiled a R500 billion fiscal stimulus package aimed at providing immediate relief for the most vulnerable through social grants, while supporting businesses via tax deferments and a R200 billion loan scheme in conjunction with local banks. Although the aggregate numbers are large, much of the funding will come from the reprioritisation of the 2020 budget and social security funds like the Unemployment Insurance Fund.
South Africa will also seek an estimated R95 billion in funding from international financial institutions such as the IMF, World Bank and New Development Bank (BRICS bank). The funding will be used for the Covid-19 health crisis and as such should not carry the conditionality that often accompanies loans from these entities.
The South African Reserve Bank cut interest rates by a further 100 bps in early April, in an out-of-cycle but unanimous decision. Further credit ratings downgrades from S&P and Fitch reflected a challenging fiscal backdrop with added pressures from SOEs like SAA and Land Bank and an urgent need for structural reforms. Despite volatility throughout the month on the much-anticipated WGBI rebalance, the All Bond Index recovered by +3.9%. The FTSE/JSE All Share Index benefitted from improved global sentiment, gaining +14,0% in April. Recoveries were seen in the worst-hit sectors, including banks and insurers, while oil counter Sasol did a spectacular about-turn, gaining +136% over the month. Despite great uncertainty facing property companies and the failure of embattled retailer, Edcon, the property sector gained +7,0% in April, leaving returns over the last 12 months at a paltry -46,0%.
After the indiscriminate sell-off in March, the recovery has been swift as markets look forward to a world beyond the current health crisis. Although we believe that the crisis will be contained in time and the state’s efforts has softened the initial blow, balancing lives and livelihoods will remain difficult and unable to prevent the inevitability of casualties.
Want to know more? Here's what to do: