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Markets bet on recovery in 2021

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OP-EDS

Last Tuesday, I took a call from my good friend, Ronnie, whose equity portfolio I manage.

It was the first day of December, and the media was describing November 2020 as a record month for global stock markets. The S&P500, a measure of United States (US) equity markets, had climbed a staggering 11%, supported by news that an effective COVID-19 vaccine would be available before the end of the year, that a Joe Biden presidency would repair America’s battered international image, and that the leading nations would continue to sustain an ailing world economy.

“Did you catch the bounce?” was Ronnie’s only concern. “Were we fully invested, huh?”

Ronnie had worked hard his whole life and was very well-off. But he was a born worrier. He would openly confess that if he had nothing to worry about, he couldn’t sleep at night.

I shook my head, bemused, and laughed out aloud. “Ronnie, back in March [when the stock market plunged dramatically], you phoned me in a total panic, insisting I build a cash buffer against further losses. Get out, if you must, you urged me. Now you are asking me if I ignored your hysteria, stayed fully invested, and rode the recovery?”

Ronnie’s mania bears testimony to the extraordinary emotional buffeting we weathered over the past eight months. When news of the deadly virus first broke, we were consumed by fear and uncertainty, troubled not only about our health but also about our financial well-being. We were shaken to the core.

Yet, as the medical profession developed a better understanding of the virus and modified its treatments accordingly, and as the scientists made progress in creating vaccines, society gradually regained its confidence and adapted its lifestyle to new conventions, sanitising hands and wearing masks in public places and contacting friends and families on video rather than in person. People have slowly returned to shops and restaurants, keeping their social distance and not lingering unnecessarily.

The advances mitigating the virus and the wide distribution of vaccines projected in 2021 are guaranteed to make next year more prosperous than 2020. The global economy will recover from the steep decline suffered in the first half of 2020, when governments around the world imposed far-reaching lockdown measures, bringing international trade and industry to a near standstill. The extent of the recovery we expect is difficult to calibrate, particularly against the recurring outbreaks of the virus in the US, United Kingdom, and Europe, although the consensus among leading investment houses suggests that global economic output and corporate earnings will reach pre-pandemic levels by the end of 2021.

These forecasts take for granted ongoing fiscal and monetary measures from governments and central banks designed to bridge the loss in income and revenue inflicted on households and businesses by the closure of the world economy in 2020. And until the world’s largest economies have fully recovered from the financial and psychological devastation caused by the virus, additional stimulus packages will follow. A precondition of these remedial actions is that interest rates will remain low for a very long time. With interest rates at rock bottom, equities will continue to outperform other asset classes like credit, bonds, and property. This isn’t good news for investors seeking yield who might have to modify their income targets, substituting capital gains for interest

We should also not underestimate the role of the outcome of the American election on a rebound in the world economy. A Biden victory has raised hopes that, in the absence of troublesome Trump tweets, trade and commerce between the US and its allies will thrive. Popular appointments to Biden’s cabinet, too, have added to the positive sentiment surrounding his victory.

There are many companies whose services helped us cope with the challenging times experienced over the past eight months, businesses such as Zoom, Amazon, Netflix, Google, Facebook, and Uber Eats, and the question is whether these firms will continue to prosper when life returns to normal after the pandemic is beaten. In addition, investors ask, will those businesses that were wrecked by the lockdown – hotels, restaurants, theatres, shopping malls – recover speedily, or will the change in attitudes and habits encountered during lockdown leave a permanent incision on our lives?

Patterns about the future shape of our lives are clearly emerging, from families requiring more space for stay-at-home work to increased outlays on upgrading residences and purchasing more powerful computers. Moving to the suburbs has driven a demand for privately owned motor vehicles, while seeking the companionship and joy of four-legged friends has led to a boom in pet food. Home fitness programmes are flourishing, athleisure has replaced formal office wear, and exposing your face on Zoom has sustained the demand for face cream and makeup.

Other developments and changes we have embraced, such as signing documents digitally, ordering home delivery from restaurants and shopping online, will stay with us well after the pandemic is over.

The rise in share prices that has pushed global equity indices to record peaks during 2020 have been the “virus winners” – the big technology giants that helped us keep our sanity during lockdown. Their dominance in the markets in which they operate and their policy of using their vast profits to seek new avenues of growth will underpin further gains in 2021 and beyond. But as infection rates in the world diminish and the global economy renews itself, “vaccine beneficiaries” – hospitality, leisure, financials, energy, and metals – will broaden the market’s opportunities and appeal. Whatever, we are safely positioned for another good year in stock markets.

I ended my call with Ronnie, assuring him affably that during our long and established relationship, we had learnt to navigate his impulsive outbursts. As I explained at the time, the one thing I had learnt over many years on the stock exchange was that after every major disturbance, no matter how severe, the stock market soon recovered – some a little sooner than others. It happened after 1969, 1987, 2000, and 2009 – and 2020 didn’t disappoint!

  • David Shapiro is a veteran stockbroker, market commentator, and former deputy chairman at Sasfin Securities.

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OP-EDS

A crisis not to waste

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South Africa has survived an insurrection, if President Cyril Ramaphosa is to be believed. This is no laughing matter. The extent and context of the violence unleashed within KwaZulu-Natal and Gauteng last week should leave many unsettled and insecure about the state’s ability to provide security in the short term and stability in the medium term.

There should be little real surprise at the turn of events. It was, indeed, a perfect storm across a number of indicators. Primarily, the looting and pillaging was a function of the confluence of both political instability and economic stress. They came together in a toxic cocktail that has left well in excess of 200 people dead, thousands without jobs, and an economic bill likely to run in excess of R100 billion with a possible 0.5% drop in gross domestic product just as a result of the violence of a fateful 72-hour period.

The protests began just hours after former President Jacob Zuma reported to prison on contempt of court charges. The effects of the Zuma presidency on the country are now well-documented. But, the ascent to power of Ramaphosa upset the existing patronage networks established under Zuma, some of which form part of the state capture enquiry while others represent a crony capitalism and clientelism which favoured connected elites and individuals with lucrative contracts and access to state tenders.

The switch to Ramaphosa was a signal that these murky relationships were likely to be investigated and upended. Ramaphosa, for all his detractors, has been a reformer within the African National Congress (ANC). And, reformers who disrupt cosy established networks run major personal risks themselves.

With the Zondo Commission breathing down the necks of Zuma as well as ANC Secretary-General Ace Magashule, amongst others, it was always going to be a risky period for the governing party.

Political factionalism and in-fighting occur in a variety of state quarters, with the mistrust and malfeasance involved stretching across a swathe of state-owned enterprises. This level of political decline has been evident for many years. And the ANC’s own debilitating moral decline has served to undermine authority and credibility. With the conflation of party and state in the country, the ANC’s problems have spilled over into South Africa’s problems – as witnessed last week.

The problem for Ramaphosa is that he himself is a fragile leader elected with a super-slender majority within his own party. Although he allowed the legal consequences of the Zondo Commission (ironically established by Zuma himself) to weaken his political enemies, his own insecurities resulted in a broader state apparatus bloated with former Zuma acolytes.

Similarly, Ramaphosa’s desire to balance the various ANC constituent forces resulted in the appointment of an executive (cabinet) that prioritised ANC unity over that of efficiency, expertise, and political reliability. From a leadership perspective, Ramaphosa’s choices in the security cluster have been particularly problematic and given the events of this last week, a failure.

While issues will still be clarified in ensuing months, the president has been sorely embarrassed by the lack of adequate intelligence as well as a police ministry clearly incapable of a semblance of public-order policing.

Of course, the catalyst for the unrest was Zuma. He was the fuse that lit the spark. And it was a spark that became a fire on the back of an economically deprived and stressed populace who, when faced with the prospects of looting without any consequences, resorted to a mass criminal event.

South Africa has a long history of political protest linked to the destabilisation of the country. And this was yet another chapter. Instigators used criminal elements to assist, and the sabotaging of schools, theft from blood banks and ammunition supplies, water plants, and cell phone masts showed an intent well beyond the criminal hysteria visible.

Ultimately, insurrection often occurs in a weak state – and for sure, this was the ticket that allowed the devastation to ensue.

Those participating in the free-for-all looting spree themselves have been victim of the broad failure of economic policy over the past decade to pursue growth-oriented policies.

The ANC has largely concentrated on redistributive policies seemingly unable to overcome ideological constraints to deregulate our economy and embrace the private sector in partnership with the state. Add COVID-19 to this mix, and the instigators keen to weaken the Ramaphosa presidency found a ready-made army even if many of those unwittingly just took advantage of the complete state of anarchy.

With unemployment at more than 40% for all adults and more than 65% for those under 25 years, economic policy hasn’t worked. Rising poverty levels and inequality have been a feature of the country for the past five years. There is, frankly, nothing new about the inadequacy of state policy. Analysts have warned about the consequences of failed strategies and non-existent implementation for years.

In the end, South Africa faces some major hurdles should we begin to move away from the highly dangerous atmosphere prevailing. The violence at hand is a direct consequence of ANC politics and policies. While we can – and should – rebuild the physical and social damage caused, it’s the ANC that needs an internal flush-out.

The only way to pressurise the ANC is via enhancing a competitive democracy that begins to threaten the governing party at the polls. In mature democracies, it’s only the fear of being booted out of office that gets governments to act. It’s a pity in South Africa’s case that the opposition continues to be fragmented and perhaps requires an “alliance for change” umbrella to reduce intra-party sniping.

Secondly, South Africans have appeased this decline for too long. Pressure has to be brought to bear from our powerful business community who have often sought to cosy-up to government in exchange for contracts rather than speak their mind. There is little room for mealy-mouthed expressions of concern in the current environment, which threatens physical infrastructure as well as lives and livelihoods.

Thirdly, South Africa needs an economic re-boot. It’s clear that the damning statistical decline of our indicators requires new thinking. And for that to happen, political pressure has to be brought to bear to end the ideological myopia that has held us back. We need a modern, market friendly, and socially responsible environment without the dictates of an interfering state.

While we can join hands around an “ubuntu” renewal and a basic income grant, it’s a deeper structural problem in our political make-up that requires a shift. If this shocking week of violence assists with that in any way, maybe then it will be a crisis we won’t waste.

  • Daniel Silke is a political-economy analyst and keynote speaker based in Cape Town. Follow him on Twitter @DanielSilke and view his website at www.danielsilkeglobal.com

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OP-EDS

What if this IS us?

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I’m cursed with optimism. But as the smouldering cinders of last week burned themselves to charcoal and our president flanked by his podgy unkempt generals wailed war talk of an insurrection, and social media was overrun with stirring renditions of the national anthem and images of people sweeping the broken shards of debris from a week of shame, I felt short changed.

I cannot allow my optimism to blind me like cataracts to reality.

In a slight elevation from his usual monotone, the president informed us that an unnamed Zuma and a dirty dozen of saboteurs wrought havoc on our nation. In an attack on our democracy, they targeted road arteries, ports, oil refineries, and strategic key-points, but their attempted resurrection had come to naught.

The woke coterie of TV commentators berated us with stories of how what we are witnessing is the poor, destitute, and unvaccinated taking food to which they were entitled given long COVID-19 shutdowns, gross income inequality, and insufficient government support.

My fellow squad of optimists tell us how the country has come together, how people of all races have manned the barricades, protected the malls, how taxi associations have sought out the fugitives, and how, with brooms in hand, by sweeping the destruction of supermarket aisles, we will rebuild South Africa.

Channelling a national therapist, our president assured us that this past week wasn’t us, “This isn’t who we are as a people,” he said. But what happens if he’s wrong? Isn’t it time to take a really good look at ourselves in the mirror and realise that this is exactly “us”, this is exactly who we have become as a nation.

What concerns me isn’t that a kleptocratic former president and his criminal cohort attempted to overthrow a democratically elected government. What doesn’t worry me is that sadly, Pick n Pay and Shoprite Checkers were robbed of bread, milk, and eggs. What concerns me most is the image of long lines of orderly, disciplined luxury and semi luxury vehicles waiting peacefully in line for their chance to loot the Makro distribution centre in KwaZulu-Natal.

These cars and their jubilant occupants weren’t the poor, the hungry, the destitute. These were middle class and upper-middle-class fat cats, willing to steal because order and society had simply broken down.

After the 1994 first democratic elections, while executive director of the Independent Electoral Commission (IEC), I employed the services of a private detective to track down the assets of the IEC which had been stolen, looted, and plundered during our first democratic vote.

The detective taught me a valuable lesson. Twenty percent of the population will always steal, he explained, 20% of the population will never steal, but the remaining 60% of people will steal, rob, and loot if they are presented with an opportunity where they are likely to get away with it, when law and order has broken down, and where criminality has become an acceptable norm.

And very sadly, that’s the environment we have created in South Africa. We have watched the Zumas, the Guptas, the Magashules, and most of our last few governments loot the state. Pravin Gordhan, our minister of public enterprise, estimates that R500 billion was stolen from the people of South Africa during the Zuma era.

Analysts believe that corruption has lost the country R1.5 trillion since the advent of democracy. That’s about R50 000 per adult South African stolen by a government which swept to power in order to liberate and transform South Africa.

That’s been the price for each individual South African, stolen from pensions never paid, houses never built, jobs never created, and grants never paid.

When you live in a society with no consequence, when theft is all around you, when those in power are never brought to justice, then the fertile ground is ploughed for anarchy.

Permission is granted to everyone to say, “If he can, why can’t I?”

If the police stand back and watch the looting, swearing helplessly at the criminals, but allowing the chaos to engulf the nation, then you are guaranteed crime with no consequence.

In Rwanda, ordinary citizens turned on their neighbours and became murderers for a month. They weren’t murderers before, and they weren’t murderers afterwards.

Similarly, in Nazi Germany, in places like Lithuania, where most of us herald from, Jews were killed by their neighbours who didn’t kill before and didn’t kill again. But the climate was created in which there was no consequence for the crime, where criminality was the norm, where everyone was given permission to be part of the mob rather than the one to stand against the tide.

In these circumstances, ordinary, law-abiding, tummy-filled South Africans took to the streets to steal R67 000 couches that don’t fit into their homes, to loot 75-inch TVs that can’t fit into their cars, and to line up orderly and peacefully waiting to loot and plunder their local mall and store.

So, Mr President, this wasn’t an aberration, this was “us”. This was the real South Africa that we have created, a country with no consequence, a country that the apartheid apologists warned us about.

It’s time we looked in the mirror and realised that the real South Africa just punched us all directly in the face.

  • Howard Sackstein is chairperson of the SA Jewish Report.

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OP-EDS

Cyber addicts slip under COVID-19 radar

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Psycho-social media and literature have long highlighted the negative effects that the cyber age is having on our youth.

The computer screen, cell phone, internet, game console or tablet, when abused and/or used to replace human teaching and live interaction rather than as an educational tool, aren’t helpful. More often than not, they lead to the sacrifice of basic skills of analysis, synthesis, and application of knowledge. Add to this the decay in gross motor development and even interpersonal skills, and you have the real issues at play.

But what about the other dangers of unmonitored use of these devices by our youth?

The use of media devices and platforms increased with the advent of home or lockdown learning in the COVID-19 environment. But, due to the focus of our collective psyche shifting to safety from COVID-19 and fear of contraction of the virus, pre-COVID-19 awareness of the danger of unmonitored teenage (and even younger) access and behaviour in cyberspace has ironically slipped off the radar.

“I’m on my Google Classroom/WhatsApp group researching assignments,” is the prevalent reply to parents when asking their children or young adults what they are doing on the devices.

While this may be true to varying degrees, a device in the hands of a child or young adult with the knowledge that mum or dad doesn’t really ever check his/her phone, is a potentially precarious situation.

Here are some tips for parents, children, and young adults to better maximise cyber-safety in general:

  • Be extremely selective when posting or re-posting images, conversations, videos, articles, and so on. Check with adults. Adults need to do their best to be constantly aware of what their children/young adults are posting out there;
  • If you become aware of any online cyberbullying on groups, posting of inappropriate messages or images, leave the group after reporting the event/s to a responsible adult in your home or school. Even though you may not have been the person who originally posted the negative post or image, once you forward it, you are held accountable for perpetuating the chain of publication of that post/image;
  • Be aware of games that can have a negative impact and dull sensitivities towards others when played too frequently;
  • Certain things should always remain in the private domain. Don’t overshare, but be mindful of what’s posted. Ask yourself prior to posting, “Am I happy for this post to appear on the front page of the news tomorrow morning?”;
  • Digital profiles should have privacy settings in place;
  • Create specific times that you cut out screen time such as meal times, family gatherings, bed time, or homework and study time; and
  • In most cases, parents are paying for the phone and contract. Audit your child/young adult’s phone at random intervals and ban inappropriate sites, games, activities, or platforms.

Stay alert – stay safe!

  • Antony Radomsky is the principal of Eden College in Lyndhurst, Johannesburg.

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