Ramaphosa’s plan leaves financial markets unmoved
Infrastructure and employment initiatives are impressive on paper, but scant on details
THE LONG- AWAITED Economic Reconstruction and Recovery Plan presented by President Cyril Ramaphosa on Thursday came and went almost without any effect on the financial markets. It was as if economists, analysts and investors adopted the attitude: “The plan that says everything but will lead to almost nothing.”
The main criticism is that, once again, it seems to be a wish list that cannot be implemented.
The aggressive infrastructure investment and mass employment programmes seem impressive on paper, but the president did not provide any details on how these programmes will be financed.
Surely it won’t be through the Budget, or will the minister of finance hint in his Medium- Term Budget Policy Statement on October 28 that he will cut other government expenditure aggressively to earmark billions for these programmes?
Will the “promised” R10.6 billion bailout of SA Airways also be scrapped? “To re- industrialise our economy, focusing on growing small businesses” has, for more than 12 years, been part of the National Development Plan and has not been implemented.
Will the cost of doing businesses be addressed once and for all, and will the strong hand of the labour unions be stayed?
“To accelerate economic reforms to unlock investment and growth” also remains rhetoric. The investment summits seem to be hopeful, but when will money flow, or will it remain promises?
“To fight crime and corruption” also reminds many of the lack of leadership to lead in this fight as the Covid- 19 relief fraud almost cries out “I told you so.”
“To improve the capability of the state” reminds many people of “state capture”, where employment will once again be created only by government.
Therefore, the financial markets were almost indifferent after the pres
ident’s speech and seemed to react to global market and economic events. The events in Senekal on Friday also seem to have left the rand, bonds and equities unmoved.
Geopolitical events ( the US presidential election) and the second wave of Covid- 19 outbreaks overshadowed financial markets. Equity, bond and exchange rate markets adopted a wait- and- see attitude as expectations around renewed stimulus packages in the developed world weighed against the effects of the second wave of Covid- 19 in the US and Europe.
Despite these uncertainties, more US data points towards a quick rebound in its economy.
On Friday, US stocks climbed steadily but surely as US retail sales rose 1.9 percent last month on the August number. Although it led to a weaker dollar, investors and analysts remained sceptical after the news that manufacturing production unexpectedly declined last month, supporting the uneven pace of the economic rebound that’s being threatened by a new acceleration in coronavirus infections and Congress’s failure to agree on a fresh stimulus package.
On the JSE, the FTSE/ JSE All Share Index ended Friday at 55 096 points, or 1.2 percent lower than the previous Friday as global uncertainties continue.
Lower commodity prices contrib
uted towards Resources Index losing 0.8 percent, whereas domestic and geopolitical uncertainties saw the Fin 15 index lose another 2.4 percent.
Some individual stars among industrial equities, such as Richemont and MTN, helped the industrial board to end the week 0.8 percent higher.
On the capital market, bonds remain the winners for the year. The yield on the R187 benchmark shortterm bond gained another 2.1 percent.
The rand exchange rate remains uncertain against the dollar, with gains against the pound and the euro.