• With inflation and the reactive tightening of monetary policy around the world – money becomes more expensive. Inflation weakens economic growth and depreciates currencies, particularly the currencies of countries with poor fiscal discipline such as South Africa. Putin’s war in Ukraine continues to increase the prices of fossil fuels with material impacts on inflation. High-interest rates are synonymous with recessions.

• The resurgence of Covid outbreaks in Shanghai and potentially Beijing. This will have a corrosive effect on the supply chain with corresponding price hikes following. China’s economy suffers from weaker growth as a result and the knock-on effect is lower chines demand for South African commodities, the very commodity demand that has sheltered South Africa from the currency fallout of all the risk factors covered thus far. The property bubble in certain sectors in China exacerbates this risk.
• Specific to South Africa is the flood issues and the political climate. The re-election of Gumede in KZN is a portent of the ructions that will more than likely define the forthcoming elective conference of the ANC.

To our partners, it must be repeated at the risk of being accused of monotonous repetition: the Rand is giving up its recent strengths, as are all emerging markets (see IMF graph below of EM’s relative to the advanced economies), but amongst the emerging markets it is still one of the top performers (see graph below).