{"id":10436,"date":"2022-02-14T07:37:42","date_gmt":"2022-02-14T07:37:42","guid":{"rendered":"https:\/\/www.africa-press.net\/mauritius\/all-news\/south-africa-inflation-risks-undermine-case-for-equity-investors-research-says"},"modified":"2022-02-14T07:37:42","modified_gmt":"2022-02-14T07:37:42","slug":"south-africa-inflation-risks-undermine-case-for-equity-investors-research-says","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/mauritius\/all-news\/south-africa-inflation-risks-undermine-case-for-equity-investors-research-says","title":{"rendered":"South Africa: Inflation risks undermine case for equity investors, research says"},"content":{"rendered":"

Africa-Press – Mauritius. <\/strong><\/span>The prospect of stagflation as South Africa experiences relatively low economic growth with rising inflation\u201d dims prospects across the board, with the exception of food retail, according to analysis from UK-based Salmour Research.<\/p>\n

\u201cShould interest rates have to rise due to rising inflation, the effect could potentially be devastating for South Africa.<\/p>\n

\u201d South Africa\u2019s key interest rate stands at a record low of 3.5% following a series of cuts in 2020 to counter the fall-out from Covid-19.<\/p>\n

This year, the monetary policy committee has consistently indicated that the next move will be up. Annual inflation rate rose to 5.0% in September from 4.9% in August, above the midpoint of the central bank\u2019s target range of 3% to 6%.<\/p>\n

Higher interest rates would lead to \u201csubstantial bad debt provisions\u201d at banks and other lenders, Salmour\u2019s research says. Banks also face increased competition, meaning they should be avoided along with retail credit providers, it adds.<\/p>\n

With taxation likely to rise and the rand predicted to weaken, investors should favour export-driven companies and those who get most of their income outside the country, it says.<\/p>\n

Domestically, discretionary retailers will be hurt by inflationary pressures and weak spending, the report says. Food retailers are likely to be able to sustain their earnings in an inflationary environment, according to the research.<\/p>\n

Shoprite, perceived as South Africa\u2019s leading low-price grocery retailer, is \u201clikely to be the biggest beneficiary\u201d, it says. Windfall over Some investors voiced optimism after the appointment of Enoch Godongwana as finance minister in August.<\/p>\n

Investors such as Mesh Pillay, CEO of YW Capital investment in Johannesburg, see Godongwana as both business-friendly and politically astute. Salmour has little confidence that ready solutions are at hand.<\/p>\n

Years of poor economic policies have left high structural unemployment and low economic growth, the report says. South Africa, the research points out, now has more unemployed people than the United States, where the population is six times larger.<\/p>\n

A real long-term reduction in South African unemployment would require economic growth of between 5% to 7% for the next 20 to 30 years, it says. According to the Bureau for Economic Research (BER) at Stellenbosch University, the country\u2019s GDP likely contracted in the third quarter.<\/p>\n

In the last 18 months, South Africa has had a windfall from surging commodity prices and mining export receipts, which has helped to prop up balance of payments and the rand, the report says.<\/p>\n

That windfall is now seen as being over. Kumba Iron Ore, Anglo American and Glencore were among beneficiaries from higher iron ore prices that have now slid back, while the price of rhodium has also slumped.<\/p>\n

China\u2019s infrastructure spending has largely ground to a halt due to weakness in the property sector, exposing South African miners to further commodity-price declines. Strong copper prices, the research notes, are of little help, given South Africa\u2019s lack of direct exposure.<\/p>\n

For More News And Analysis About Mauritius<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Mauritius. The prospect of stagflation as South Africa experiences relatively low economic growth with rising inflation\u201d dims prospects across the board, with the exception of food retail, according to analysis from UK-based Salmour Research. \u201cShould interest rates have to rise due to rising inflation, the effect could potentially be devastating for South Africa. […]<\/p>\n","protected":false},"author":84,"featured_media":10435,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,6,8,16],"tags":[233,245,241,693],"class_list":["post-10436","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-files","category-homepage-english","category-twitter","tag-africa-press","tag-africa-press-mauritius","tag-mauritius","tag-south-africa"],"yoast_head":"\nSouth Africa: Inflation risks undermine case for equity investors, research says - Mauritius<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/mauritius\/all-news\/south-africa-inflation-risks-undermine-case-for-equity-investors-research-says\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"South Africa: Inflation risks undermine case for equity investors, research says\" \/>\n<meta property=\"og:description\" content=\"Africa-Press – Mauritius. The prospect of stagflation as South Africa experiences relatively low economic growth with rising inflation\u201d dims prospects across the board, with the exception of food retail, according to analysis from UK-based Salmour Research. \u201cShould interest rates have to rise due to rising inflation, the effect could potentially be devastating for South Africa. 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