A – ANC
I’m sure that 2017 is a year that the ANC would love to forget. At the time of writing, the party was getting ready for their 54th National Conference where a new leader for the ANC would be chosen. At this stage in the race, it looks like Cyril Ramaphosa and Nkosazana Dlamini-Zuma are the favourites. Let’s hope, however, that irrespective of who is chosen that it will bring a positive change to the SA economy in 2018.
B – Bitcoin
Even though Bitcoin didn’t make its first appearance in 2017, it will definitely stand out as the year that the most noise has been made about this cryptocurrency. After kicking off the year at $968.23 per US$, it is currently trading at nearly $10,000 per US$. Whether you feel that it’s here to stay, or whether this too will turn out like tulips in the 1600s remains a mystery for now.
C – Cash
Pensioners living off interest are definitely not breathing easier following the lowering of interest rates in 2017. After money market rates ended 2016 at 6.94%, the current 6.7% luckily isn’t that much lower for 2017.
D – Diversification
2017 reminded us yet again of the importance of a well-diversified portfolio. Investors had a tough ride during the first half of the year with local shares, while bonds were still performing well. During the second half of this year, this picture was turned upside down.
E – Economy
From a local economic perspective, South Africa suffered another very mediocre year in 2017. According to the IMF, South Africa’s GDP should have grown by 0.7% for 2017, which look marginally better than 2016. Bottom line is that we weren’t good enough when we compare this figure with world GDP growth of 3.6% and emerging market GDP growth of 4.6%
F – #FEESMUSTFALL
Although things have been relatively calm this year surrounding the #FEESMUSTFALL marches, it still made the news on several occasions during 2017.
G – Gigaba and his mid-term budget
Under great protest and a cloud of controversy, Pravin Gordhan was dismissed as Minister of Finance and Minister Malusi Gigaba was appointed in his place. Look, I wouldn’t have wanted to be the one delivering this year’s mid-term budget speech, but if one word could be used to summarise the speech, it would probably be “Ouch!”. Government finances definitely aren’t looking good and Gigaba didn’t sugar-coat the situation either, but we remain hopeful that 2018 will bring some improvement.
H – House prices & properties
House prices, along with the rest of the SA economy, had a relatively tough year in 2017 and according to FNB, this segment grew by only 4% so far for 2017 until the end of October. Listed properties, however, managed to make very good progress by showing 12.4% growth for 2017 until 31 October 2017.
I – Inflation
With the release of the latest CPI figures, it seems as though our local inflation is under control at 4.8% for the time being.
J – JSE
On paper, the JSE definitely had a wonderful year in 2017, but although the index grew by 22% in 2017 (until 24 November 2017), this growth was clearly largely driven by the big guns such as Naspers and Richemont. Only 56% of all shares listed on the FTSE/JSE All Share Index were positive for 2017. Let’s hope that the rest will follow in 2018.
K – Kite-flyer’s Society
Although debt levels are still much higher than they were 10, 20 or even 30 years ago, debt as a percentage of income has seen a slight drop from 75% in 2016 to 73% in 2017. Let’s hope this positive trend continues into 2018 and beyond.
L – Long bonds
Long bonds kicked the year off at 9.2% and ended at around 8.8% at the end of March. Shortly after, Gordhan’s dismissal followed by our credit downgrade to junk status, these levels shot up to its current 9.8%. Again, let’s hope that 2018 will bring about more good news for bonds.
M – Mugabe/Mnangagwa
I’m sure that Robert Mugabe would also like to forget 2017, after he was requested to step down as president of Zimbabwe after 37 years of ruling. He is replaced by Emmerson Mnangagwa, who promised that his first priority as president of Zimbabwe, will be to bring about financial stability.
N – Naspers
How can we do an A-Z without singling out Naspers? At one point in 2017, this company showed a whopping 100% growth for 2017 and on its own, and it makes up nearly 19% of the 22% total growth experienced by the JSE so far. Their greatest shareholding, Tencent, recently released results in which it was revealed that this company has grown by 60 to 70% year-on-year, clearly showing that its growth wasn’t driven by warm air.
O – Oil & Ore
Brent crude oil also had a very interesting year. It started the year at $56/barrel, then fell to $45/barrel in July before building on its rally in 2016. It is currently trading at around $64/barrel. Unfortunately, the same cannot be said for iron ore. It couldn’t manage to set forth its rally of 2016 in 2017, but this didn’t crash iron ore producers’ optimism. After showing wonderful growth during 2016, Kumba is up by 90% so far (as at 24 November 2017) and Assore is up by 29%.
P – Prime Rate
2017 turned out to be a great year for interest rates. Sure, many will be amused by the fact that I’m calling one interest rate drop of 0.25% a “great year”, but it was the first drop we’ve seen since 2014 and hopefully this marks the beginning of even further drops in 2018.
Q – QE
With the Fed’s first quantitative easing (QE) announced in November 2008, later followed by further QEs, it seems as though they have now had the desired effect in the USA and are coming to an end.
R – Retirement
With the SA economy still under severe pressure and interest rates still very low, securing a comfortable retirement is still a massive challenge faced by countless South Africans.
S – South African Rand
The rand definitely took a wild rollercoaster ride in 2017, even wilder than the Springboks’ win/lose scores over the same period. The rand managed to strengthen quite well during the second half of 2016 and continued its good momentum during the first quarter of 2017, reaching R12.30/US$ on the 27th of March this year. Of course, it came tumbling down shortly after, thanks to political chaos and our downgrade to junk status and we are now trading at around R13.94/US$ (as at 24 November) – a disappointing negative 1.5% growth for the year so far.
T – Trump
Donald Trump definitely didn’t get any less publicity in 2017. It doesn’t matter whether you like him or hate him, the fact remains that he simply cannot be ignored.
Unsettled – South-African politics
We have made several references to SA politics so far, and it doesn’t matter who you vote for or what your political view is, everyone can agree that 2017 has been unsettled on the political front.
V – Volatility
In 2014, the SA Volatility Index traded at its lowest levels since 2006 (12%), but it managed to recover to an average of 21.6% during 2016. With the big guns like Naspers who only went up this year, however, the index again dropped and is now trading at a mere 14%.
W – World Markets
We already mentioned that the JSE had a good year in terms of growth. The rest of the world economy didn’t fall far behind, with the FTSE 100 showing 3.8% growth, the MSCI World Index 19%, the Nikkei 225 showing 18% and the S&P500 showing 16.2% growth for the year so far, making it a good year for investors.
X – X-factor
Unrest in the Middle East remains as ISIS continues with their terror attacks. Add the USA’s and North-Korean tensions into the mix and we are left with a good reason to worry.
Y – Yuan (China)
Following the ShanghaiComp Index’s difficult year in 2016, 2017 brought new optimism about developing countries like China. As at 24 November 2017, the Index was already up by 8% for 2017 and the Yuan also performed slightly stronger in 2017 relative to the US$.
Z – Zuma
Zuma was almost beaten to the punch for “Z” by Zimbabwe this year, but we simply cannot end 2017 without mentioning President Jacob Zuma. His leadership remains doubtful and he is now experiencing increasing pressure from within the ANC itself. We can only wonder what 2018 will bring. His term as leader of the ANC comes to an end in December this year, and 2018 promises to be a very interesting year at the very least.
The opinions expressed in this document are the opinions of the writer and not necessarily those of PSG. These opinions do not constitute advice. This is intended as general information and does not form part of any financial, tax, legal or investment related advice. Although the utmost care has been taken in the research and preparation of this document, no responsibility can be taken for actions taken based on the information contained in this newsletter. Since individual needs and risk profiles differ, it is always advisable to consult a qualified financial adviser before taking action.