News Column

No factors to help bolster the rand, says Omigsa

January 29, 2014

It was impossible to say where the rand would go against the dollar but it looked as if it had priced in local risks, Johann Els, the senior economist at Old Mutual Investment Group SA (Omigsa), said yesterday. Els said the fate of the rand was also related to further weakness in the emerging markets. "There are no factors that will strengthen it," he said. "But better global growth and a current account improvement might help to stabilise [it]." Els was speaking after making a media presentation, hosted by Omigsa, outlining the themes for the year. The weakening of the rand would cause slow economic growth, high unemployment, labour troubles, and political, policy and social instability. He added that there would be inflation and interest rate risks from the rand's weakness. Inflation would remain around 6 percent, which was acceptable to the Reserve Bank . He said South Africa should expect a tighter Budget next month, with income tax hikes likely and few give-aways. Globally, growth prospects in emerging markets would have an impact on commodity prices. There were better growth prospects in the US, where growth was on the upside. A quick tightening of US policy was not expected. He said US rates would not rise soon and the EU was worried about deflation, which would keep the European Central Bank dovish. Els said the global outlook had improved from last year. "I would not be surprised to see an upward revision of global growth." Peter Brooke , the head of the MacroSolutions boutique at Omigsa, said that generally it had been a good 10 years for South Africa . Real returns in rands had been impressive, particularly in equities. However, he noted that growth had not been that robust on a global basis. The global cost of capital had gone up, which hurt borrowers. Chinese growth had surprised on the downside and its investment boom had peaked to a slower trend. Hyvel George, the director of investments at Omigsa, said strong growth was forecast for African countries, with 28 ranked in the top 50 emerging and developing economies, according to real gross domestic product growth projected to 2017. He said 45 percent of the African population was under 15, and the median age in sub-Saharan Africa was 18.6 years. " Africa's population demographics should help to boost economic growth on the continent with a projected increase in the relatively low median age, and a growing middle class which is larger than India's ." Pretoria News


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Source: Pretoria News (South Africa)


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