This thread is mainly on the Economy and Rand impact from various areas.
I am going to try to be as concise as possible instead of my usual rambling on.
From 2010 FDI into SA basically fell off and most of inflows were poured into the equity and bond markets. Yes, there are occasional cross border big buys but they won't fix the underlying problem. Budgetary deficits, saving rates negative due to local outflows and inflation impact, fixed asset investment not occurring organically, trade share as % of GDP implies very high volatility when world markets turn against you.
Where do you see the Rand a year from now? I certainly think it goes downhill, since budget deficits seem to be expected to be $20+bil for a while and at that clip you reach the precipice pretty fast.
My feeling is that in the next few years until elections your gov't will try to use reserves to prop up currency and budget eating through them at record pace. Once the reserves are drawn down the bond market desire will implode and rates will skyrocket along with the exchange rate not in your favor. While this is happening foreign capital will slowly pull out equity/bond capital at an accelerating pace making the situation spiral out of control. Is this possible in the next two years? if exports dwindle down somewhat?
I don't know.
I am interested in the point where the marginal impact hits various industries. For example imagine the rand goes to 10.50 from 8.50 now or -19%. Which industries bear the most pain? Banks come to mind since they will loose purchasing power. Oil price impact on everything will go up by the inverse 23.5% plus the margin on top of it.
Thoughts, Ideas, are welcome. Curious how people would deal with it on a 1/4th devaluation scale and perceptions etc...
(2011 was Walmart btw)
The rand has been lifted by about 84 billion rand ($10 billion) of portfolio flows since the start of 2012 as foreign accounts that track the WGBI stocked up on local debt ahead of the October 1 inclusion, Marcus said.
But the governor cautioned these levels were not sustainable.
Despite its recent strong run, the rand is still among the weakest performers against the dollar so far this year in a basket of 20 emerging market currencies, shedding more than four percent since January.