SA economy needs rescue action now or we sink
Our country is burning and if the government does not drive the revival campaign urgently, we will see more job losses, company closures, loss of confidence in our country as an investment destination and continued, often times violent social unrest.
Stoking the unrest is high levels of unemployment and immense personal financial distress stemming from the poor economic environment.
One huge, brewing problem – as the government fails to treat our current crisis as a “state of economic emergency” – is that our unproductive economy is pushing it to keep borrowing money to sustain the country’s needs.
This is important for many reasons. Firstly, as citizens we are not being consulted on this additional debt. Secondly, some of the money is being taken to give you benefits that the state should in an ideal world, where the economy is growing. Thirdly, this is creating a big debt trap which could last until generations to come.
The last reason why this should give you sleepless nights, is that a poor economy can only breed further poverty. Should there be no steps taken to fix this challenge, your life and that of your children, and their children will only get worse.
Ask the people of Venezuela and Zimbabwe about a little disease called “hyperinflation”.
It is unthinkable that South Africans, who are already restless, would tone down the unrest when confronted with the possibility of buying a loaf of bread for R100. By then you will not be able to afford taxi fare to get to work - if you still had a job.
Our economic cocktail is not sustainable
Let us be honest. You know that in life you cannot have your bread buttered on both sides. You can’t want a good life without working hard for it. Otherwise, someone else is paying for it.
I am sure that people who currently depend on social grants don’t want to live on grants forever, especially the young. They want jobs, and opportunities to run small businesses.
So, why is this not a focus of our government? The answer is simple, we haven’t decided if we are a capitalist or socialist country. We are living a socialistic life at the expense of a few taxpayers.
We are living a capitalistic life through the principles of allowing people to run businesses, but not pushing the same business people to grow their businesses by creating a conducive environment. We keep throwing money at the problem, but the money fizzles out into thin air.
If you are scared it is understandable, but better to be prepared.
Should the government fail to deal with the state of economic crisis, hyperinflation, where prices become unaffordable, cannot be ruled out. To combat high inflation, interest rates would have to be increased which could have many negative consequences for property prices and values as well as making bond repayments unaffordable.
Inflation will also make insurance premiums, from short-term risk to long-term life solutions, unaffordable and very few people will be able to afford to cover themselves and their families against risks.
Hopefully this is a scenario that will not play out.
In the meantime, you should protect your investment values, by investing in inflation-beating solutions, and importantly, diversify with a suitable portion of your investments in global markets. This is doable and is not only for the big investor. An offshore option might be the only saving grace in a “very bad outcome” scenario.
If your investments are not earning inflation-beating returns with good exposure across asset classes locally and globally, I implore you to seek professional financial advice.
- Nkomo is a director at Inkunzi Wealth Group