Snapshot 📸 February 14, 2022

Ruger Stocking
Ruger Stocking

State Of the Nation Address

The state of the nation is becoming more difficult for the government. The President of South Africa talks of numerous changes and revamping of the economy, all from a podium in a temporary Parliament as the original still smolders.  Mr. Ramaphosa spoke about reforms in areas including electricity, water, transport, policing and anti- corruption. From his tone one would assume South Africa needed minor tweaking when in reality it needs a total overhaul of every department. Also when contrasted with previous SONA it would be illogical to expect actual changes. Although collapsing voting results for the ANC could spur a shift to the right........

July Riots

A new report on the July 2021 unrest and looting was released. Written by an expert panel appointed by the President, the investigation found that the living conditions that caused the unrest have stayed the same, and another riot can therefore not be ruled out. This is considered even more likely as the ANC comes unglued from within and the police force remains virtually non-existent. Also the President noted that the Cabinet should take responsibility, but of course failed to actually outline any penalties.

No Gas

South Africa suffered a massive setback to its refinery capacity when BP and Shell announced last week that they were no longer going to invest in the Sapref refinery near Durban. This is southern Africa’s largest crude oil refinery. The single plant makes up 35% of the nations refining capacity and the closure is blamed on new government restrictions. To keep the plant running at a profit would require massive investment, but BP and Shell noted that ROI was not guaranteed because the government controls fuel prices. Supply chains will correct to acquire fuel from abroad but the domestic impact is massive including lost tax, jobs, and company investment. There is also money lost in the currency conversion necessary to pay for fuel abroad.

Interesting to note at same time Dangote Group in Nigeria has plans to open Africa's largest refinery.

Russian Invasion Impact on Rand

The media has been ringing the alarm bells that invasion of Ukraine is imminent. It has yet to be seen if this will come to fruition, but assuming it does there will be massive impacts on the Rand. Because of BRICS all these economies are somewhat tethered together. But it is important to note that South Africa is one of the few countries where its relation to the USD is directly inverse. So assuming we see a Russian invasion logically the Rand would jump, as a fellow BRICS member shows its power, and also a weaker projection of US power would trigger a USD decline (thus triggering a Rand jump).

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