South Africa’s economy has been reeling of late, but the latest BankservAfrica Economic Transactions Index (BETI) has provided a glimmer of light. According to July’s facts and figures, monthly transactional activity for the month was up 0.6% year-on-year. Unfortunately, a closer inspection reveals that this year’s increase is a result of weaker interest rates and a particularly poor July 2016 in terms of transaction values.
In spite of the real-term implications of the recent news, financial minds can draw at least some positives from the latest report. While it would be a stretch to say South Africa’s economy is on its way to becoming a financial powerhouse, things haven’t gone backwards. In fact, as some commentators suggest, South Africa could be poised to benefit from a continental boom.
A Boom in Africa is a Chance for South Africa 40 Companies to Thrive
“Stock Exchange Quotation Display” (CC BY 2.0) by CoreMedia Product Demo
Looking at the present value of the South Africa 40 index and the current economic boom in parts of Africa, ITWeb Finance’s Richard Baker suggests that positive times may be on the horizon. Taking the opinion that South Africa represents a solid investment opportunity, Baker believes that companies contributing to the South Africa 40 index have a strong long-term value.
Although not a new idea, the relevance of South Africa, moreover South African businesses, in the context of Africa as a whole has strengthened recently as countries around it have grown. For instance, The Economist’s 2017 African Business Outlook Survey suggests that nine African countries such as the Ivory Coast are experiencing impressive economic growth at the moment. Indeed, the report suggests at least nine African countries are among the top 20 fastest growing economies in the world.
With this being the case and the likes of the Ivory Coast seeing an 8.5% GDP increase in 2016, South Africa’s role as a major economic and business hub become important. A South Africa 40 mining company like Gold Fields is perfectly positioned to supply the ever-increasing demand for resources across these developing countries. It typically follows that a country with a growing economy requires a larger infrastructure and this requires natural resources.
There Are Opportunities Despite Political Unrest
“Belts Carrying Tin Ore” (CC BY 2.0) by Podknox
South African mining companies can provide these resources and that’s something investors are taking note of. Beyond this, it’s something that could help the South African economy as a whole. Besides South Africa 40 companies generating more revenue and, therefore, contributing more to the tax coffers, it will attract more businesses. If international outfits start to see the benefits of South Africa’s position in a booming region, it could bring yet more money into the economy.
Taking this a step further, with the UK poised to leave the European Union and search for new global trading deals, this could also throw up more opportunities in 2019. Essentially, the message here is that South Africa’s economy isn’t without hope. The recent positive BETI report may be something of a misnomer in real terms, but it’s a reminder that things aren’t as bad as the headlines would suggest. Political unrest might have caused some economic turbulence, but it’s a storm the country can weather.