Home Money SA should brace for rising commodity costs – Silke

SA should brace for rising commodity costs – Silke

SA should brace for rising commodity costs – Silke

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Whereas no simplistic conclusions might be drawn from what appears like a fancy subject, South Africa ought to brace for rising commodity costs and provide shortages as a result of ongoing Russia-Ukraine battle.

This was one of many views expressed by political analyst Daniel Silke throughout a PSG Assume Massive webinar held on Friday.

Silke factors out that a lot of South Africa’s destiny will relaxation upon a choice to be made by Chinese language President Xi Jinping that will likely be a turning level for the battle and the worldwide financial system, as creating nations more and more come underneath stress.

Following a Friday morning telephone name between US President Joe Biden and Xi to debate Russia’s invasion of Ukraine, it stays unclear whether or not China will flip down Russia’s requests for army and financial help.

“Whereas the world’s eye is mounted on Western Europe, we want to keep in mind {that a} potential encroachment on Taiwan is effervescent underneath the floor,” says Silke.

“China will likely be watching the geopolitical panorama fastidiously, ascertaining what the medium- to long-term impact of worldwide sanctions will likely be on the Russian financial system.

“In the end, it’s not in China’s finest pursuits to subscribe to Russia’s isolationist political philosophy. I subsequently imagine that it is going to be prudent in its direct involvement with the battle – however once more, its future designs on Taiwan will likely be a key deciding issue.”

Affect on SA

Commenting on the affect the conflict could have on South Africa, Silke says: “As a nation, we’re confronted with a double whammy. The post-Covid interval has been characterised by provide shortages.

Presently, that is compounded by the ban on Russian oil imports and sanctions on its provide chain to South Africa.

“In the long run, probably the most vital impact that South Africa will really feel is said to rising gas and transportation prices,” he says.

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“Happily, we’re comparatively extra meals safe than different international locations. As such we’re in a touch higher place than international locations like Tunisia and Turkey, for instance. This actuality, nevertheless, actually doesn’t [protect] us from the long-term results of the battle on our fragile financial system and the added pressures that include these results.”

‘Powder keg’

Silke additionally predicts that the price of borrowing will surge as a result of conflict, including to present pressures. He notes that South Africa’s plans to stabilise itself economically are hanging within the steadiness, provided that funds deficits will inevitably rise.

“Our projections for the 12 months forward, which we noticed in the latest Budget Speech, will likely be enormously affected by the affect of the conflict,” he says.

“Given the impact of our fragile political surroundings, and the fragility of the disposable revenue of the vast majority of South Africans, what we’ve got is a powder keg that may be set off by rising poverty ranges, exacerbated by record-high unemployment.

“The state’s choices over the subsequent few months will play a vital position in figuring out South Africa’s long-term financial future.”

Ideas for traders

As to the affect of the conflict on investing, PSG Wealth chief funding officer Adriaan Pask says: “We advise traders to prioritise diversification and to associate with specialists who’re in a position to share precious insights and have expertise in navigating the dangers that emerge throughout political crises.”

Pask notes that whereas the affect will likely be inevitable, the present geopolitical local weather serves as a impolite awakening that planning for the long-term whereas navigating the dangers that exist inside the current is essential.

Palesa Mofokeng is a Moneyweb intern.

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