Investors will be concerned over the recent news of the ‘authoritarian’ cabinet reshuffle and consequent credit rating downgrade
from S&P on the 3rd of April. This has important implications for all asset classes, and therefore prospective investor returns.
This comment aims to provide some insight for investors to help understand how it will affect their investments.
What has happened thus far:
A major reshuffle in cabinet ministers seen as a destabilising move by the government. Primarily this drives uncertainty on
economic policy, and the stability of state institutions (e.g. Eskom). Increased uncertainty increases the risk attached to South
African linked investments, typically resulting in a fall in prices (and therefore returns).
The currency as well as government bonds and local dependent shares (like banks) have sold off to reflect worsening
prospects. This impacts most investors.