South Africa’s economy is under severe pressure following the COVID-19 lockdown, which has triggered a sharp decline in business activity.
The Organisation for Economic Co-operation and Development (OECD) expects South Africa’s GDP to decline by between 7.5% and 8.2% this year.
It said the government’s relief plan will mitigate the fall in household consumption, but investment, which has been declining over the past two years, will decline to a record low level.
According to the OECD, persistent electricity shortages, rising government debt, and policy uncertainty will continue to hold back investment and underscore low growth.
The decline in economic activity has already impacted millions of South Africans through salary cuts and job losses.
A recent National Income Dynamics Coronavirus Rapid Mobile Survey report estimated that approximately three million people have lost their jobs over the lockdown period.
This represents an 18% decline in employment from 17 million people employed in February, to 14 million people employed in April 2020.
South Africa’s GDP decline, job losses, and rising debt do not bode well for local companies and the stability of the rand.
This raises the question of which investments will give South Africans protection against the country’s deteriorating financial position.
Sasfin Securities deputy chairman David Shapiro has provided six investment picks to hedges against South Africa’s faltering economy.
Shapiro’s picks are Prosus, Satrix Nasdaq, Sygnia 4th Ind Rev, Sygnia MSCI US, Sygnia EuroStoxx50, and Satrix MSCI China.
He highlighted that other than Prosus, these are all exchange-traded funds with strong exposure to offshore tech companies.
Shapiro said these investments are a strategy to protect the purchasing power of your savings.
He explained local businesses have a tough period ahead and predicts that we have not seen the bottom yet.
Here is a short description of each fund, with the performance for the year to date. Keep in mind that the JSE declined by 1.46% over the same period.