27 Nov

South African Rand, Brazil Pension Saga Top Emerging-Market Bill

Emerging-market investors can almost always count on South Africa to keep them on their toes these days.

Rand-denominated bonds will trade Monday for the first time since S&P Global Ratings lowered the country’s local-currency debt to junk last week. Elsewhere in emerging markets, Brazil’s government is seeking to drum up support for the pension overhaul, Mexico will nominate a new central bank governor and India will release third-quarter economic data.

South Korea and Israel head a list of central banks setting interest rates. Policy makers in Angola, Ghana, Kazakhstan and Mauritius are also due to hold meetings.

South Africa  

Domestic bonds and the rand, among the worst performers in emerging markets this year, are likely to decline on Monday after S&P cut the nation’s local-currency debt to junk and Moody’s Investors Service warned it may do the same.

The yield on South Africa’s rand-denominated bonds due December 2026 has risen almost 80 basis points this quarter, the most since the three months ended December 2015.


Third-quarter economic data will show how quickly India recovered from a slowdown caused by a partial cash ban late last year. Gross domestic product increased 6.5 percent year-on-year, according to a Bloomberg survey of economists and analysts, from 5.7 percent in the three months through June.


Investors will keep a close eye on who will be nominated as central bank governor as Augustin Carstens prepares to leave at the end of the month. The median forecast of economists surveyed by Bloomberg is for the benchmark interest rate to remain unchanged at 76 percent until the second quarter of 2018. But traders on Thursday increased bets on a rate hike after Mexico’s inflation unexpectedly climbed in the first half of November.

To read the full article, click here.

11 Aug

The government are targeting retirement funds and pensions to force investment in the state


South Africa is looking to bolster its finances by making prescribed assets a vehicle to fund government-approved institutions. This includes those who are in possession of retirement funds or pensions, who will have no choice but to make contributions to state assets – regardless of their financial situation.

The legislation has certainly flew under the radar, and the ANC really did do their best to hide it: They only announced these plans on the last day of their policy conference in July and it doesn’t feature in any of their proposal documents.

Changes to pensions in South Africa

This decision was only announced after their ill-advised plans to nationalise the Reserve Bank, making it a good day to bury a change that will surely prove divisive amongst its effected audience.

Albert Botha is the fixed income portfolio manager at Ashburton Investments: He firmly believes that applying prescribed assets in pensions will ultimately have a negative effect on our citizens:

“Assume that 50% of assets are prescribed and this leads to a 1% per annum lower return for your pension – this would result in the average pension fund returning 3% above inflation rather than 4%.”

“In real terms, the average person would have to work and save for 2 years and 8 months longer to reach the same retirement goals over 30 years.”

What’s the retirement age in South Africa?

According to Botha, this would result in South Africans having to work until they are 68 rather than 65. Conversely, a worker wanting to stick to the retirement age of 65 may have to be content with a pension that’s 16% less than that of 68-year-old retiree.

It’s not necessarily a bad idea, though. Although it has the potential to hit pensions, Botha claims that similar schemes across the world have helped regenerate failing economies.

He cites the USA (tax exempt bonds for states/cities) and the European Union (first-loss guarantees for investors) for getting their prescribed assets strategies right.

Botha’s Ashburton Investments worked with the Treasury’s Job Fund to create over 9,000 jobs using 90% non-state finances. So there are methods that can benefit the average worker and the economy in tandem.

source from The South African

30 May

Egypt announces $2.49 billion package to cope with inflation

Egypt on Monday announced a $2.49 billion package of income tax discounts, bonuses for state employees, increased pension payments and cash subsidies for lower and middle income Egyptians to cope with soaring inflation.

The package will go into effect July 1, the start of the fiscal year, according to a Cabinet statement.

The measures are partially designed to defuse discontent over steep price hikes resulting from reforms introduced in November, including floatation of the Egyptian pound, the introduction of value added tax and partial lifting of subsidies on fuel.

The reforms, part of a deal to secure a $12-billion loan from the International Monetary Fund, sent inflation soaring to more than 30 percent. More of the subsidies on fuel and electricity are expected to be lifted this summer.

“This inflationary wave is clearly not demand-driven, it was caused by a sudden increase in costs,” said Omar El-Shenety, managing director at Cairo-based investment bank Multiples Group to Bloomberg. That means that higher interest rates “will do little to contain it,” he said.

President Abdel-Fattah el-Sissi says the reforms, though biting, were the only way to revive the economy, battered by years of turmoil and high-profile terror attacks blamed on Islamic militants waging an insurgency in the north of the Sinai Peninsula.

With presidential elections due a year from now, el-Sissi risked his once sweeping popularity when he introduced the reforms. He has not said whether he would run for a second, four-year term, but he most likely would.

Monday’s package is welcome news to millions of Egyptians because it comes soon after the start of the holy month of Ramadan, when observing Muslims refrain from food and drink from dawn to dusk. During the month, Egyptians spend much more than they unusually do on food, feasting on large sunset meals along with traditional sweets. Food prices usually inch higher in response to Ramadan’s increased demand.