TVC Economic Review: Q1 2019

If it is not important in a month from now, it was never important. 
We believe this to be true and apply this approach to our quarterly economic review. This allows us to asses the fundamental economic changes and trends to advise our clients appropriately.

In this economic review, we discuss the events of the first quarter of 2019. We explain what happened, what experts are saying and what you can do.

Local Economy


Table Mountain

The Reserve Bank has kept interest rates unchanged (6,75%), largely because inflation has slowed down to 4,1% for the quarter (well within the reserve bank’s target of 3-6%).

The credit rating agency, Moody’s, delivered no change in the credit rating for South Africa. This is good news as people have feared they would downgrade their rating which would have taken the country to junk bond status.

The SA economy also delivered some of it’s best quarters in some time, benefiting from improved global sentiment and a rally in the commodity prices. This was pushed up on the back of the improved growth in the Chinese economy.


Eskom Power Station

Load shedding returned to the country and progressed all the way to stage 4, causing consumers and industrial operators much distress. This caused downward adjustments to expected future GDP Growth for the coming year.

NERSA (National Energy Regulator of South Africa) also announced a 9% electricity increase for the year, following on Eskom’s higher than requested tariff increase. Eskom requested initially an increase of around 14%-16% of electricity rates, but fortunately for South African Consumers, it was agreed at a level of 9%.

Further downward adjustments were made to economic growth by different institutions, such as the International Monetary Fund (IMF), the National Treasury and the South African Reserve Bank. This was based on slower than expected economic forecasts.

Global Economy


Trump & Xi Jinping

The US shutdown came to an end and Trump seems to have moderated his behavior over recent months in terms of his frequent tweets. These tweets caused much market volatility as they were very often making extremely controversial statements. The government shutdown lasted well over 3 weeks.

There was also improvement in the relationships between the US and China. These trade talks are still ongoing, with both sides suggesting that real progress is being made.

Finally on the other controversial topic of Brexit – Even though the European Parliament remains deadlocked over Brexit, it would appear that the probability of an economically damaging hard Brexit has significantly diminished. There has been an extension to the Brexit negotiations with the EU until 31 October 2019.


There was some disappointing economic data released after a deteriorating economic outlook which saw a shift in the central bank policy guidance. This was largely based on a slowdown across Europe in terms of economic growth. The change in Central Bank policy has caused both the American Federal Reserve as well as the European Central Bank to announce no more rate hikes than would be expected during 2019.

In March the short end of the bond yield curve inverted, leading to an equity market sell-off and a rally in the bond market. This inversion of the bond yield was caused by historical evidence that shows an early warning sign for future recessions. We have seen that the UK and US markets have shown strong economic growth and equity returns over the last 2-3 years, which is very often followed by recessions.

Lastly, the returns from Europe remained weak representing the epicenter of economic growth and business contending with the uncertainty caused by Brexit.

Economic Performance

Bar Chart
  • South African Equity Market: +8%
  • South African Listed Property: +1,5%
  • South African Bond Market: +3,8%
  • Cash: 1,8%
  • Global Equity: 12,3%
  • Global Property: 14,9%
  • Global Bonds: 2,2%
  • Cash: 2%
  • Rand: -0,3% to the $
  • -2,6% to the £
  • +1,5% to the €

Expert Insights

Local Economy

South Africa has a debt problem. This debt needs to be reduced for our economy to start growing again. Eskom’s R 230 billion bailout, make this difficult.

There is still a real risk of Moody’s downgrading South Africa’s sovereign credit rating to sub-investment grade. Concerns about the government’s financial support of Eskom and low economic growth can change Moody’s outlook.

Low inflation and weak economic growth open the door for an interest rate cut. This will be the Reserve Bank’s attempt to stimulate economic growth.

South African Property is trading below valuations. This can be attractive for Long Term Investors.

South Africa is on the road to recovery from years of corruption and state capture.
We expect slow economic growth over the next 2 years while our country recovers.

Global Economy

The global economy has enjoyed a long expansion since the worst days of the financial and economic crisis in 2009.  This expansion looks to be slowing down and has investors worried about the next “big turndown”. Some experts estimate a 30% chance of a global recession in the next 12-months.

The uncertainty caused by the US-China trade war is leaving its mark. The International Monetary Fund (IMF) listed a no-deal Brexit as one of the main events that could throw the global economy off-course. All parts of the world are losing Momentum due to low business and consumer confidence.

The world is changing faster than ever before. With billions of people hyper-connected to each other in an unprecedented global network, it allows for an almost instantaneous and frictionless spread of new ideas and innovations.

Combine this connectedness with rapidly changing demographics, shifting values and attitudes, growing political uncertainty, and exponential advances in technology, and it’s clear the next decade is setting up to be one of historic transformation.

Let’s talk

We specialise in aligning our clients’ investment portfolios with their priorities, life stage, and goals.

When advising our clients we consider the following factors:

  • Investment Term
  • Risk Profile
  • Tax Structure
  • Currency Risk
  • Liquidity

Give us a call or send an email to request a meeting where we can discuss your investment needs.


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