South Africa’s economy is $37 billion larger than previously thought: Top advice for local traders
South Africa’s economy is 11% larger than previously estimated. We share advice for traders on how to take advantage of investment opportunities!
South Africa’s economy was left reeling after the devastating one-two punch of economic shutdowns and ongoing worker lockdowns. In September 2021, however, the country’s prospects are a lot brighter compared to a year ago. Back then it implemented some of the most stringent economic shutdowns in the world.
Today, we look at the country’s prospects and share advice for traders.
SA’s economy is $37bn bigger after revision
Authorities in South Africa announced that the country’s economy is 11% larger, $37-billion than previous estimates. This follows a report that the government altered its method for calculating gross domestic product (or GDP). This higher GDP also means that Africa’s (still) second-largest economy has a lower debt burden than previously thought.
SA’s GDP at current prices was R5.52 trillion in 2020, compared with a previous estimate of R4.97 trillion. South Africa’s economy remains Africa’s second-largest behind Nigeria.
The upward revision means the country’s investment prospects should be more appealing.
Rand vs Dollar
After a minor stumble in the second half of the year, South Africa’s currency, the rand, is set for a rebound as the country’s GDP outlook has improved. Another major factor pushing the strength of the rand is the US Federal Reserve’s policy negatively affecting the US Dollar. The rand saw its best performance against the USD in years, with forex rates of R14/USD seen in 2021; as of September 2, the rand traded at R14.35 against the dollar, 0.35% stronger than its previous close.
The rand has topped gains among emerging-market currencies. The currency’s rally was fueled by easing delayed US stimulus talks earlier in 2021 and a bounce in commodity prices. The rand has risen steadily in August as the greenback lost ground amid signals the Fed would not raise interest rates.
Advice for local traders
From local market trends to factors affecting the SA economy, Zihaad Israel, CMTrading’s Regional Manager for South Africa, provides advice for all traders.
Q: For Forex Traders – How has the South African Rand fared against the USD?
“The South African Rand, Russian Ruble, Chinese Yuan, Brazilian Real, and Indian Rupee have all recovered more than 10%, 11%, 3%, 11%, and 3% against the dollar—the world’s reserve currency —respectively, from this year’s intraday lows.
“Major emerging market currencies are either properly priced or inexpensive in comparison to the dollar. South Africa’s Rand is predicted to gain another 5% in the next 12 months.
Q: What are sound investment prospects for South Africa?
“Despite last year’s initial disastrous effects, South Africa is on course to expand at its highest rate in a decade, up from a 7% drop in 2020. Analysts forecast a resumption of 4% growth by 2021.
Top reasons to invest in South Africa:
- The business environment is favorable, and state financial management is capable.
- A large and active stock exchange exists in the country.
- South Africa’s traditional industries have given way to manufacturing and financial services, which now account for the majority of the country’s GDP.
- The tourist and retail industries both have enormous potential.
- The mining industry is a significant element of the economy. It produces the most chrome, manganese, platinum, vanadium, and vermiculite in the world. It is the world’s second-largest ilmenite, palladium, rutile, and zirconium producer. The country exports the third most coal in the world.
- South Africa is also a major diamond and iron ore exporter.
- In addition, the country has a strategic geographic position that makes it a good hub for accessing sub-Saharan markets.
“In the current South African context, the government has the chance to make tough policy decisions in an atmosphere where land reform is beneficial to the country’s prosperity. This may aid in major advances as well as boost confidence in the country’s future as it faces upheaval.
“As the threat of COVID-19 persists, it will be critical to seize this opportunity and lay the groundwork for future development and inclusion in this post-pandemic epidemic.”
Q: What are some industries to consider for investment?
“South Africa, in comparison to other African countries, has strong tourism potential. Despite progress, the country’s foreign direct investment (or FDI) attractiveness is typically low, owing mostly to infrastructure investment opportunities.
“The government’s objective of obtaining $100 billion in FDI by 2023 is driving this trend. Most of the increase in recent years has been attributed to intercompany finance and stock inflows. Beijing Automotive Industry Holding, BMW, Nissan, and Mainstream Renewable Energy have all made significant investments in recent years.
“European nations (including the United Kingdom, Netherlands, Belgium, Germany, and Luxembourg), as well as the United States, Japan, China, and Australia, have traditionally been active investors in South Africa.
“The financial, mining, manufacturing, transportation, and retail sectors receive most of the investment. The country has many attractive assets for investors such as a diversiﬁed economy, abundant natural resources, a transparent legal system, and political stability compared to other African nations.
“Despite the passage of the Protection of Investment Act in December 2015, which strengthens legal guarantees for foreign investors, the investment potential is limited by legal ambiguities that deter international investors. The government, on the other hand, is striving to make South Africa a more appealing investment location.”
Q: Why choose CMTrading?
“CMTrading is one of South Africa’s top CFD brokers. The broker provides clients with a free MT4 platform, the Sirix WebTrader system, daily forex signals, and a comprehensive education center. Whether you are new to trading or looking to improve your strategy, CMTrading is a regulated, award-winning broker you can trust.
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