SA professionals expect rand to weaken further

Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Mahlasedi Mojapelo, research specialist at PPS, says this is not surprising given the recent fluctuations in the value of the rand, especially since it breached the R11:US$1 level in January. "Continued strike action in the mining sector, coupled with the withdrawal of investment into emerging markets globally, may have contributed to professionals becoming concerned that the value of the rand could decline further."

According to David Crosoer, executive of research and investments at PPS Investments, the rand is significantly undervalued if trading above R11/USD compared to where it should trade on fundamental grounds. "While currencies can always overshoot, a weaker currency (making our exports more competitive) and improving global economy (increasing demand for our exports) could ultimately be positive for South Africa and help support the level of the rand."

Increase was significant

"The Reserve Bank's decision in January to increase short-term rates by 0.5% was significant, as it demonstrated the bank's willingness to take a deteriorating inflation outlook seriously. Unfortunately, the on-going unrest in the mining sector makes it difficult for the economy to benefit fully from a depreciated currency and could impact negatively on the currency in the short-term," adds Crosoer.

The survey also revealed a confidence level of 50% for the economic outlook for South Africa over the next 12 months - the lowest confidence level ever recorded for this question since the survey's inception. Mojapelo says this result is in line with the World Bank revising South Africa's economic growth outlook from 3.5% to 2.7% in early February.

Respondents revealed a confidence level of 59% that they have saved enough to retire comfortably, while 67% believe compulsory preservation is necessary to enforce South Africans to save.

Value of saving

Nick Battersby, chief executive of PPS Investments, says current industry statistics indicate that well over half of South African retirement fund members are likely to withdraw their retirement savings when changing employment. "Therefore, it is encouraging to note that professionals appreciate the value of saving consistently throughout their careers to attain a secure retirement."

Battersby highlights that National Treasury estimates that only 10% of South Africans are able to maintain their pre-retirement level of consumption after retirement, largely because of a lack of preservation of retirement fund assets when members leave their jobs. "Treasury previously proposed the possibility of phasing in a preservation requirement, and we look forward to further clarity on measures that may promote preservation among South African investors."