So that was February

Well February was eventful. We started with the second wave of Covid causing havoc. We had vaccines and then we didn’t - it now looks as though things are calming down and there is possible light at the end of the tunnel.

JSE

We have had an exciting time over the past month with lots of movement on the Stock Exchange. The experts predicted that the South African stock market would do well this year but we never expected this. After being pretty much flat for the past six years, the JSE is up by 13% so far this year.

A lot of this growth was due to the performance of the resources sector. As I mentioned last month, economists are predicting that the Chinese economy would do particularly well. As we supply them with raw materials, it should have a positive impact on our resources sector. The resources sector has seen a massive 48% growth over the past 6 months. This was part of the reason SARS brought in an additional R99bn in taxes.

Budget

We were anticipating a tax increase but the tax windfall from the resources boom meant that we actually got a tax cut. The tax brackets were adjusted by 5% so you should end up paying a lower rate of tax this year.

In terms of the budget, many analysts were concerned as to whether the government would be serious about cutting government expenditure. As you can see on the chart below, we will be in trouble if the current trend continues.

Managing the public sector wage bill is key as it accounts for more than 1/3 of government expenditure. This will be the issue to watch over the next couple of months. The government has reaffirmed its commitment to freeze wages for 3 years. However, it is an election year and the public service unions have already asked for a 7% wage increase.

Some useful info

I wrote a number of articles over the past month and have attached the links should you be interested in reading or sharing them:

• Financial Planning Institute article on how to protect your family during the time of plague

• Daily Maverick - How to choose the right critical illness cover

• Daily Maverick - Why you should contribute to an RA even if you are on pension

• Daily Maverick - How the new tax laws affect people living overseas

• Daily Maverick - What to watch out for when buying property overseas

• Daily Maverick - How to calculate the amount of life cover you need

• Daily Maverick - How to spot a Financial Scam

Tax Free Savings

The new financial year has started and you are allowed to invest up to R36 000 into a tax free savings account each year. What is nice about this type of investment is that all the growth will be tax free. This is an ideal investment for parents to make on behalf of their children.

Till next month, avoid super spreader events!

ENDS