- Discovery* (JSE code: DSY) results were top notch and complicated as they always are. I own this stock as the business model really works, but as I have mentioned before the complexity adds risk. Risk I am happy with as most stocks I own have real simple business models.
- JSE (JSE code: JSE) results show HEPS down 6%. But look at value being traded these days. R25billion a day has become a regular feature, last year average was around R15billion. That equals lots of extra revenue in this financial year.
- Mining charter back to the drawing board. Good for local miners (of which we have very few).
- January CPI dropped to 4.4%, interest cuts coming to a prime rate near you? But budget may add to inflation (fuel being the one, not directly but will increase transport costs so food inflation).
- Up coming events;
Firstly I think Cyril Ramaphosa may have played it real smart by letting Malusi Gigaba deliver the budget. He can now spend the next year claiming it was not his budget but a Zuma legacy budget.
Overall not the train smash expected but still lots of tax increases with R36billion of extra tax. Lots of cuts to spending, R86billion over three years and which has to actually happen.
- VAT increased to 15% (first change since 1993), with 19 basic food items being zero-rated. (The low vat diet).
- Cue everybody suddenly caring about how this will hurt the poor.
- “Wealthiest 30% of household contribute 85% of VAT revenue”.
- “The Old age, disability and care dependency grants will increase on 1 April 2018 from the existing R1600 by R90 to R1690 and by a further R10 to R1700 on 1st October 2018.”
GDP growth 1.5% in 2018 and rising to 2.1% in 2020. I hope they are very wrong on this.
No changes to;
- Dividend withholding tax (DWT)
- CGT (40% inclusion rate with first R40k exempt)
- Tax-free limits (annual or life time)
Retirement funds will be allowed to invest up to 40% outside of SA – 30% “offshore” and another 10% elsewhere in Africa.
JSE added 1.25% during the speech, USDZAR 8c and government bonds back at 8%, bond levels last seen three years ago.
For our investments. Consumers being taxed, no surprise. But with inflation dropping leading to prime rate likely heading lower I still like the SA Inc. investment thesis.
Overall – a good balancing act albeit still a tough budget. But could have been much worse and I think Moodys will not downgrade us on the back of it.
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