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Why Silver Is A Good Investment
23 July 2023Silver Starting To Surge
3 December 2023Introduction
Yes, South Africa is broke. This is not something we as citizens want to hear. Especially at a time like this when most households are struggling to keep their heads above water. Fuel prices are increasing every month. Groceries are just getting more expensive by the day. The buying power of our money is getting weaker every day. Consumers are being squeezed from all sides. Savings, for those who still have it, are dropping at an alarming rate.
SA Government 10 year Bond Rates
I have long said that any country’s economic health can be seen by looking at the government bond rates. The 10 year bond rate on 1/06/19 was 8.09%. Today it is 10.475%. The higher this rate goes, the more risk international and local buyers see when considering investing in South Africa. The outflow from the South African bond market year to date is R116 billion. The 10 year bond rate for Kenya today is 16.11% and Turkey is 24.575%. It is general knowledge that these two countries have defaulted on their bonds. This is where South Africa is heading I am sorry to say.
Why do we need to look at this?
SA Budget deficit
We need to take notice of this issue because it will affect our finances to a huge extent and thereby our standard of living.
Nedbank CEO, Thomas Brown recently flagged the government debt issue and provided some staggering insights into what is happening with the government debt. Nedbank had to increase its provision for bad debts by a whopping 57%. This tells us that consumers are struggling. Loadshedding is costing the country about 1Billion a day. The low growth rate will surely increase unemployment as we go forward. The government’s social support schemes like free education and social support grants for the poor, is simply unsustainable. The government’s fear of losing votes prevents them from reigning in these enormously expensive programmes in spite of the fact that our finance minister warned parliament about this impending disaster. The government monthly debt payment is 2 Billion rand a day! National Treasury is trying to sell R14 billion worth of bonds per week to finance their budget deficit. The sad fact is that they are having a very hard time to find buyers. The tax revenue from the mining sector has dropped dramatically due to the slow precious metals market and loadshedding. The government is frantically trying to find new ways of generating revenue. We are in a huge debt trap
We might see a VAT increase soon.
Conclusion
The government’s financial woes are just starting and I predict that things will get a lot worse going forward. The big problem for us as investors is that the rand will surely depreciate a lot more as things get worse. We need to hedge ourselves against this coming calamity.
Buying gold and silver bars is one sure way to protect yourself.