afrol News, 10 October - The Johannesburg Stock Exchange (JSE) has fallen strongly, but not as much as bourses in the North, and South African business stakeholders are insecure whether the country will profit or lose out during the current global crisis. Foreign investors are more negative and have sent the rand straight downwards.

The JSE, Africa's main stock exchange, today did not escape the worldwide depression and desperation on the financial market. While the JSE has seen less losses than comparable bourses in Europe and America, the South African stock exchange in total has declined an astonishing 48 percent from the record highs that were registered in May this year.

But also today, the worst day so far in the world financial crisis, the JSE did relatively well - or less disastrously - compared to other exchanges. Again, the large presence of gold shares in Johannesburg provided a glimpse of light. Gold, now being the safest investment as stocks and banks are not safe, is steadily rising. The safe haven now has reached a price of US$ 914 an ounce, and this price jump finally made a positive impact on the JSE's gold index, which had been performing very badly for years.

Gold is the commodity that South Africans hope will bring them safely through the world crisis. Gradually losing its significance in the nation's economy for decades, the gold market has been performing rather badly for around five years, being the worst sector performer at the JSE. Anglo American shares have lost more than 60 percent of their value since the peak in May, but today started turning the trend while other sectors were tumbling.

In a global recession, many of South Africa's other main export products could be in danger. If consume in the rich countries turns downward, industrial products but also South Africa as a major tourist destination will be in for tough times. Raw materials, including gold and diamonds, could therefore again prove a lifeline for South Africa's economic stability and development.

From a domestic view, South Africans are yet to find out whether the country is heading into a crisis or not. South African banks have done remarkably well during the financial crisis, with leading Standard Bank only registering a 25 percent loss in share values. South Africa's central bank also has gone against the global stream, maintaining its benchmark interest rate and indicating it has no plans of lowering it. A weaker rand and a rising inflation stood behind the decision.

A further indication that the global crisis has not been domesticated - at least so far - is that South Africa's property market remains relatively stable. The property market has been one of the fastest raising ones in the world during the last decade, and many have feared the bobble may burst. So far, however, the South African property boom has ended in a soft landing. Prices are not rising anymore, but there are no serious indications that they may fall neither. Furthermore, with the country's relatively strong banks and relatively low household debt to income ratios, analysts hold South Africa may avoid a property market crisis.

While insiders in the South African market thus remain assured that the country is safe and sound, foreign investors however have proven more nervous. Pull-outs from South African stocks and the rand are mostly attributed to foreign investors, and these may have been triggered by distrust in the South African economy; or simply the need to free assets as major losses have been made in other markets.

Nevertheless, the divestment in South Africa already has consequences. Only today, the rand was sent 2 percent down, following several devaluations of the region's main currency. For ordinary Southern Africans, this means that the many imported goods are becoming more expensive, which already is registered in the country's rapidly increasing inflation.

It still remains to be seen if South Africans also have to prepare for a domestic bank, property and employment crisis - which could be the result if external shocks grow even tougher next week - or if the country's well diversified economy is strong enough to stand through these globally tough times.

By Rainer Chr. Hennig

© afrol News

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