Step 1: Create a Budget

One of the most impactful resolutions you can make is to develop and stick to a budget. A budget is a financial plan that outlines your income and expenses, helping you understand where your money goes each month. Start by tracking your spending for a month to identify spending patterns and areas where you can cut back.

• Set Clear Goals: Determine short-term and long-term savings goals, whether it’s saving for a vacation, a new car, or a down payment on a home.
• Categorise Expenses: Divide your expenses into fixed (rent, utilities) and variable (entertainment, dining out) categories. This helps identify where you can reduce spending.
• Review Regularly: Your budget should evolve as your financial situation changes. Review it regularly to ensure you’re on track to meet your goals.

Step 2: Establish a Savings Plan

Once you’ve set a budget, the next resolution should be to commit to saving regularly. Aim to build a safety net that can cushion you against unexpected expenses and provide a foundation for future investments.

• Emergency Fund: Start by saving three to six months’ worth of living expenses in an easily accessible account. This fund is crucial for managing unexpected financial setbacks, such as medical emergencies or job loss.
• Savings Habit: Automate your savings by setting up recurring transfers from your checking account to your savings account. This makes saving effortless and ensures you pay yourself first before spending on other expenses.
• High-Interest Accounts: Look for high-yield savings accounts or certificates of deposit (CDs) that offer better interest rates for your savings.

Step 3: Diversify Your Investments

Investing is an essential strategy for building wealth over time. As you plan for the New Year, consider how you can diversify your investment portfolio. A balanced approach can mitigate risk and enhance returns.

• Traditional Investments: Start by investing in a mix of equity and bonds. Equity offers growth potential, while bonds provide stability and income. Aim for a portfolio that matches your risk tolerance and investment horizon.
• Alternative Investments: In addition to traditional assets, consider incorporating alternative investments like private equity and crypto assets into your portfolio.
  • Private Equity: This form of investment involves investing in companies with funds specifically designed to take advantage of opportunities in the market as it relates to “delisted companies” and growth opportunities that were only available via venture capital or big banks that could previously tap into these opportunities. Private equity can offer high returns coupled with less market volatility, but it usually requires a longer investment horizon.
  • Cryptocurrency: While more volatile than traditional investments, crypto assets have gained popularity and can provide diversification. Consider allocating a small portion of your overall portfolio to cryptocurrencies but be cautious and conduct thorough research before investing.

Step 4: Educate Yourself

Financial literacy is key to making informed decisions and achieving your financial resolutions. Take time to educate yourself about personal finance, investing strategies, and market trends.

• Resources: Utilise books, podcasts, online courses, and webinars to enhance your financial knowledge.
• Networking: Join investment clubs or online forums to share experiences and strategies with other investors. Collaboration can open doors to innovative investment ideas and strategies.

Step 5: Set Specific and Measurable Goals

Finally, your financial resolutions should be specific and measurable. Instead of simply saying, “I want to save more money,” specify an amount, timeline, and method. For example, commit to saving R30,000 for a vacation by the end of the year by setting aside R2500 each month.

Conclusion

New Year’s resolutions are a powerful tool to foster positive change, particularly in your financial life. By creating a budget, establishing a savings plan, diversifying your investments, educating yourself, and setting specific goals, you can pave the way for financial success in 2025. Embrace these resolutions with determination, and watch your financial future become brighter and more prosperous. Cheers to a financially rewarding new year!

This year has been packed with events that are sure to make it one for the history books. Around the world, many elections took place, particularly in Europe, where centre-right and far-right parties made significant gains. Notably, elections in Germany, the Netherlands, Austria, and France saw right-leaning parties increasing their seats, marking a notable shift. Germany’s AFD party pushed for early elections following their governing coalition’s collapse, while France recently faced a similar situation as the French government just collapsed this week. In the Netherlands, Geert Wilders’ Party for Freedom emerged victorious despite past ridicule.

On the other hand, the UK is somewhat of an outlier in this rightward trend. It appears to be in a challenging position with Prime Minister “Two-Tier” Keir Starmer, who is enacting unpopular laws that undermine free speech amid ongoing mass migration while inheritance tax on farms and farmers exacerbates his political and popularity dilemma even further.

In the U.S., the election on November 5, 2024, resulted in former President Trump’s landslide victory, winning both the electoral and popular votes. This success enabled him to gain control of the House and Senate, allowing for swift cabinet appointments.

Gold prices experienced a notable increase over the past year, driven by heightened international tensions, particularly due to the war in Ukraine and conflicts in the Middle East. Investors often turn to gold as a safe haven in uncertain times. Interestingly, following Trump’s election, gold prices dipped slightly, as his administration is expected to work toward de-escalating these conflicts.

The U.S. stock markets rallied after the election results, with Bitcoin’s price skyrocketing from around $70,000 to $98,000. Many analysts were surprised by this jump, despite Trump’s known pro-business, pro-crypto stance.

All these international developments set the stage for an exciting 2024, and South Africa’s domestic landscape was equally dynamic in terms of politics and economics. The year started as many recent years have, with ongoing loadshedding and a degree of political instability. The governing party appeared to realise that change was necessary, especially with increasing demands for accountability amid financial mismanagement. As South Africans grappled with high inflation, rising living costs, high interest rates, and soaring unemployment, the calls for change grew louder.

Just before the national elections in May 2024, loadshedding finally eased, but many viewed this as a political tactic to secure more votes. Fortunately, loadshedding has since been eliminated, helping to restore confidence in the economy.

The economic growth report for Q4 2023, released in March 2024, indicated a modest growth of 0.3%, and the annual growth rate for 2023 was 0.7%. However, the economy stagnated in Q1 2024, with the second quarter expanding by just 0.3%—too meagre to create significant job opportunities.

Following the elections, it was evident that the ANC party lost a substantial number of votes, forcing them to form either a coalition government, or Government of National Unity (GNU), with help from opposition parties. This coalition was seen positively by the market, leading to an appreciation of the rand against other major currencies. Alongside this, consumer and business confidence began to improve.

While inflation remained a concern for the South African Reserve Bank (SARB), international oil prices started to decline after June, while the Rand strengthened further given the positive view the market had on the newly formed GNU. The lower oil prices and eased loadshedding helped reduce inflation significantly, allowing the MPC to lower interest rates by 25 basis points in September, followed by another similar reduction in November 2024.

Despite high consumer indebtedness affecting overall demand, the mining, manufacturing, finance, and trade sectors experienced growth in Q3 2024. This positive trend is expected to continue into the fourth quarter, with forecasts showing growth rates for Q4 2024 at 1.4% and 0.4% for Q1 2025, leading to an anticipated annual growth of 1.7% for 2025.

Looking ahead, international commodity prices, along with global political and economic dynamics, must be monitored, particularly regarding U.S. involvement in ongoing conflicts and the effects thereof on the global economy and international supply chains. How the new Trump administration addresses these issues could significantly impact commodity prices, global inflation and international economic stability.

Ultimately, a stable exchange rate, lower international oil prices, and improved economic conditions bode well for inflation expectations and interest rate decisions by the MPC in early 2025. Should interest rates decrease further, this could stimulate demand and promote faster economic growth.

Let’s hope that the GNU lasts its full term, allowing South Africa to capitalise on the renewed hope and confidence that it desperately needs to grow and create jobs for its citizens.

Black Friday, originating from the United States, has rapidly gained traction in South Africa, transforming into an annual shopping phenomenon that significantly influences the country’s economy. Every year, consumers flock to both brick-and-mortar stores and online platforms, eager to capitalise on attractive discounts. This surge in consumer spending on Black Friday not only reflects changing shopping behaviours but also has substantial implications for retail trade sales, wholesale trade sales, and overall economic growth. Consumer demand as measured by the sales in both retail and wholesale remained strained so far during 2024 as both consumers and businesses found it challenging amid rising costs and reduced purchasing power for every Rand being spent.

According to data from Statistics South Africa (StatsSA), the retail sector experiences a notable spike in sales during the Black Friday period both in monthly and annual growth metrics. Retail trade sales often see a remarkable uptick, with retailers reporting significant increases in revenue. For example, in the months surrounding Black Friday, retail trade sales can experience double-digit growth rates compared to the previous month. This trend is indicative of consumers embracing the opportunity to make essential purchases at perceived discounted prices, especially in challenging economic climates where household budgets are under strain. The interest cut of another 25 basis points on the 21st of November 2024 may just boost sales on Black Friday ever so slightly as consumers now have some extra “breathing space” to allocate additional disposable income.

Furthermore, the effects of Black Friday extend beyond direct retail sales; wholesale trade sales also witness a positive impact. Wholesalers play a crucial role in supply chains, providing products to retailers. As demand increases during Black Friday, wholesalers see a corresponding rise in purchase orders. This amplified demand can translate into better margins and increased economic activity, bolstering the wholesale sector, increase import demand and enhance economic activity from the GDP expenditure side. Enhanced wholesale trade sales are essential, as they help stimulate the broader economy and support numerous related sectors.

Increased consumer spending during Black Friday is not merely a momentary surge but a vital contributor to demand within the South African economy, something that retailers and consumers are “banking” on, especially from a consumer’s side after the introduction of two-pot system where consumers/savers have taken quite a bit of funds to alleviate financial needs in the short-term.

As consumers become more inclined to spend, it creates a ripple effect that stimulates production in various sectors. Businesses may respond to heightened demand by increasing their output, hiring additional staff, or investing in inventory, all of which can lead to possible economic growth.

Importantly, this increased demand can have several macroeconomic benefits. With a more robust retail and wholesale sector, job creation becomes a possibility as businesses expand to meet consumer needs. In a country where unemployment remains a critical issue, these developments are encouraging when realised. Moreover, higher sales during Black Friday can lead to increased tax revenues for the government, which can then be directed toward public goods and services, ultimately benefiting all citizens.

While the allure of Black Friday is undeniable, it is essential to approach it with caution. Consumer debt levels can rise as individuals spend beyond their means to take advantage of sales, even after an interest reduction and savings money being used to finance these “want” purchases. A balanced approach to spending combined with responsible financial practices is essential to safeguard against long-term economic challenges.

In conclusion, Black Friday has emerged as a powerful driver of retail and wholesale trade sales in South Africa. The event significantly boosts demand, positively impacting economic growth by stimulating production, fostering job creation, and generating tax revenues. As South Africans increasingly embrace this shopping event, its effects on the economy will likely continue to unfold, emphasising the importance of strategic consumer behaviour and economic resilience in the face of ongoing challenges.

Prominent figures in this circle include Robert F. Kennedy Jr. (RFK), Vivek Ramaswamy, Joe Rogan, Patrick Bet-David, Dana White, Bill Ackman, Tucker Carlson, Tulsi Gabbard, and most notably, South African-born business tycoon Elon Musk. Musk’s influence grew significantly after he acquired Twitter and rebranded it as X. He focused on maintaining freedom of speech within legal boundaries, restoring many banned accounts, including Trump’s.

Back in the 2016 election, Trump effectively used social media to support his campaign against Hillary Clinton, leading to his victory. But in 2020, big platforms like Facebook and Twitter restricted his reach, while Twitter banned him outright. These actions, combined with unfavourable coverage by left-leaning media and the impact of the COVID-19 pandemic, hindered his re-election bid.

Everything changed on April 14, 2022, when Musk took over Twitter. He made radical changes, renaming the platform X, cutting the workforce, and reintroducing previously banned users, giving them a platform to speak freely once again.
Meanwhile, several pressing issues have troubled the American public, including rising inflation and housing costs, high energy prices, immigration concerns at the Southern border, debates over gender education and critical race theory in schools, perceived limits on free speech, and ongoing international conflicts in the Middle East and Ukraine. These issues have fuelled growing dissatisfaction with the Biden administration, alongside controversial tax policies that have unsettled businesses and investors.

Musk’s acquisition of Twitter, combined with these economic challenges, laid a solid foundation for Trump’s re-election campaign. Though there was still much work to do, the groundwork was set, and Trump needed the endorsement of influential business figures to advance his campaign.

The first significant endorsement came from Vivek Ramaswamy, who publicly supported Trump early in his campaign and later suspended his own presidential bid on January 16, 2024. Musk followed suit, endorsing Trump on July 13, 2024. After this, Musk interviewed Trump on X on August 12, 2024, and soon after, RFK suspended his campaign and threw his support behind Trump as well.

These endorsements were promising, but Trump still needed to amplify his message amidst legacy media’s unfavourable portrayal. Thus, he turned to alternative media and popular podcasts to reach millions. Notable appearances included:

• The Lex Fridman Podcast
• The Dan Bongino Show
• Impaulsive with Logan Paul
• The PBD Podcast with Patrick Bet-David
• The Shawn Ryan Show
• The Joe Rogan Experience

Joe Rogan, with the largest podcast audience, endorsed Trump on the eve of the election, further legitimising his re-election efforts. These appearances garnered Trump millions of views and improved how voters perceived him while broadcasting his messages unfiltered.

All these factors contributed to Trump achieving a landslide victory in the November 5, 2024, elections, elevating the profiles of influential supporters like Musk, Ramaswamy, and RFK.

As the new administration takes shape, Musk and Ramaswamy will lead the newly established “Department of Government Efficiency (DOGE)”, focusing on cost-cutting and government expenditures, while RFK will investigate healthcare matters, especially relating to the U.S. response to the COVID-19 pandemic.

You might wonder why these individuals have suddenly gained prominence. The answer lies in Trump’s view on loyalty. In his world, loyalty secures you a voice, and sharing similar ideas and aspirations for the U.S. enhances trustworthiness.

Those who publicly endorsed Trump during his campaign are seen as loyal and capable of making a difference in his administration, likely increasing their power once he takes office in January 2025. Evidence of this is already visible in Musk’s recent comments about Italy’s migrant crisis, which upset Italian President Sergio Mattarella, as well as his public disagreements with Brazilian lawmakers over the “ban of X” and potential election interference surrounding the upcoming Brazilian elections in 2026. As Trump assumes control, we can expect similar incidents to continue and could even happen ever-more frequently.

In the immediate aftermath of the election, global stock indices, notably the S&P 500, exhibited remarkable upward momentum. Investor enthusiasm surged as expectations around sustained economic policies invigorated market sentiment. The S&P 500, often viewed as a benchmark for global economic health, reached new heights, propelled by strong corporate earnings across sectors such as technology, healthcare, and consumer discretionary. The favourable regulatory environment has allowed these sectors to thrive, thus catalysing further investment.

The rise of equities has not been limited to the U.S. markets; emerging markets have also gained traction. Increased foreign investments and an appetite for high-growth opportunities have driven stock market rallies in countries with robust trade relationships with the U.S. This interconnectedness highlights a more global economic dynamic that thrives on stability, presenting abundant opportunities for investors.

Parallel to the resurgence in traditional equities, the cryptocurrency market has seen impressive price increases, particularly for Bitcoin, which recorded a historic price surge of over $80,000 shortly after the elections. This remarkable appreciation is indicative of a growing acceptance and institutional interest in cryptocurrencies. As investors increasingly view Bitcoin as a digital store of value akin to gold, it has emerged as a potential hedge against traditional financial vulnerabilities and inflation concerns. The ongoing institutional adoption signals that Bitcoin is finding its place within diversified investment portfolios, enhancing its legitimacy and accessibility in the broader financial landscape.

The recent favourable debates surrounding cryptocurrency regulations further bolster this positive sentiment. With a conducive environment for innovation and growth stemming from the election results, the crypto industry is poised to thrive amidst evolving regulatory landscapes. The increasing recognition of Bitcoin’s value by established financial institutions fosters a growing ecosystem of crypto-related products and services, thereby enhancing investor confidence.

Another notable trend observed post-elections is the strength of the U.S. dollar. A robust dollar reflects growing confidence in the U.S. economy and its policies. Following the election, the dollar has demonstrated increased strength against major currencies, driven by investor optimism about sustained economic growth. This upward trajectory in dollar strength may have mixed implications for U.S. exports but simultaneously benefits consumers by lowering import costs.
As global investors seek safety in dollar-denominated assets during times of uncertainty, the dollar’s position as the world’s primary reserve currency remains unchallenged. Though the strong dollar might create challenges for some sectors, it underscores the underlying confidence in the U.S. economic outlook.

In summary, the movement in international stock markets and cryptocurrencies since the November 6 elections showcases a resilient and dynamic investment climate. The synergy between pro-business policies, strong corporate earnings, increasing cryptocurrency adoption, and dollar strength creates a favourable environment for investors. By embracing a diversified portfolio that includes both traditional equities and innovative digital assets, investors are well-positioned to capitalize on growth opportunities. As the global economy continues to evolve, the potential for substantial growth remains, offering a promising outlook for those navigating this ever-changing financial landscape.

Overview of the Tax on Unrealised Gains

Taxing unrealized gains entails that investors pay taxes on the appreciation of their assets, regardless of whether those assets have been sold. For instance, if an investor buys a stock for $100,000 and its value increases to $150,000, they would owe taxes on the $50,000 gain despite not having realised any cash from a sale. This approach diverges from the conventional taxation model, where taxes are applied only to realized income, raising concerns about fairness and its broader economic impact.

This divergence from conventional tax practices could have serious ramification on international capital markets and furthermore on overall market liquidity. This change in tax policy could lead to the following challenges such as:

• Capital Accumulation Challenge: The prospect of taxing unrealised gains creates disincentives for long-term investing. Investors may feel compelled to sell assets prematurely to meet tax obligations, disrupting the natural investment cycle. This pressure could lead to reduced capital growth, ultimately hindering economic development and innovation, as fewer funds would be available for new ventures.
• Decreased Market Liquidity: Anticipating tax liabilities on unrealised gains may discourage investors from buying or selling assets, leading to diminished trading volumes. A drop in market activity can widen bid-ask spreads, complicating the execution of trades without significantly impacting prices. This reduced liquidity could also increase volatility in financial markets, making investment strategies more challenging.
• Negative Impact on Equity Markets: The fundamental nature of market behaviour is at stake. The stock market thrives on optimism and the potential for future gains. If investors perceive the tax environment as unfavourable, they may shift their focus toward capital preservation rather than growth, leading to adverse effects on overall market performance.

Challenges for Business Expansion and Growth

The proposal to tax unrealised gains raises profound concerns about capital raising for business growth. Startups and small to medium enterprises (SMEs) heavily depend on equity investments for expansion. A burdensome tax framework would likely deter investors, making them hesitant to commit capital to new ventures.

The implications could be dire: a decline in access to capital would hamper existing companies’ expansion efforts while making it progressively challenging for new entrepreneurs to enter the market. This stagnation in investment threatens job creation and economic dynamism, crucial elements for sustainable growth in the American economy, not to speak about the ripple effect that would be felt across capital markets globally.

Conclusion

While Vice President Kamala Harris’s tax plan aims to address income inequality, the proposal to tax unrealised gains raises critical concerns regarding its implications for financial markets, capital accumulation, and overall economic growth for both the US economy as well as its effect globally. As this discourse evolves, it is imperative for policymakers to consider the long-term effects of such sweeping reforms.

A balanced approach to taxation that encourages investment while addressing equity concerns is essential for sustaining growth and innovation in the economy. By fostering a favourable investment climate, policymakers can benefit not only financial markets but also society as a whole, ensuring opportunities for prosperity are preserved for future generations.

Benefits of a Trump Victory include:

• Economic Growth: Trump’s presidency was characterised by strong economic policies, including a 2.5% GDP increase in his final year. A return to similar pro-business policies could boost trade relations with South Africa and stimulate growth.
• Investment Opportunities: Trump’s focus on deregulation and tax incentives could lead to increased U.S. investment in South Africa, creating much-needed jobs in a country with over 34% unemployment.
• AGOA Benefits: Under a Trump administration, AGOA, which provides duty-free access for South African products to the U.S. market, may be reinforced, potentially enhancing economic ties.
• Newfound Stability in Trade Policies: Trump’s assertive approach could result in clearer, more predictable trade policies, allowing South African exporters to plan their long-term strategies with greater assurance.

The possible positive impact a Harris/Walz victory for South Africa include some of the following points to take note of:

• Strengthening Trade Relations: A Harris administration may prioritize trade agreements with African nations, potentially expanding AGOA and benefiting South African exports.
• Climate Change Focus: Harris’s support for environmental initiatives could attract investment into South Africa’s renewable energy sector, vital for economic growth.
• Increased Foreign Investment: Harris’s emphasis on social and economic justice may boost foreign direct investment in South Africa. As American companies seek to engage with responsible markets, this could lead to higher employment rates and expanded economic activity.

There are however possible downsides to both candidates and what that could mean for South Africa going forward for the next four years under either a Trump or Harris administration.

Possible downside for South Africa under a Trump administration includes but is not limited to the following main points of concern:

• Increased US Protectionism and Tariffs: Trump’s known protectionist policies could impose tariffs, adversely affecting South African exports, particularly in sectors reliant on AGOA, like the textiles sector but also the South African agricultural sector.
• Currency Volatility: Political instability could lead to fluctuations in the foreign exchange market, impacting the Rand’s value and complicating trade for South African businesses.
• Continued Global Economic Uncertainty: An erratic presidency could foster instability in global markets, leading to currency volatility. Should aggressive trade measures be implemented, the rand could depreciate notably in a short time frame and thus potentially could have adverse effects on import prices and volumes and ultimately lead to further inflationary pressure within South Africa.

Concerns with a Harris administration include the following discussion points:

• Risk of Protectionism increased: There’s a risk that a Harris administration might adopt protectionist trends similar to those of previous administrations. If aggressive trade policies emerge, South African exports, particularly those reliant on AGOA, could be negatively impacted
• Currency Exchange Rate Impacts: Changes in U.S. trade policies can lead to volatility in the foreign exchange market. Protectionist measures could struggle against South African exports, leading to depreciation of the rand, which would increase import costs and exacerbate inflation.
• Unpredictable Foreign Policy: While focusing on diplomacy, Harris’s foreign policy could still introduce uncertainty. Any shifts in U.S. policy priorities may complicate South Africa’s geopolitical standing and economic dealings, particularly if there’s a focus on a broader African strategy that may not align with South African interests.
• Unusual tax policy consideration: The Harris campaign mentioned the possible consideration of a tax on unrealised gains. This concept, while aimed at increasing revenue from wealthier individuals, raises significant concerns regarding its potential impact on financial markets, market liquidity, and overall economic growth.

The Economic Context

The South African rand is sensitive to U.S. economic policies, market movements and US sentiment towards emerging markets. Aggressive trade actions from the US may trigger a depreciation of the Rand, complicating the import landscape while driving up import prices as a result. Conversely, anticipated investment and trade could strengthen the currency, contingent on the U.S. market’s response to Trump’s or Kamala’s policies.

It should however be kept in mind that approximately 13% of South Africa’s total exports go to the U.S., making it one of the country’s largest trading partners. Knowing that a U.S. is one of South Africa’s largest trading partners, the AGOA agreement facilitated a growth of nearly 41% of South African exports to the U.S. in 2020 alone, underscoring the importance of this agreement to South Africa and its U.S. related exports.

As of 2023, the unemployment rate stood at around 34%, particularly concerning for youth aged 15-24. Enhanced access to the U.S. market could support job growth, while increased tariffs pose a risk to these opportunities.

Conclusion

A potential Trump or Harris victory brings both opportunities and challenges for South Africa. Stronger economic growth and stable trade policies could yield significant benefits, but protectionist measures and geopolitical tensions present substantial risks. To navigate these complexities, South Africa should capitalise on AGOA opportunities while preparing for possible uncertainties.

Market volatility is likely inevitable, particularly when political risks influence various asset classes, resulting in significant fluctuations in listed stocks, bonds, and currency values. In the event of either a Trump or Harris administration, returns on private equity and alternative investments may be less volatile and more stable due to the nature of these assets, which often respond differently to political risk compared to publicly traded securities.

As global markets continue to evolve, adaptability will be essential for fostering a bright economic future, irrespective of the political climate in the United States. Effectively managing these dynamics will help ensure sustained growth and stability for the South African economy.

Positive Contributions of Cryptocurrencies

Cryptocurrencies, notably through their decentralised nature, promote financial inclusion by enabling peer-to-peer transactions without traditional banking intermediaries. This bridging of the gap is particularly beneficial in regions with limited access to banking services, as evidenced by a Chainalysis report revealing that nearly 80% of the global population remains unbanked. Additionally, cryptocurrencies typically offer lower transaction fees compared to conventional methods, making them ideal for international remittances, particularly for migrant workers.

Private equity investments in digital assets have surged, with the global private equity sector managing approximately $5.6 trillion in assets in 2024, reflecting strong investor confidence. In South Africa, the local cryptocurrency market is thriving, with approximately 13% of the population owning or investing in digital currencies.

El Salvador’s Bold Move

El Salvador made global headlines in 2021 by becoming the first country to adopt Bitcoin as legal tender. This initiative aimed to boost financial inclusion and stimulate economic growth. Although the transition faced challenges, the government reported a 14% increase in remittances, partially attributed to Bitcoin transactions. This embrace of cryptocurrency has sparked interest and debate worldwide regarding its potential economic benefits and risks.

Nefarious Uses of Cryptocurrencies

Despite their advantages, cryptocurrencies also facilitate illegal activities, as their anonymous nature can be exploited for money laundering and tax evasion. Reports suggest that around 30% of Bitcoin transactions are linked to illicit activities, prompting the need for regulatory frameworks to mitigate misuse.

In South Africa, the South African Revenue Service (SARS) is taking steps to address compliance in the cryptocurrency space, with estimates suggesting about 5.8 million South Africans hold crypto assets. The agency has urged crypto traders to disclose their transactions voluntarily to avoid severe tax ramifications for non-compliance.

The tax implications of cryptocurrencies in South Africa are currently unclear and sometimes more complex in nature than initially thought. Digital assets may be subject to capital gains tax if they appreciate in value or classified as income tax if traders actively buy and sell them. Additionally, there may be VAT implications for these assets. The South African Revenue Service (SARS) considers any transaction and the gains from it, even if cryptocurrencies have not been converted back to fiat currency (Rands), as taxable events. This can lead to significant tax ramifications for uninformed crypto traders.

The Regulatory Landscape in South Africa

The South African government recognizes the importance of developing regulations that support the growth of cryptocurrency while maintaining consumer protection. The South African Reserve Bank (SARB) is working on guidelines to regulate the use and trading of digital currencies, highlighting the need to balance innovation with risk mitigation.

Future Prospects

The outlook for cryptocurrencies in South Africa is cautiously optimistic. With the government focusing on regulation, there is potential for safe growth in this emerging industry. Additionally, advancements in blockchain technology can further integrate cryptocurrencies into various sectors of the economy.

Conclusion

The rise of cryptocurrencies presents unique opportunities and challenges, especially for the younger generation. By embracing digital currencies, South Africa can enhance financial inclusion, reduce transaction costs, and stimulate economic growth. As the landscape evolves, a strong emphasis on regulation will be essential to harness the benefits and address the risks associated with cryptocurrencies. The experiences of countries like El Salvador provide valuable insights into the path forward, emphasizing the importance of thoughtful implementation and regulatory clarity for the future of cryptocurrencies.

Economic Contributions

According to the National Small Business Chamber (NSBC), SMEs account for roughly 98% of all registered businesses in South Africa. These enterprises contribute to approximately 30% of the country’s gross domestic product (GDP) and are responsible for about 66% of total employment. This statistic underscores the importance of SMEs as key drivers of economic activity.

Fun Fact: The Small Enterprise Development Agency (SEDA) estimates that for every Rand spent on SMEs, there is a R0.93 return on investment in terms of job creation and economic growth.

Driving Economic Growth

The significance of SMEs extends beyond mere numbers. They are crucial in fostering economic growth at a grassroots level. By addressing unique local needs and delivering specialized products and services, SMEs stimulate competition, drive efficiency, and promote innovation. For example, technology-focused SMEs help to introduce cutting-edge solutions that can enhance operational efficiencies across various sectors.

Moreover, the resilience of SMEs has been notably highlighted in the aftermath of the COVID-19 pandemic. Many SMEs adapted quickly to changing market conditions by pivoting their business models, leading to the emergence of new products and services that respond to shifting consumer demands. This adaptability is a testament to their importance in maintaining economic dynamism.

Employment Opportunities

The role of SMEs in creating employment opportunities cannot be overstated. In a country like South Africa, where unemployment rates have consistently been high, the potential for SMEs to generate jobs is significant. They not only provide employment opportunities but also offer skills development and training to individuals who may otherwise find it difficult to enter the workforce.

In 2022, it was estimated that SMEs created around 1.3 million jobs, and the number of jobs created in 2023 would even be higher, reflecting their capacity to absorb labour and alleviate unemployment. This is crucial for South Africa, where the youth unemployment rate stands at a staggering 66% among individuals aged 15 to 24, possibly being a powder keg the South African economy is sitting on if not attended meaningfully in due course.

Innovation and Transformation

In addition to economic growth and job creation, SMEs are pivotal in driving innovation. They often serve as incubators for new ideas and entrepreneurial spirit, fostering a culture of creativity and ingenuity. This innovative capacity is particularly important in sectors such as technology, green energy, and agro-processing, where small businesses are frequently on the cutting edge of new developments.

Interesting Fact: According to the Global Entrepreneurship Monitor (GEM), South Africa’s entrepreneurial activity rate stands at 11.5%, reflecting a robust spirit among the population to start and grow their own businesses.

Challenges and Opportunities

While the contributions of SMEs are commendable, they face numerous challenges, including access to financing, regulatory burdens, and market competition. According to a survey by FinScope, 43% of SMEs cited access to finance as a major barrier to growth. Addressing these challenges requires concerted efforts from the government and financial institutions to create an enabling environment that supports SME development.

On the flip side, there are notable opportunities for SMEs in South Africa, especially given the global shift towards digitalisation and sustainability. By embracing digital technologies, SMEs can broaden their reach and improve operational efficiencies, while focusing on sustainable practices can enhance their appeal in a growing eco-conscious market.

Conclusion

In conclusion, small and medium enterprises are indeed the lifeblood of the South African economy. Their contributions to economic growth, employment creation, and innovation are indispensable. By addressing the challenges, they face and leveraging emerging opportunities, SMEs can continue to thrive and play a pivotal role in shaping a brighter economic future for South Africa. Fostering an environment conducive to SME growth will not only benefit these businesses but the economy as a whole, creating a cycle of prosperity that benefits all South Africans.

Understanding Alternative Investments

Alternative investments encompass a diverse range of assets outside conventional categories, including real estate, commodities, hedge funds, collectibles, and notably, private equity. Unlike public market investments, alternative options often offer different risk-return profiles and lower correlations with traditional asset classes, making them attractive for those seeking to diversify their portfolios.

Private equity involves investing directly in private companies or acquiring public companies to delist them. This sector has seen significant growth, promising higher returns than traditional investment avenues. According to Preqin, the global private equity sector managed around $4.5 trillion in assets as of 2024, indicating a robust acceptance and confidence among investors. Some interesting facts about alternative investments are:

• There is a rising Interest: A 2021 survey by Deloitte found that 60% of millennial investors are considering alternative investments as part of their portfolios and,
• Portfolios with PE investments have diversification benefits: Studies suggest that including just 5% to 10% of alternatives in a traditional portfolio can enhance returns and reduce overall risk.

The Rise of Private Equity

In recent years, private equity has become a popular choice among young investors. Reports indicate that private equity assets under management (AUM) rose to $4.5 trillion in 2024, marking a substantial increase over the past decade. This growth reinforces private equity’s appeal as an investment vehicle, particularly for those seeking higher returns.

Why the Younger Generation is Attracted to Alternatives

Several factors contribute to the younger generation’s interest in alternative investments these include among others:

1. Potential for Higher Returns: Private equity investments often yield greater returns than traditional public equities. According to Cambridge Associates, private equity has consistently outperformed public markets over the years, providing a compelling argument for diversification.
2. Aligning with Values: Many young investors prioritize investments that reflect their values, such as sustainability and social impact. Private equity firms increasingly focus on Environmental, Social, and Governance (ESG) criteria, attracting socially conscious investors.
3. Access to Unique Opportunities: Alternative investments, particularly private equity, provide access to exclusive deals and emerging companies that can drive substantial returns.

Growth of Alternative Investments in South Africa

Interest in alternative investments within South Africa is increasing. According to the Association for Savings and Investment South Africa (ASISA), assets under management in the local private equity sector grew significantly, reaching over R199 billion in 2021. From 2022 to 2023, these assets rose from R213 billion to R237 billion, reflecting an annual growth rate of approximately 11%. The sector has shown resilience, attracting investments even during economic downturns. Recent trends indicate a shift from generalist investments to those focused on infrastructure and energy, aligning with the challenges faced by South African businesses and citizens.

A 2023 survey by the African Private Equity and Venture Capital Association (AVCA) revealed that South African private equity professionals remain optimistic about growth prospects, highlighting a strong belief in alternative assets.

Performance of Alternative Investments

Alternative investments have historically performed well, particularly in volatile market conditions. In South Africa, private equity funds have reported internal rates of return (IRR) averaging around 15% to 20%, often outperforming traditional public equity markets. However, it’s crucial for young investors to understand the risks involved, as private equity tends to require a longer investment horizon and can lack liquidity compared to public investments.

The rise of open-ended private equity portfolios

Open-ended private equity portfolios are investment vehicles that allow continuous fundraising and provide investors with the flexibility to enter and exit the portfolio over time, as opposed to the traditional private equity funds that have fixed lifespans and close-ended structures. This mode of private equity investing is becoming more popular, especially as investors seek to balance long-term growth with some degree of liquidity in private market exposure.

Conclusion

Investors across the board and in particular younger investors, increasingly lean toward alternative investments, private equity stands out due to its potential for higher returns and its role in supporting essential sectors of the economy, particularly SMEs and businesses in need of funding to grow or expand.

Open ended private equity portfolios, such as the Aluma PE Growth Portfolio or the Aluma PE Income Portfolio, allow investors (both established and first-time) the ability to participate in this sector at a lower entry level and with greater flexibility.

By diversifying into these asset classes such as private equity and “alternative investments”, the younger generation can enhance their financial portfolios and contribute to broader economic growth and innovation globally and in emerging markets like South Africa and other countries on the African continent. Understanding and leveraging alternative investments will be key to securing a prosperous financial future as both domestic and global markets continue to evolve and access to finance, opportunities, growth and wealth creation become increasingly important and sought after by young- and old investors alike.