Many expected the goalposts to be moved as Greece’s deadline to pay its creditors loomed on Tuesday, instead over the weekend, the country revealed that it would hold a referendum on whether to accept more austerity for aid. This led to talks failing with its creditors. But how has all this affected Africa?
David Shapiro, deputy chairman at Sasfin, said unsurprisingly, the African markets have responded with relative stability to the Greece crisis because it has been a long time coming which prompted a “knee-jerk reaction”.
He cautioned that investors are going to be more circumspect and companies that are considered risky will be shied away from.
According to Shapiro, America is going to be the biggest beneficiary of the Greece crisis as the dollar strengthened and commodity prices have been declining. This is on the backdrop of America profiting from low oil prices and gaining momentum in consumption.
Africa stands to benefit as an indirect consequence to the strong dollar and that is the playground where majority of investors should be playing in by trying to optimise on the dollar, he said.
Aly-Khan Satchu, CEO of Rich Management, held a different perspective and said the Greece crisis stands to affect strong African currencies like South Africa’s rand and the Kenyan shilling. “There is an enormous correlation and a high spill-over risk, we’ve seen the rand sell-off to 12.31 and the shilling is actually weaker. At close of trade, commercial banks quoted the shilling at 98.60/70 to the dollar versus Friday's close of 98.40/50. The rand stood at 12.27 to dollar just after 7pm CAT.
The worry is that this infection starts to spread and infects other emerging markets and high yielding assets.”
Gary Booysen, a portfolio manager for Rand Swiss said the rand is prone to weaken on a general risk-on-risk-off approach that affects emerging markets. There has been a rise into “safe haven investments”, he said.
“A good portfolio manager would have been advising his clients to be hedging already, getting exposures down and getting some money off the table,” Booysen’s added.
Yra Harris, partner at Praxis Training, added that right now the markets are scared because they can detect uncertainty. “The emerging markets have already taken a hit over the last 12 months in reference to this uncertainty.”
According to Harris, this presents “really good opportunities” and most of them will be coming from the periphery of Europe. “That’s where the real fitness test is going to be to see how the investors feel.”
With emerging markets making up roughly 20 to 25 per cent of the world’s GDP, many analysts share the sentiment that they are “grossly under-represented”. Harris responded that while this may be true, it is important to be mindful that investors still need to get comfortable in these spaces.
Following Greece’s application for a referendum, Harris said, “The problem with a referendum is that it becomes contagious because no one has asked the German people whether they want to absorb the cost of being the main predator in Europe.
It’s going to be a spill-out effect where everyone wants a referendum in Europe and that becomes very dangerous for the elite.”