| The podcast to the newsletter can be found here. Market and Economic Roundup South Africa South Africa’s currency is on track for its biggest August gain in two decades, with stocks not far behind, as a weakening dollar spurs demand for high-yielding assets outside the US. The rand is up 3% against the greenback this month, the best performance for August since 2005. And the country’s equity benchmark has clocked a gain of 3.4%, the most for the month since 2006.  The rand has handed investors 3.2% in the carry trade in August, among the top returns in emerging markets. (A carry trade is a financial strategy in which an investor borrows money in a currency with a low interest rate (called the funding currency) and uses those funds to invest in assets or currencies that offer higher interest rates (called the target currency or asset). The goal is to profit from the difference in interest rates, known as the “carry.”) Remember that when the Japanese carry trade wobbled in 2023? The latest weekly RSA government bond auction drew the strongest demand in seven weeks, with investors anticipating strong returns on the back of the coalition government’s plans to curb the fiscal deficit. A large part of the positive August performance by the rand and South African equity market is related to the risk-on global sentiment that prevailed as markets continually priced in a higher probability of the Fed cutting interest rates in September. Precious metals miners are among the biggest contributors to the gains in local equity markets this month, buoyed by rising gold and platinum prices. Meanwhile, moderate inflation, partly due to low oil prices and the strengthening rand, has kept costs for exporters of raw materials in check. This sector is up a whopping 90% on the year.  The gains go beyond the mining sector, however. Companies from financial-services firm Momentum Group Ltd. to chemicals maker Sasol Ltd. have released statements in the past week pointing to higher earnings and outlooks due to improving market confidence in the local economy, especially as consumer finances benefit from lower interest rates. This comes even as South Africa’s economy faces new pressure from a 30% tariff imposed on its exports to the US — one of the highest levies in the world. The duties are expected to mainly affect the nation’s agricultural and automotive sectors, but remember that the US is not RSA’s major trading partner, with these 2 sectors only making up around 3% of our exports. Spare a thought for Lesotho whose economy has now been devastated by tariffs on its world-class denim manufacturing industry. (anchor) Global markets Canada-Tariff Adjustment Under CUSMA. Canadian Prime Minister Mark Carney announced easing of retaliatory tariffs on U.S. goods under the Canada-U.S.-Mexico Agreement (CUSMA), aiming to restart trade talks with the U.S. This decision has met mixed reviews domestically but is seen as a move toward stabilising North American trade relations. South Korea-U.S. Trade and Security Talks. South Korean President Lee is set to meet with U.S. President Trump to discuss trade deals and the status of U.S. troops in South Korea on August 25th, reflecting ongoing strategic and economic discussions in the Asia-Pacific region. India Update. Donald Trump’s levies on India are hitting exporters hard, with industry groups pushing for stimulus as they say they can’t survive without government support. The tariffs—which took effect Wednesday in Washington—are now among the highest in Asia, leaving Indian goods uncompetitive in the US market. After months of pressure from Trump, the Mexican government plans to increase tariffs on China as part of its 2026 budget proposal. Other Asian countries are also expected to face higher tariffs. India is now on Trump’s radar, and these “Secondary tariffs’ should be called out for what they are – a penalty for supplying Russia with oil. USA markets Over the last week, the US market and economy showed signs of cautious optimism driven largely by signals from Federal Reserve Chair Jerome Powell indicating a possible interest rate cut in September. The Dow Jones Industrial Average surged to a new record close, rising over 846 points (around 1.9%) after Powell’s comments at the Jackson Hole symposium hinted at easing monetary policy. The S&P 500 gained 0.3% for the week, with a notable jump of 1.5% on the day of Powell’s speech over the last weekend. Small-cap stocks outperformed, with the Russell 2000 index jumping 3.3% for the week. Growth and value stocks had varied performance, with value stocks rising by 2.25%. When you consider how the major US indices have exploded over the last few years, this index has been crawling sideways since 2021. Why? No AI/big tech.  Treasury yields declined, with the 10-year note falling to around 4.26%, reflecting expectations of lower interest rates ahead. Inflation concerns remained, but Powell indicated that tariff-related price increases might be short-lived. The ‘de minimis’ tariff exemption in the US has now ended, and exporters throughout the world have stopped these ‘small parcel’ shipments to the US. There have been large retailers who have been using this loophole ( de-bulking shipments) to get around the tariffs, but now it is mostly small businesses and individuals that will be impacted. Spare a thought for Temu, which has had a massive marketing drive into the US and is expected to rise due to tariffs being applied to shipments based on country of origin tariff rates, ranging from 10% to as high as 50%, plus potential fixed fees of $80 to $200 per shipment during a six-month transition period.  Curro You probably read last week that Jannie Mouton’s foundation has offered to buy out Curro (for an eyewatering R7.2Bn), the highly successful educational company, plans to delist it and turn it into a non-profit. The decision reflects Jan Mouton’s and his father’s strong belief in the importance of fixing education in the country and is considered one of the biggest private education donations in South African history. The buyout offers shareholders a substantial premium of about 60%, valuing Curro shares at R13 each. After the buyout, Curro will be governed by its current management and board but will shift its focus to being a public benefit organisation dedicated to advancing education as a public good.  Curro share price This move is also inspired by philanthropic principles similar to those of Warren Buffett, focusing on large, impactful acts of giving. The foundation’s investment in Curro aligns with Jannie Mouton’s legacy of entrepreneurship and dedication to education and social impact in South Africa. As far as investment theses go, it was a no-brainer: if there is one thing any family prized by families, it’s quality education for their children. And, in a country like South Africa, where the public education system is on its knees – as every numeracy and literacy report will affirm – buying a stake in a private schooling outfit couldn’t have seemed more obvious. This was certainly Jannie Mouton’s thinking when he listed schooling company Curro on the JSE in 2011. Only, it hasn’t worked out as planned – the stock soared to R60 a share, before plunging back to R4.63 during Covid. Effectively, he will be donating the entire school group (189 of them) to the country. By not having to worry about shareholders, they have much more scope to hand out bursaries and scholarships. This will be some legacy for a man who, in August 1995, was sacked from a stockbroking company he founded, SMK – an experience he recorded in his bestseller, And Then They Fired Me. Since then, the “Boere Buffett” built the most astounding portfolio of assets, including Capitec, Kaap Agri, PSG Konsult, Curro and Stadio.  AI in Education One topic that Cobie and I have touched on over the years is the potential to leverage technology in education, especially in a country like RSA, which just does not have enough qualified and experienced educators. I know there’s the fear that AI will stop people, and learners specifically, from “thinking” and make them lazy and dependent on technology. This will definitely happen in some cases, but used properly, AI can significantly enhance and speed up a learning curve. Educators all over the world are fighting against the use of AI to help youngsters in the classroom, with AI checkers getting out of date the day they are released. Interestingly The University of Cape Town (UCT) has announced it will stop using AI detection software, such as Turnitin’s AI Score, starting October 1, 2025. This decision was made because AI detection tools are widely considered unreliable, often producing false positives and false negatives, which can compromise student trust and academic fairness. Instead of relying on flawed detection technologies, UCT is adopting an AI in Education Framework that emphasises ethical AI literacy, innovative assessment design, and teaching methods that focus more on the learning process than just the final product. The university plans to implement alternative assessment methods such as oral exams, observed group work, and requiring students to disclose and critically reflect on their use of AI. UCT’s shift reflects a broader trend of educational institutions reconsidering how they address AI in student work, moving away from policing AI use through unreliable detection tools toward integrating AI ethically and constructively into learning. AI might become the big differentiator, with those who see it as an enhancement to their critical thinking skills (that AI is still a way off from being able to replicate) and everyone else who will be more than happy to get their Basic Income Grant (BIG). Grafters versus Grantees. There just have to be enough grafters to produce the tax countries are going to need to support the BIG. Can AI make learning interesting again? I am sure every one of us has a story to tell of a superb or appalling teacher or lecturer who shaped our lives. I know that my life would have been very different if I hadn’t had those early influences (probably exacerbated by being in Boarding school from the age of 6, sometimes only seeing my parents once a year). Personalized Learning AI enables customised lessons tailored to each student’s strengths, weaknesses, and learning pace. Adaptive learning platforms analyse real-time data to modify content delivery, helping students master concepts at their own speed and style, improving engagement and retention. Intelligent Tutoring AI-driven tutoring systems provide real-time, personalised guidance and practice, mimicking human tutors. These systems can break down complex problems, offer hints, and provide step-by-step feedback, accessible anytime, supporting students outside of classroom hours. Obviously, South Africa has some unique challenges, especially in rural areas, but new technology like Starlink and Solar can certainly fill some of those gaps. Automated Administrative Tasks AI automates grading, attendance tracking, scheduling, and report generation, reducing teachers’ administrative workloads and freeing them to focus on teaching and student interaction. Data-Driven Insights AI analyses vast educational data to identify trends, predict student performance, and flag early signs of disengagement or learning difficulties, allowing educators to intervene proactively. Enhanced Accessibility AI-powered tools support students with disabilities through real-time translation, speech-to-text, and custom assistive technologies, making learning more inclusive. Increased Engagement and Scalability AI gamifies learning and creates interactive content that keeps students motivated. It also scales educational opportunities, especially in under-resourced regions or remote learning environments.  Lesotho’s denim industry Lesotho’s denim industry has a significant history as a major player in the textile and garment manufacturing sector, particularly specialising in denim jeans production. The industry took off in the mid-1980s, spurred largely by South African companies relocating production to Lesotho to circumvent sanctions faced by South Africa in the USA and Europe at the time. Additionally, Lesotho benefited from incentives like favourable factory rentals, tax holidays, and subsidised wages to attract investment. Lesotho produces about 26 million pairs of denim jeans annually, mostly for export, with around 98% sold to the United States. The country also manufactures tens of millions of knitted garments each year. The industry includes multiple manufacturing firms, with companies like the Nien Hsing Group and the CGM Group dominating denim jeans production (Levis and Wrangler are also made there). Lesotho has a vertically integrated denim manufacturing mill, the Formosa Mill, established around 2004, which produces denim fabric and cotton yarn. This mill imports cotton from various African countries, processes it into yarn, dyes it, and weaves denim fabric used both locally and exported. The garment industry accounts for more than 90% of formal manufacturing jobs in Lesotho and contributes roughly 20% to GDP. It is also one of the largest employers, with a majority of the workforce being women. The denim sector has been a strategic growth area in Lesotho’s economy, benefiting from preferential trade access to the US under the African Growth and Opportunity Act (AGOA) and to the European Union through the Lome Convention and its successors. Social issues such as gender-based violence and labour conditions have been reported within the garment workforce, which is mostly female. Overall, Lesotho is recognised as a major denim production hub in Africa, with a vertically integrated industry supplying global brands including Levi’s and Wrangler, and contributing significantly to the country’s export earnings and employment.  |
| Nvidia results Nvidia Corp., the first company ever to amass a market capitalisation above $4 trillion, continues to keep us excited. Its growth is undeniable, with the real concern more about the sustainability of revenues and profits, rather than the share price. In the latest quarter, the company announced results after the market closed on Wednesday, and after-hours traders didn’t like them. That said, a fall of about 3.5%, which CEO Jensen Huang’s appearance on the earnings call didn’t really shift, is a moderate response by Nvidia’s standards: Over the last year, its market cap has overtaken the total valuations of the main stock indexes in the UK, France and Germany. It’s also overtaken the entire S&P 500 energy sector, to whose members will fall the task of powering the machines that use Nvidia chips. Nvidia narrative continues to be about its phenomenal success in selling people chips and doing so at a profit. This chart compares market cap relative to other indices over the last decade. Since the arrival of ChatGPT in November 2022, Nvidia has gone into orbit:  Growth in EPS and revenue continues to be phenomenal. They cannot carry on at this rate indefinitely; Nvidia will have to start looking for customers elsewhere in the solar system, so deceleration is only to be expected before long. The two flies in the ointment that prompted the sell-off we saw were: • Data centre growth — central to the artificial intelligence story — was a little below forecasts; and • The company announced that it had effectively made no sales to China during the quarter, and that its future projections were based on the assumption that China would continue to be off-limits. On the China issue, Nvidia also made the very disquieting disclosure that the lauded deal to pay 15% of its Chinese revenues with the US government still hasn’t been finalised (and maybe never will). Don’t tell the Donald, but there is a word for governments insisting on a stake of private companies, it’s called nationalisation, a much-loved Socialist/Communist stance. The good news, that Nvidia is being very cautious, and any resumption of sales to China will be pure upside compared to the current forecast (even if they share a chunk with Uncle Sam). The bad news is that the Trump administration’s modus operandi of striking vague deals in principle and not thrashing out the details creates real problems for anyone trying to plan their business. Nvidia is trying to say that as clearly as it can without incurring presidential wrath. The company stood up to the administration about as much as anyone in the corporate world now dares, saying the government had “not published any specifics or codified any terms of the agreement.” As Dave Lee points out, from Huang’s perspective, the administration is standing in the way of a $50 billion bonanza.  Changing demographics and Billionaires Birth rates are falling to historic lows across the developed world, and understanding why is a priority for governments worried about the impact on growth and public finances. Career progression, social norms and how we choose to spend our time are key to this changing dynamic, as is our desire to be better and more focused parents for the current 1.38 average births per woman in Europe and 1.59 in the US (it used to be around 2.1 not so long ago). Typically, as countries get richer, fertility rates tend to decline. So why, then, do some of the wealthiest people on the planet seem to equate status with having more, not fewer, children? Elon Musk, who dreams of repopulating the planet, has fathered 14 children. Luxury mogul Bernard Arnault has five, each with an appointed role in his LVMH Moet Hennessy Louis Vuitton SE empire. Telegram Messenger LLP owner Pavel Durov has six — not counting the eyebrow-raising 100 future heirs he claims to have fathered through sperm donations across 12 countries. Maybe it’s an alpha-male thing — and not something most of us would see as exemplary fatherhood, judging by reports of how Musk treats the mothers of his infant “legion.” Yet a look at the top 100 wealthiest Americans on the Bloomberg Billionaires Index, including women like Melinda Gates and Diana Hendricks, shows they have just over three children on average — more baby boom than bust. A study of the 948 wealthiest Americans by economist Ria Wilken published in January calculated an average of 2.99 children. Billionaires do skew male overall and do a fair bit of re-marrying, so this can’t be directly compared with the national (female) fertility rate. Still, 2.99 is higher than the 1.94 average children per family recorded in US census data. Most Americans (71%) have had two children or fewer, according to last year’s General Social Survey. It would seem that whatever the preferences and norms of the industrialized world are, they don’t neatly map onto the uber-rich. But a simpler conclusion is that more money means having the number of kids you want. With the cost of raising a child to adulthood estimated at $310,605 in the US, no amount of preferences or norms can get away from the fact that kids are “very expensive,” Even as fertility rates plummet in countries like Sweden and Japan, data suggests better-off men and women are more likely to have children than less well-off men and women. A United Nations survey last month found 40% of respondents blamed financial barriers for keeping them from having an ideal family size. Accepting this could be key for the right kind of parent-friendly policy at a time of panic and desperate fixes — not to mention resistance to immigration. Cash bonuses for new parents, as seen in countries like Italy, Greece and now China, are unlikely to move the needle at $500-$2,500. What might work better is access to the kind of infrastructure, housing and work flexibility that the wealthy have in abundance. Norway’s push to improve daycare access from the mid-1970s improved the fertility rate by 0.1 for every 10% rise in the rate of children in care. And despite France’s own worsening outlook, its birth rate is double South Korea’s, a sign that generous support for childcare, family allowances and parental leave can make a difference. Fairer taxation could also help.  SWIFT U.S. President Donald Trump and some U.S. lawmakers have pushed for cutting South Africa off from the SWIFT network as part of sanctions due to South Africa’s perceived alignment with U.S. adversaries like Russia, China, and Iran. This move is tied to the “U.S.-South Africa Bilateral Relations Review Act of 2025” (H.R. 2633), a bill seeking to review and potentially sanction South Africa over its foreign policy and alleged support to entities hostile to U.S. interests. What is SWIFT? SWIFT, or the Society for Worldwide Interbank Financial Telecommunication, is a global messaging system that enables over 11,000 banks and financial institutions in more than 200 countries to communicate about cross-border financial transactions securely and quickly. SWIFT itself does not move money but facilitates payment instructions that are critical for international trade and banking operations. Why the Threat? The threat to cut off South Africa from SWIFT is driven by concerns that the country is strengthening political and economic ties with countries and groups opposed by the U.S. This includes allegations of South Africa supporting Russia, China, Iran, and even groups labelled as terrorist organisations by the U.S. The Trump administration has also frozen U.S. aid and imposed high tariffs on South African exports. Implications of Being Cut Off from SWIFT If South Africa were removed from SWIFT, it would face severe economic consequences: • Disruption of $400 billion in annual trade due to difficulties in executing international payments. • Destabilisation of the banking sector as access to the global financial system would be restricted. • Loss of investor confidence leading to potential capital flight. • Increased transaction costs and inefficiency as alternative, slower, less secure payment methods would have to be used. • Economic downturn similar to what occurred in Russia and Iran when they were cut off, where GDP contractions of 15-40% happened, and currencies plunged. South African banking leaders and the National Treasury have been actively discussing responses and defensive strategies, including engaging U.S. counterparts and exploring alternative payment systems and trade routes to mitigate the impact. In summary, Trump’s push to cut South Africa off from SWIFT is part of a broader U.S. geopolitical strategy to penalise South Africa for its foreign policy positions. Such a move would represent a severe financial sanction with broad implications for South Africa’s economy and its role in the global financial system. Author: Dawn Ridler  Governments vs central banks Last week, there was more evidence of the US government wanting to take control of their Central Bank. President Trump is hoping to fire Federal Reserve Board Governor Lisa Cook, citing allegations of mortgage fraud as the cause. This move was unprecedented in the 112-year history of the Federal Reserve, as governors typically can only be removed “for cause,” a term that is not clearly defined in the law. Lisa Cook has denied any wrongdoing and stated that Trump has no authority to remove her, vowing to contest the dismissal in court. Her lawyer confirmed that they will challenge the firing legally, arguing it lacks proper process and legal basis. This action has raised concerns about the independence of the Federal Reserve and potential political interference in U.S. monetary policy. The situation is expected to escalate to the Supreme Court for resolution. Below is the interest rate set by central banks of various countries (black line) relative to what the market expects those rates to be in December next year (blue line). One can see that in the US, UK and Australia, markets are expecting rates to reduce from their current levels. This is especially true for those countries which are heavily indebted, such as the US and the UK. What, though, is of greater importance is what happens to longer-term yields. Indicated in red, is the 30-year treasury yields across various countries. Without exception, these are rising as investors demand higher yields for borrowing money to governments over the long term.  Remember that governments prefer to borrow money where the principal only needs to be repaid decades later. This allows them the freedom to make use of the capital and commit to long-term projects with only the coupon payments required for over three decades. But when 30-year yields rise (as above), borrowing money over this term becomes less attractive and the government ends up issuing short-term debt. This is the issue that the US has been facing and I would probably say as of last week, France will be facing as well (not indicated above). The US is hoping to deal with their debt crisis by controlling the narrative, as the government hopes to take control of the FED. In France, they are hoping to deal with it by passing a new budget. France’s Prime Minister François Bayrou has called for a confidence vote on September 8 2025, over his proposed austerity budget plan to reduce the country’s budget deficit. This gamble is widely expected to fail, as major opposition parties, including the far-left France Unbowed, the centre-left Socialists, and even the far-right National Rally led by Marine Le Pen have announced their intention to vote against the government. The rejection of the confidence vote would most likely bring down Bayrou’s fragile minority government, marking an unprecedented fifth French prime minister in just 20 months. The confidence vote is linked to Bayrou’s plan to slash approximately €44 billion in spending, a move that has faced significant political and public opposition. Failure in the vote would trigger a new phase of instability, with President Emmanuel Macron potentially appointing a new prime minister or calling early parliamentary elections. Cutting back on government expenditure is political suicide. This is why the US is embarking on austerity by calling it “Putting America First”. The control over the FED, tariffs, reduction on international obligations (think USAID), partial NATO withdrawal and fostering peace everywhere have much more to do with the US deficit than anything else. Author: Cobie Le Grange EXCHANGE RATES:  The Rand/Dollar closed at R17.65 (R17.44, R17.61, R17.74, R18.15,R17.76, R17.72, R17.90, R17.58, R17.89, R17.99, R17.92, R17.77, R17.95, R17.88, R18.04, R18.16, R18.39, R18.64, R18.89, R19.12, R19.10, R18.36, R18.21, R18.18, R18.20, R18.71, R18.35, R18.38, R18.41, R18,67, R18.38, R18.73, R18.03, R18.05, R18.11, R18.21,)  The Rand/Pound closed at R23.84 (R23.53, R23.84, R23.84, R24.09, R23.88, R23.76, R24.22, R24.08, R24.49, R24.22, R24.35, R24.05, R24.18, R24.14, R23.95, R24.16, R24.40, R24.82, R25.10, R25.01, R24.73, R23.78, R23.55, R23.52, R23.50, R23.53, R23.19, R23.12, R22.85, R23,16, R22.93, R22.80, R22.99, R22.98, R22.72, R22.99, R22.73, )  The Rand/Euro closed the week at R20.62 (R20.44, R20.56, R20.64, R21.04, R20.86, R20.61, R20.93, R 20.70, R20.91, R20.74, R20.68, R20.24, R20,37, R20.27, R20.13, R20.43, R20.78, R21.21, R21.52, R21.72, R20.93, R19.95, R19.72, R19.83, R19.72, R19.41, R19.20, R19.29, R19.02, R19,35, R19.31, R19.23, R19.09, R18.87, R19.19, R18.85, ,)  Brent Crude: Closed the week $67.38 ($67.73, $66.08, $66.07, $69.46, $68.29, $69.21, $70.58, $68.27, $67.39, $77.27, $74.38, $66.56, $62.61, $65.41, $63.88, $61.29, $65.86, $67.72 $64.76, $65.95, $72.40, $72.13, $70.51, $70.33, $73.03, $74.23, $74.51, $74.65, $76,40, $77.60, $79.98, $71.00, $72.38, $75.05, $70.87, $73.86, $73.99).  Bitcoin closed at $108,923 ( $114,916, $117,371, $118,043, $113,608, $118,139, $118,214, $117,871, $108,056, $107,461, $103,455, $105,017, $105,643, $104,049, $103,551, $104,615, $96,405, $94,185, $84,571, $84,695, $82,661, $83,074, $84,889, $82,639, $83,710, $85,696, $96,151, $96,821, $96,286, $99,049, $104,559, $104,971, $99,341, $97,113, $97,950). Articles and Blogs: Who needs a plan anyway NEW 8 questions you need to ask around retirement NEW What to do when interest rates drop How to survive volatility in your investments What to do when interest rates drop Difficult Financial Conversations Financial Implications of Longevity Kick Start Your Own Retirement Plan You matter more than your kids in retirement To catch a falling knife Income at retirement 2025 Budget Apportioning blame for your financial state Tempering fear and greed New Year’s resolutions over? Try a Wealth Bingo Card instead. Wills and Estate Planning (comprehensive 3 in one post) Pre-retirement – The make-or-break moments Some unconventional thoughts on wealth and risk management Wealth creation is a balancing act over time Wealth traps waiting for unsuspecting entrepreneurs Two Pot pension system demystified Keeping your legacy shining bright Financial well-being when dealing with Dementia and Alzheimers Weathering the storm Pruning your wealth farm Should you change your investments with changing politics? Taking a holistic view of your wealth Why do I need a financial advisor? Costs Fees and Commissions The NHI and what to do about it New-Normal for Retirement? Locking-In Interest rates – The inflation story Situs – The Myths and Reality Tax Residency – New Rules new headaches Are retirement annuities dead A new look at retirement Offshore investing – an unpopular opinion Cobie Legrange and Dawn Ridler, Rexsolom Invest, Licensed FSP 45521. Email: cobie@rexsolom.co.za, dawn@rexsolom.co.za Website: rexsolom.co.za, wealthecology.co.za |