This week we saw parts of the country being looted and burned. Much has been said about the causes, but what will the consequences be for the economy?
- Businesses that are already suffering as a result of the lockdown have suffered major damage and this can result in local job losses.
- Supply chains are disrupted and this can lead to temporary shortages of certain goods.
- The business sector is asking for support and unions are asking for a basic income grant and this will increase pressure on government finances.
- Maybe poor, hungry looters do not care about the value of the rand, but a weakening of the exchange rate will increase fuel prices and food prices and that affects us all.
- The biggest impact will be on investor confidence. Violence creates uncertainty and it increases the option value of waiting at a time when the economy needed investment.