Violence and uncertainty

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.