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Cape Town – Renewed political and policy uncertainty has made South Africa’s operating environment particularly challenging for business, Sanlam said in an operational update on Wednesday.
“The key trends emerging during the 2016 financial year persisted into 2017,” Sanlam [JSE:SLM] said.
“An unexpected cabinet reshuffle and removal of the minister of finance at the end of March were followed by downgrades of South Africa’s foreign currency rating to below investment grade by two rating agencies, with one also downgrading the local currency rating to below investment grade,” Sanlam said.
Sanlam’s share price has dropped by 4% since Pravin Gordhan was removed as finance minister on March 31. Its share price was up 0.81% on Wednesday at 14:50.
“Investment market reaction to these events was not as adverse as anticipated, as it coincided with renewed emerging market interest from global investors, providing support to the rand, equity markets and long-term interest rates," Sanlam said.
“The renewed political and policy uncertainties were, however, detrimental to investor, business and consumer confidence, which impacted on the group’s new business growth in the mass affluent and high net worth segments, and will also delay any meaningful improvement in economic and employment conditions.
“The South African operating environment therefore remained particularly challenging for our businesses.”
Looking forward, Sanlam expects the economic and operating environment to remain challenging for the remainder of 2017.
“Persistent investor risk aversion, average investment market levels, the relative strength of the rand exchange rate and the level of long-term interest rates are key factors that may have an impact on the growth in net result from financial services, normalised headline earnings and group equity value to be reported for the first half of the 2017 financial year.
“The group is, however, well-positioned to weather the current headwinds and to continue delivering value for our shareholders and other stakeholders.”
