Why President Trump is not good news for South Africa

The surprise victory by Donald Trump in the US presidential race may have some very negative consequences for deeply indebted South African consumers.

This is according to Debt Rescue CEO, Neil Roets, who said that with very little in the line of actual policies that he will follow out in the open, it is likely to bring profound uncertainty to financial markets, including South Africa.

Trump pulled off a surprise victory in the 2016 United States presidential election, and is set to become the new US president on 20 January 2017.

The republican won many key swing states, including Florida, which many saw as the state which would determine the election outcome.

Many experts and media houses predicted an easy win for Democratic Party candidate Hillary Clinton, but Republican Party hopefuls warned that these polls were misleading.

The Republicans also won the House and Senate.

With a lot of uncertainty, a Trump presidency could see South Africa become a negative trade market as investors move to “safe” markets.

The rand has already weakened significantly after it emerged that Trump was likely to be the winner of the presidential race – showing investor uncertainty.

By 10h00, the rand traded 2.15% weaker against the dollar, at R13.46.

Roets said the uncertainty that Trump brings to the American presidency will upset the establishment in Washington to the point that nobody knows exactly which direction he will follow.

“There is nothing that markets hate more than uncertainty and the Trump victory will have a substantially negative effect on international markets which will in short order manifest themselves in our marketplace.

“While the Trump victory may bring about a brief spike in markets, it will in short order be followed by a substantial drop because he is such an unknown quantity which once again brings uncertainty to the marketplace,” Roets said.

Clinton was seen by investors as offering greater certainty and stability but they remained wary, taking heed of Britain’s shock vote in June to leave the European Union and the negative consequences which have emerged from that decision.

“We can only guess at the ripple effect his election is going to bring to the world economy but none of it is going to help deeply indebted consumers in South Africa to catch a breather, he said.

Roets said a bigger problem than the US election outcome was the announcement by ratings agency Moody’s that South Africa’s big four banks will see a rise in problem loans in the next 12 to 18 months as the economy struggles to grow.

“This problem has been a long time in the making as South Africa’s very low growth rate and growing unemployment has put growing pressure on consumers who are defaulting on their loans at near-record a levels,” Roets said.

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