If you are reading this, you survived 2020.
For many of us, it was an extremely difficult year, filled with loss and uncertainty. The renewed outbreak meant that the Festive Season was far from merry for many of us, but we can at least look ahead to better days. For some, 2021 will be about rebuilding, while for the more fortunate, it will be a case of building on the successes of the past year.
Of the many things that stood out in 2020, the resilience, adaptability and innovativeness of human beings must be top of the list. The life we lived – locked down, online and socially distant – would have been unthinkable even in 2019. It quickly became second nature. The amazing speed with which scientists developed vaccines was also in this spirit. As you read this, several million people have already been vaccinated against a disease that was only officially named in February 2020.
It is the vaccine news that drove markets higher in the final quarter of last year. It means the economic recovery that was already underway can continue and that there is hope or returning to normal in the near future. We don’t know yet when South Africans can receive the jab, but that doesn’t matter all that much as far as your portfolio is concerned. Local financial markets take their lead from what happens globally. When traders in London or New York feel optimistic about the world, they buy the rand. When they feel gloomy, they sell it. Not a moment’s thought is given to the latest political intrigues. Thus we saw the rand collapse in March and April and recover strongly thereafter, especially in the fourth quarter.
Clearly, the rand is never a one-way bet, and therefore portfolio diversification remains prudent. It has become fashionable to say local investors should take every last cent offshore, but such an all-or-nothing attitude assumes perfect foresight. Spreading the risk is more sensible.
The other point to highlight is that investors earned more from the equity market in November and December than they would have from a whole year in the money market. That is where patient investing is so important. Over the long term, equities beat cash because of such extraordinary months. Unfortunately, you can’t predict when they will happen.
Since it is still summer and since we can now look forward to live sport returning one day thanks to vaccines, let’s use a cricketing analogy. Equities are the player that hits fours and sixes, and you need these to build a big total. But for several overs, you can get nothing, and sometimes you lose a wicket. On the other hand, cash gives you a single off every ball. It is safe and steady, but not enough on its own. Again, the trick is to field a diverse team that can perform under a wide range of conditions.
Here’s to a knock-out year in 2021
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Blue wave’ returns to the agenda with Senate flip

Two months after the US election, the Democrats have flipped the Senate, with unexpected victories in two runoffs in Georgia. This gives President-elect Biden a much greater chance of implementing his policies, which are likely to include further stimulus with a strong decarbonisation agenda.
Two months on from the election, US politics is back at the forefront of the news agenda following defeats for both Republican senators in the runoffs for their respective seats in Georgia. The results are significant, as an evenly split Senate allows incoming Vice-President Kamala Harris to cast deciding tie-breaking votes when necessary. In effect, this removes the Republican majority in the upper chamber, which, combined with the Democrats’ majority in the House of Representatives, means President-elect Biden has a much greater chance of implementing his legislative agenda. This will have an impact not just politically, but for the broader financial markets, too. In this short piece, Sahil Mahtani, Strategist in Ninety One’s Investment Institute, and Deidre Cooper, Co-Portfolio Manager of Ninety One’s Global Environment Strategy, offer insight on what a Biden presidency combined with a Democratic Senate could mean for investors.

What does this mean for markets?

Democratic control of the Senate and the House makes it virtually certain that the Biden administration will seek to implement meaningful stimulus in 2021 with a strong sustainability agenda. In late 2021 or early 2022, when the economy is stronger, tax increases will likely be implemented to fund this spending. Stimulus is positive for US growth, and therefore inflows into US equities, and may lead to a substantial rise in developed market bond yields, with significant cross-asset implications.  

Nevertheless, a Democratic clean sweep is likely to be negative for the US dollar in the first instance because it decreases the risk premia on emerging market (EM) assets that has built up as a result of volatile US foreign policy. In the medium-term, supportive stimulus policies in the US will also tend to push up global economic growth, which is supportive of EM currencies. Inflationary pressures should also support gold.

At a sector level, the Democratic policy of pushing for net-zero emissions by 2050 is likely to benefit clean-energy equipment and utilities businesses, while the fossil-fuel complex could be a loser, depending on what the Biden administration’s policy towards that industry ultimately is. ‘Big tech’ might lag the market due to the threat of increased regulation, while in healthcare, so often a key battleground, reform is possible in an attempt to lower costs. Democratic policy should favour the managed-care organisations, generic pharma companies and non-US pharma companies, with potential losers including domestic pharma businesses and healthcare services providers. 

What are the implications for environmental policy?

The US approach to environmental matters under Biden will be in marked contrast to his predecessor, with the US committing to hold a climate summit this year and seeking to re-join the Paris agreement. The climate plan Biden announced on the campaign trail last July reflected a pivot towards Bernie Sanders’/Elizabeth Warren’s primary plan, with a net-zero target by 2050, 100% zero-carbon electricity by 2035 and 4 million buildings to be made more energy efficient. Of course, campaign manifestos are not policy. Democrats already included a short extension to the wind and solar tax credits in the stimulus passed at the end of 2020. And with effective, albeit razor thin control of the Senate, it is likely that the Biden administration will implement further stimulus in 2021 with a strong decarbonisation agenda. 

Chuck Schumer, as the new majority leader of the Senate, is likely to favour a progressive agenda, particularly as he may well face Alexandria Ocasio-Cortez as an opponent in his primary in 2022. Specifically, we would expect the tax credits for renewable energy (despite being highly imperfect tools to stimulate demand) to be further extended as part of that stimulus and, crucially, a separate tax credit for energy storage to be implemented. This is particularly important for the US wind industry, where the production tax credit sunsets earlier than the investment tax credit for solar, and the nature of the production tax credit makes it difficult to collocate storage with wind but much easier with solar.
Regulatory support is now possible

A Democrat-appointed Federal Energy Regulatory Commission should also help, as will faster permitting for offshore wind farms which had been consistently delayed by the Trump administration. There also may be potential for federal renewable portfolio standards, which Obama tried to introduce. As a result, our 2022-25 wind-installation forecasts have close to 100% upside in a clean sweep versus the status quo ante. This implies significant upside for leading wind developers and companies in their supply chains, such as turbine-blade makers. Additional upside for solar is more muted, just because the growth outlook is so strong anyway. The targeted energy-efficiency upgrades to buildings, likely to be part of an infrastructure stimulus, would be a strong tailwind for companies that provide solutions for heating, cooling and powering buildings more sustainably. 

We would also expect the 200,000-vehicle-per-automaker cap on the current US$7,500 incentive for electric vehicles to be removed and emissions standards for automotive OEMs to be tightened, meaning that our US electric-vehicle sales forecast also has close to 100% upside (to date, the US has been by far our lowest-growth electric-vehicle market); this would be a tailwind for the diverse companies in the electric-vehicle supply chain, from makers of battery components to suppliers of sensors, software and power semiconductors.

Granny was the “true parent”, court rules in inheritance case

  • The Gauteng High Court has ruled that a grandmother who looked after a child should benefit from the child’s estate.
  • The child, who had cerebral palsy, died at five leaving about R15 million.
  • The father of the child had not seen him since he was six months old; his mother suffered from depression and his grandmother brought him up.
  • Judge Jody Kollapen ruled that the mother and the grandmother, not the father, should share the child’s estate.

The precedent-setting judgment penned by Gauteng High Court Judge Jody Kollapen focuses on the interpretation to be given to the term “parent” in the Intestate Succession Act (ISA). The matter before him was a dispute over who should inherit a substantial estate, about R15 million, of a child who had cerebral palsy and died aged five.
His estate, which comprised a payout from the Department of Health for future care as a result of negligence during his birth, was placed under the control of an executor, appointed by the Master of the High Court a month after he died in April 2018.
Three people laid claim to the estate: the child’s biological father, his biological mother, and his maternal grandmother.
Their claims, Judge Kollapen said, triggered an important discussion as to the meaning and context of what is understood by the idea of parenting and parenthood.

“Is the definition of a parent for the purpose of the ISA simply a matter of blood and biology or is its determination a matter which in each case is to be arrived at by a consideration of what parenting, parenthood and being a parent has come to mean in our law, regard being had to the values and objectives of the constitutional dispensation which enjoys supremacy in our legal regime?” he asked.

The facts before the court were that the child’s parents never married, nor did they cohabit before or after his birth. His father was not present at his birth, and did not assume any parental responsibilities or contribute in any manner to raising him. The father last saw the child when he was six months old.
The child lived with his mother and grandmother. His mother suffered from depression and was unable to take proper care of him. She would disappear for days. She was unemployed and relied on her own mother financially.
The grandmother stepped up, giving up her job as a hairdresser and became his full-time caregiver.
Shortly before the child died, a protracted legal battle was finalised in the Gauteng High Court, in which she and the mom were granted parental responsibilities and rights and the father’s rights were terminated. In that application, the granny detailed how needy the child was: explaining that he could not sit, could not feed himself, had impaired vision, and was in constant need of care, love and attention.
Two days later, the child died, and the inheritance issue came before Judge Kollapen.

The father argued that the intestate inheritance in South Africa was “blind to the worthiness of individual heirs” and revolved around the issue of “blood” and “biology”.
But Judge Kollapen said while the Act referred to parents in a wide sense, it was open to interpretation.
He said the bar was low for biological fathers to acquire parental rights and responsibilities “including contributing in good faith to the child’s upbringing” , but the father had elected not to have anything to do with the child because of his disability.
“To this extent, and on the facts of the matter, interpreting the Act to mean that reference to a parent is limited to the biological or natural parent is simply untenable, will not make sense, will not accord with the understanding of what a parent is and will lead to absurd results.”
With regard to the mother, a family advocate’s report, compiled before the child’s death, had noted that she intended to do better and this was why she had been granted full parental rights and responsibilities. Judge Kollapen said he could not ignore this.

The grandmother, he said, was entitled to be called a parent “in truth, in reality and in law”.
“From time immemorial, grandparents and grandmothers in particular, played a dominant and defining role in the lives of millions of our people.

He said the father’s conduct was in stark contrast to that of the grandmother who “from his discharge from hospital after birth up to the day of his passing, lovingly provided, supported, cared for and sacrificed so much, she acted in the most unselfish way, to take care of his every need fighting for his dignity and rights”.
Judge Kollapen ordered that the mother and grandmother should inherit the estate in equal shares.


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