Black power can fuel stock boom

The CEO of Stanlib Asset Management, Allan Miller, is looking gleefully at the increases for police officers and teachers to guide his investment decisions.

The move will put more money in their pockets and they will be able to increase spending as well as take on more credit.

In his speech Minister of Finance Trevor Manuel forecast that the real per capita income of South Africans will increase by at least 30% over the next 10 years, with rapid growth in the numbers of black households entering the middle-income bands.

This, says Miller, will benefit retailers whose stock rose on Budget day. Already the property market has seen the benefits of a new middle class, increasing the demand for housing and driving up house prices.

The increase in expenditure on social grants means that people at the lower end of the market will have more to spend, a factor that is likely to benefit informal traders. “This will have a knock-on effect as traders increase their purchases at the larger cash-and-carry stores,” says Miller.

Further impetus will be given to building and construction growth by inner-city refurbishment encouraged by the urban renewal tax incentive and accelerated investment in low-income housing and municipal infrastructure and several large economic infrastructure projects in the decade ahead.

“While the market has known about the increased infrastructural expenditure, the ultimate number is higher than expected. Construction companies like Aveng and Murray & Roberts stand to benefit as well as other companies that supply building materials, like PPC and Iscor.”

Miller believes that with a stimulatory Budget, equities offer the best value for the mid- to longer-term investor.

Investors in insurance policies and endowments will benefit from the cut in corporate tax rates as the tax paid by the insurance companies will be reduced from 30% to 29%.

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Maya Fisher French
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