Impact of new budget on SA’s equity outlook

South Africa's recent budget announcement has left the market in a state of uncertainty as stakeholders continue to discuss and analyze its implications. Despite the ongoing discussions and evaluations, the budget has already made an impact on various sectors of the economy, particularly in the equities market. One key area that has seen significant shifts is the tech sector, which has responded negatively to the controversial VAT increase. While the increase was lower than initially proposed and spread over two years, it has still created challenges for businesses and consumers alike. The retail and consumer-driven sectors are expected to bear the brunt of the VAT hike, with potential impacts on consumer spending and companies' ability to absorb the additional costs. Additionally, the lack of inflationary adjustments on the personal income tax side may further strain real spending and wage growth, adding to the overall economic challenges. Despite these headwinds, some companies are positioned to weather the storm and even benefit from the budget changes. AVI, a quality company with stable returns and high dividend yields, stands out among food producers as a promising investment option. With a diverse portfolio of household brands and a history of solid performance, AVI presents an attractive opportunity for investors seeking stability and growth. In the food retail sector, companies like Shoprite and Woolworths have capitalized on market shifts, particularly in the premium end of the market. Both companies have seen growth in market share and expanded into adjacent businesses like pet products. Shoprite's diversified regional presence and cost management strategies have helped it maintain market share, while Woolworths' focus on core business areas like food and clothing has led to improved performance and growth. Another standout performer in the retail sector is Mr Price, which has shown resilience despite challenges such as power cuts and economic uncertainties. With a strong cash-based business model and a focus on value and trends, Mr Price is expected to continue its growth trajectory and outperform peers in the industry. The company's recent upgrade and projected top-line growth reflect market confidence in its ability to navigate challenging conditions. Looking ahead, the precious metals group (PGMs) sector is expected to see improvements despite recent pressures. Factors like increasing demand for electric vehicles and operational restructuring in companies like Sibanya are anticipated to drive growth in PGM prices and volumes. While challenges persist, the potential for a rebound in PGM prices and supply shortages bode well for the sector's outlook. Overall, South Africa's equity outlook in the aftermath of the budget announcement remains mixed, with opportunities for strategic investments in resilient sectors like retail and PGMs. As stakeholders continue to assess the budget's impact and navigate economic uncertainties, informed investment decisions will be crucial for maximizing returns and mitigating risks in the evolving market landscape.