Some say that the success of the Springbok rugby team is South Africa’s crowning sporting achievement, Table Mountain its signature tourist attraction, and Nelson Mandela its greatest son. However, that is only above the surface -- it is what lies beneath the country’s surface that matters more from an economic and market perspective. In managing the M&G Enhanced Income Fund, we are fully aware that the economic fortunes of South Africa, as a small open economy, are inextricably linked to changing global economic conditions. This arises both from financial and trade linkages. Our trade with the rest of the world is dominated by commodities, with global supply and demand factors having profound effects on commodity prices and ultimately on our economy and financial markets. The passage of time has seen a decline in mining’s direct contribution to economic output, and the composition of the products mined has changed as well. The boom-bust nature of commodity cycles has historically had a pronounced influence on South Africa’s business cycle, and although this influence has waned over time, the impact of commodities remains ever present.

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