Originally posted by the Voice of America. Voice of America content is produced by the Voice of America, a United States federal government-sponsored entity, and is in the public domain. Surging South African Stocks Give Psychological Lift Joe DeCapua 13 October 2010 South African stocks have had their strongest showing since July 2008, reaching the 30,000 level. South Africa is considered a strong emerging economy and has become very attractive to international investors. David Shapiro, director of Sasfin Securities, an independent banking and financial services group in Johannesburg, says, âFirst of all, psychologically to get back above 30,000 is very important. Remember, at the depth of the (economic) crisis we were down at about 18,000. So, weâve recovered quite a lot of ground.â He says, however, stocks are still about 10 percent below the 2008 level, which he says can now be viewed as an âartificial high.â âIt was just after the sub-prime (mortgage) crisis broke in America. At that stage, everybody believed that the sub-prime crisis was really confined to property in the U.S. and wouldnât affect the rest of the world. So, as the dollar weakened, we saw commodity prices going up, believing that Chinaâs demand would fill the void that America was going to leave.â Then reality set in âOf course, once Lehman Brothers fell and we learned that the crisis had spread around the world, we dropped away. So, weâve clawed our way up,â he says. Lehman Brothers, a global financial services firm, declared bankruptcy in 2008. It was the largest bankruptcy filing in U.S. history. However, while investors reap the benefits of a rising stock market, Shapiro says there are unexpected âconsequencesâ from having a strong rand. âWeâve always believed that our currency was too strong and it needs to weaken. And if anything, weâve seen our currency going the other way. Weâve seen huge inflows from foreign investors into the South African rand. Even at a time when our economy was laboringâ¦the money is flowing in, deals are being done,â he says. This includes the entrance of the U.S. based Wal-Mart and other foreign companies into South Africa to get a foothold on the continent. There have also been a number of major banking deals as well. Shapiro says, âAll these deals have sparked an enormous amount of interest in our market. Our currency, the rand, has gone very strong against the dollar, which is not helping our economy because, like everybody else, we want a weak currency to help our exporters.â He adds, âEverythingâs topsy turvy. Itâs difficult to reconcile the underlying economy with the stock market. But if youâre an investor, I think youâre rejoicing and youâre quite happy to see the market at 3,000.â No trickle down The average South African, however, is not seeing the benefits of a rising stock market. âNot really,â he says, âIn fact, we donât know how to contend with the strong rand. Because we sell in (US) dollars, but pay in rand, it means that margins are being shrunk. Yes, commodity prices are going up, but itâs been neutralized in dollars because of the strength of the rand. But local costs are going up. Weâve seen wage costs going up, the cost of electricity going up, food costs and other costs.â Shapiro says many South African companies are âbattling.â Theyâre making less money on exports, while consumers are buying cheaper imports. âOur manufacturers,â he says, âare suffering on both angles.â Diversifying South Africaâs economy could help deal with similar problems in the future. âItâs a very free economy,â he says, âItâs a very open economy. And itâs something that weâve been battling with over the last decade - just how to diversify our economy. We are trying to diversify. We need to diversify in order to create jobs.â South Africaâs unemployment rate hovers somewhere around 25 percent. âSo we have to diversity our base here, but no oneâs got the answers yet. Itâs very difficult. We havenât come out with an industrial policy that has made any difference,â he says. .