South Africa’s new Coalition Government is South Africa’s Big Chance to Move Beyond Its Past and global investors should take note.
As of 2024, South Africa holds a significant position in the global economy, ranking as the 37th largest economy by nominal GDP. This ranking places South Africa ahead of other African nations and highlights its economic prominence on the continent. Real GDP growth is expected at 1% for 2024 and 1.5% for 2025 and 1.8% for 2026. Markets will be focused on whether south Africa’s new Coalition Government can and will introduce pro-growth policies. Ten South African political parties agreed to form a ruling alliance, completing the first phase of creating a so-called government of national unity.
The future for SA south Africa equities is brighter than most people think. Many investors still have zero to no allocation in globally well diversified portfolios to rainbow nation of South Africa.
South Africa ranked 84th out of 190 economies in ease of doing business. The nation boasts 11 diverse official languages. South Africa is a gateway to an African market of about a billion people.
Rainbow Nation was a term coined by Archbishop Desmond Tutu, the term "Rainbow Nation" describes post-apartheid South Africa, emphasizing unity in diversity. Thus, "rainbow opportunities" in this context could refer to the wide range of opportunities available in a multicultural and historically rich society.
South Africa’s diverse economy and rich natural resources present a variety of investment opportunities, sometimes referred to as "rainbow opportunities" to reflect the multifaceted nature of the potential across different industries and sectors.
The new Coalition Government is South Africa’s Big Chance to Move Beyond Its Past and global investors should take note.
South Africa's Cyril Ramaphosa has been sworn in for a second term in office as president.
South Africa Lawmakers re-elected him to stay on as president last week following a deal between his and nelson Mandela’s African National Congress (ANC) to form a coalition government with long-time rival Democratic Alliance (DA) and other parties.
Lawmakers re-elected him to stay on as president last week following a deal between his African National Congress (ANC) to form a coalition government with long-time rival Democratic Alliance (DA) and other parties.
The global financial markets speak a language but not everyone is aware or willing to listen.
The global foreign exchange markets are already sending a market signal as the ZAR South African Rand is best performing emerging markets currency against the world’s reserve currency the United States dollar. YTD 2024 the ZAR south African Rand is the 8th best performing currency globally as markets focus more on the narrative of Foreign Investors Net Buyers of South African Shares.
iShares MSCI South Africa ETF (EZA) is the United States listed south Africa country ETF.
The iShares MSCI South Africa ETF seeks to track the investment results of an index composed of South African equities. The ETF is often used in portfolios to express a single country view. EZA closed the week of June 20th at USD 44.26.
Investing in South Africa can be appealing for several reasons, despite some economic and political challenges. South Africa has a well-diversified economy with key sectors including mining, manufacturing, agriculture, services, and finance. This diversification can provide multiple opportunities for investment across different industries.
South Africa benchmark index is the FTSE/JSE Top40 Index is a capitalization weighted index. Companies included in this index are the 40 largest companies by market capitalization included in the FTSE/JSE All Shares Index. The index was developed with a base value of 10399.53 as of June 21, 2002. The Top 40 index closed the week of June 20th at 72,857 and a valuation of P/E 11.22 x with a 12-month dividend yield of 3.83%. YTD year-to-date, Harmony gold mining with +36.42% and Anglo-American Platinum with -36% are respectively the best and worst performing stocks in the South African equity market. Sector wise, Consumer Discretionary +21% and Health care 20%, industrials +16%, real estate +8.7% Financials 7.4%. the communications sector is flat YTD with 0.1% while consumer staples -0.6% and materials -3.5% are the worst performing sectors of the south African stock market so far this year.
South Africa’s budget next year is expected to yield a “debt-stabilizing primary surplus” in the 2025-26 fiscal year, a reduction in the budget deficit to pre-Covid levels, and a stabilization of debt-service costs as a percentage of revenue.
The Formation of Coalition Government is being closely watched by global investors anticipating an acceleration of economic reforms under a more centrist-leaning South Africa government. The rand has strengthened 4.6% so far this month as bonds and stocks have rallied on optimism about pro-growth policy continuity.
Investing in South Africa offers a mix of high potential returns and inherent risks. Conducting thorough research and possibly seeking independent advice can help mitigate some of these risks. Conducting thorough due diligence and staying informed about the local economic and political developments is crucial for making informed investment decisions.
Rainer Michael Preiss, Partner & Portfolio Strategist at Das Family Office in Singapore
