Africa-Press – South-Africa. The ANC’s realisation that it should encourage private sector investment in the economy rather than cling to failing state monopolies is central to South Africa’s gradual economic recovery.
This realisation has kicked off a significant reform agenda, which will increase private sector participation in key economic sectors such as electricity and logistics.
These reforms should also see substantial private investment and operation of infrastructure in South Africa, unlocking hundreds of billions in investment.
The increased investment from the private sector may kickstart the local economy and create a positive flywheel that drives sustained economic growth.
This is feedback from Symmetry chief investment strategist Izak Odendaal, who outlined the case for renewed optimism in South Africa’s economy despite political noise and the potential end of the government of national unity (GNU) in the coming years.
Clearly, maintaining a positive economic and market outlook will depend on sensible politics and government policies, Odendaal said.
Coalitions are now a reality at the national level and will remain so for the foreseeable future, making extreme policies less likely in South Africa.
The current coalition, a self-styled GNU, has been welcomed by the market for its focus on the rule of law, improving governance and raising economic growth.
While there is disagreement within the GNU about how to achieve its goals with likely missteps along the way, there is a broad consensus that the country needs sustained, faster economic growth and sustainable government finances.
Whether the GNU will see out its full term remains to be seen. Local government elections late next year or early 2027 will be a key marker in how the political landscape is changing.
Either way, a crucial pivot that predates the GNU is the ANC’s realisation that it should encourage private investment, rather than clinging to state monopolies.
This mind shift was arguably brought on by the severity of the electricity crisis, but the success in ending load-shedding has given it credibility, and it is now embedded in official ANC policy.
The party will choose a successor to President Ramaphosa in late 2027 and this is a source of unease for many investors. However, a drastic change in policy seems unlikely, especially if current policies show results.
Moreover, whoever succeeds Ramaphosa will still have to operate in a coalition with other parties, limiting the potential for extreme swings.
Politics in South Africa will remain noisy, and the downside of coalitions is that they can be unstable and indecisive.
Future coalitions might include populist parties, but no one will have the full say, and all parties will have to compromise, meaning destructive policies are less likely.
The likelihood of one person concentrating power in their hands again is slim. And even if they do, we have now seen how the courts, other democratic institutions and ultimately the markets present checks and balances.
Challenges remain
Symmetry chief investment strategist Izak Odendaal
Despite the significant progress made in reforming South Africa’s electricity and logistics sectors, little change has occurred in other spheres that desperately need intervention.
In particular, the collapse of the country’s municipalities needs much greater attention, Odendaal said, as they are the main vehicles for service delivery and the primary touchpoint citizens have with the government.
This collapse is also threatening the progress made in tackling load-shedding, with electricity distribution infrastructure, which municipalities are largely responsible for, deteriorating significantly in recent years.
As a result, despite there not being a shortage of electricity, there have been sporadic power outages as distribution infrastructure fails in some municipalities. In other cases, load reduction occurs to ensure the infrastructure does not fail.
Another serious concern is the corruption in parts of the criminal justice system, as highlighted by the Madlanga Commission hearings, Odendaal said.
Unemployment also remains much higher than in any comparable economy, with economic growth being below the rate of population growth for the past decade.
However, there is a difference between how smart investors think and the way most other people do.
The latter will look at a situation and ask if it’s good or bad, while investors will ask if it’s getting better or worse. They care about the direction of travel and what it is priced in.
In the case of South Africa, the evidence keeps piling up that things are improving. Local bonds, listed property, and equities have delivered phenomenal returns of 22%, 29% and 36% respectively.
Despite this, domestic asset classes can still benefit from better fundamentals and sentiment over the longer term.
Sensible diversification will always remain important because the future is uncertain, and many things can still go wrong. Broadly speaking, South Africa’s lost decade is over — a milestone worth celebrating, Odendaal said.
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