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Is SA Back on Track?
Jurie de Kock
November 29, 2024
Is SA Back on Track?
It’s a great time to be South African. Last week brought positive momentum, with the Springboks finishing their season on a high against Wales and Pieter-Steph Du Toit taking the International Rugby Player of the Year award. Ending the year as the number one ranked side, it’s hard to see their top ranking overtaken before they only play again in July next year.
The South African Reserve Bank cut interest rates by 0,25% last week, providing relief as inflation dropped to 2,8%, the lowest since before COVID-19.
By yesterday, Eskom had reached 247 days without load shedding, a promising sign of progress. After the absence of the last few years, we have all enjoyed seeing the lights back on Table Mountain at night.
As South Africa navigates its economic recovery, what’s the outlook for growth, inflation, the Rand and bonds?
On the global stage, offshore markets enjoyed a strong week, while attention in the US is still considering the potential impact of President-elect Donald Trump’s policies.
Ninety One share their views per the first attachment which can be summarised as;
The fast view
The rand should be more stable now that load shedding is no longer constraining the economy.
Inflation remains well-behaved, allowing the South African Reserve Bank to continue easing interest rates.
We anticipate economic growth of 1,7% next year (for South Africa), thanks to lower inflation, support from two-pot withdrawals, rate cuts and investments in infrastructure, including renewable energy.
The favourable outlook for the rand, inflation, interest rates, and growth supports our bond market.
Local vs Offshore R 1 million Challenge
Via Business Day and journalist Alec Hogg, a BizNews reader created an interesting investment challenge, giving two industry managers R500,000 each to invest in funds and equities of their choice, offshore and local, to settle the debate.
The five-year investment challenge kicked off in 2021, and after six months, the local portfolio had grown to R600,000, and the offshore portfolio had shrunk to R350,000.
From November until May 2022, the local portfolio then went up 25%, while the offshore portfolio dropped 25%.
Now, after three years and time to re-evaluate - the local portfolio stands at R639,000 and the offshore portfolio is R502,000.
The offshore portfolio manager acknowledged his mistake during the stock market downturn. “I panicked and moved some assets to cash,” he said.
“Timing the market is tough. You must be right twice – when exiting and re-entering. I wasn’t, and it cost me. The local portfolio manager’s advantage was his consistency.”
For the full article, you can click on this link below;
For myself, while it’s an interesting real-life comparison - I don’t believe this is an offshore vs local investment debate.
Rather, I see this as a good indication and reason for the importance of investment professionals sticking to their investment convictions and fundamental valuations, especially during times that may appear challenging. And why for us as investors, it’s important to stick to your proven investment strategy.
Lessons in Patience
The lesson from the above R1 million offshore versus local challenge is: the “importance of investment professionals sticking to their investment convictions and fundamental valuations, especially during times when market conditions may appear challenging. And why, for us as investors, it’s important to stick to your proven investment strategy”.
Ninety One, now per the 2nd attachment, shares their views on the same topic.
The fast view
Investors often lose out on returns by impatience and not staying the course with their investments.
Market volatility is more pronounced over the short term, while the range of return outcomes narrows substantially as the investment time horizon lengthens.
A correctly structured investment portfolio requires surprisingly little attention during periods of excessive market volatility.
We encourage investors to seek professional investment advice tailored to their own circumstances.
Ninety One’s Year end function
Last week our paraplanner Heinz Nel and I spent some time with the team at Ninety One for a relaxed afternoon of playing bowls at their year-end function. Also listened to Malcolm Charles, portfolio manager of the Ninety One Diversified Income Fund sharing the thoughts he mentioned in the article above. The team was clear, finally, we can start being proud of being and staying in SA.
Below is a photo of Heinz and I talking with Product Specialist Marc Lindley about effectively structuring offshore cash investments and using section 10C of the Income Tax Act to curb estate duty. To the left is the head of advisor services Jaco van Tonder who I teamed up with in the bowls and got 3rd place overall.
The Future of Solar in SA
Loadshedding was substantially curtailed this year; how does the future for solar look?
Jon Kornik, the CEO of Plentify, via News24, shares how the rise of residential solar in South Africa stands in contrast to how solar markets have evolved in other parts of the world.
For example, in the United States, Germany, and Australia, solar energy didn't grow because of frequent power outages - it grew because it became cheaper than grid electricity. In many of these countries, generous subsidies kick-started the transition, but ultimately, cold, hard economics drove the solar boom.
“Money talks”, and therefore, if solar energy is cheaper than the grid - we can expect SA to follow the growing global trends in solar.
OMIG Best Ideas | What’s in Our Portfolios
Trump back in office - What does it mean for the US economy and global markets?
The Old Mutual Investment Group’s (OMIG) Chief Investment Officer Siboniso Nxumalo, Head of Equity Research Meryl Pick, and Investment Analyst Irina Schulenburg recently unpacked the impact of Donald Trump’s win and shared their insights on key stocks in portfolios.
To watch this interview, click on this link:
Friday Food for Thought
