There is some good news regarding your recent investment performance. You may have noticed a positive trajectory in your latest statements, and we are cautiously optimistic about the continued growth and stability of SA portfolios.
At the time of writing, since the election on 14 June 2024, the Johannesburg Stock Exchange (JSE) is up around 13% and has increased by 23% over the past 12 months. Additionally, the Rand has strengthened by 8% to R17.40/$. It is important to acknowledge that we are coming off a low base, where the Rand was particularly weak against the dollar at R19.20, and the JSE was on a Price to Earnings (PE) ratio of 8, where a fair price should be 15 times.
There are two significant developments that merit your attention and could have substantial impacts on our investment landscape locally:
1. Government of National Unity
JP Landman (http://www.jplandman.co.za/Home/Read/612) has provided an insightful analysis of the current state of the Government of National Unity (GNU). According to his article, the GNU is performing much better than the day to day noise in the media. However, it is essential to understand that the primary challenges often arise not from opposition parties but from within one’s own party. This was a notable issue during the 1994 GNU, and it remains relevant today. Recognizing and addressing these internal dynamics is crucial for maintaining unity and effective governance.
The GNU is a massive government of ministers and junior ministers to keep as many people in the tent as possible. The danger of being in a GNU will likely come from one’s own party, i.e. those who have been left outside the tent by their own party. He also points out that there is healthy competition between departments to show how effective they can be in government. This can only be a good thing. We need action.
2. Collaboration of 140 CEOs with Government Initiatives
Another positive development is the proactive collaboration between 140 of South Africa’s leading CEOs and the government under the initiative known as Operation Vulindlela. This partnership is designed to support various national projects and address critical issues. Notably, a month before the recent elections, these CEOs reported significant improvements in the electricity crisis through their interventions with private consultants. NEWS 24 has highlighted their achievements over the past year and outlined their future focus areas. https://www.news24.com/fin24/companies/140-ceos-commit-new-resources-to-support-ramaphosas-economic-reforms-20241001
One of the most significant successes of this collaboration has been the turnaround in Eskom’s power generation. This improvement directly results from the collective efforts of these CEOs and their strategic interventions.
Looking ahead, these leaders are now setting their sights on further unlocking the nation’s potential by focusing on critical areas such as the rail and port infrastructure, streamlining processes at Home Affairs to attract and retain talent, and expediting efforts to assist National Treasury’s Financial Action Task Force with it’s action plan to remove South Africa from being grey listed by June 2025. The ambition among the CEO group is palpable and growing, as they continue to drive meaningful changes across various sectors.
Are we out of the woods? No, not by any means. Is it fragile? Yes, but hopefully not as fragile as the press would have you believe.
If you missed the insightful interview with Rudi Dicks from the Presidency a few months ago, please watch it here: https://ninetyone.com/en/south-africa/events/taking-stock-event-winter-2024?kv=LhINraJ0NXm1rBs5ItiaVk. (You may need to select Type of User: Individual to gain access) The discussion provides a comprehensive overview of the Presidency’s and Treasury’s strategies, highlighting the crucial role played by their social partners in achieving these goals.
We advise you to continue to stay informed by updates in the press as these stories evolve. The progress in these areas positively influences our investment climate and offers promising prospects for the future.
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