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As this year draws to a close, we are continuing to see some positive signs in South Africa. If we stay on the same path over the next four years, we hope to see the Rand, the local bond market and the JSE all strengthen.

Rating Agencies (S&P, Moody’s & Fitch)
In recent days, international rating agencies have started to improve their outlook for South Africa. They appreciate the Government of National Unity (GNU) and the direction of its policies, which now seem more certain and implementable. This creates an environment conducive to economic growth. However, these agencies remain cautious about risks related to expenditure on wages, social spending, and state-owned enterprises (SOEs).

Over the next few months, the outlook from these ratings agencies could move from ‘Stable’ to ‘Positive’. Achieving an upgrade to an investable rating will take a few more years, but we are on the right path. This rating change will initially have a significant effect on the Rand and the bond market. International investors will buy (rather than sell) the Rand, strengthening the currency. The bond markets, which are enormous and dwarf the JSE, will also see strong flows if investors start buying SA bonds.

New York Conference
The South African economic outlook appears stronger. Recently, an important investors’ conference was held in New York, attended by political figures, leaders of SOEs, and business leaders who met and presented to potential international investors. There is certainly increased interest in South Africa, although investors remain cautious after previous experiences during the “Ramaphoria” period of the last election cycle.

Reports from New York highlight that John Steenhuisen emphasized the Democratic Alliance’s commitment to seeing the GNU through its full five-year term, contrasting with the local media’s portrayal. SOEs conveyed their openness to collaborating with private businesses for improvement, and private enterprises showed a readiness to contribute. The conference frequently highlighted the new cooperation between the private sector and government, which both parties are eager to continue. This trend is gaining momentum and is seen as positive by investors.

International Interest in SA Increasing
Reports from major international banks indicate that the number of analysts now listening to South African CEOs’ presentations has increased significantly. International interest in these calls has declined over the past few years but has recently revived with a lot more investors and analysts looking for investment opportunities. However, they have not yet shown any true commitment to buying South African stocks in any meaningful amounts yet. If they do, it could have a significant impact on the Johannesburg Stock Exchange (JSE). Funding institutions also expressed a strong willingness to facilitate investments in viable projects.

These are early signals of what is possible with clear and effective governance. Investors are hungry for investment opportunities but must do their due diligence. Six months ago, they were not looking at South Africa. These early interest signals are positive for the stock market.

However, to reiterate, they have not moved yet. We need to continue to demonstrate progress. If/When investors start to invest and show some confidence, we will see further strength in the Rand, JSE, and the bond market.

In summary, South Africa is ending the year on an optimistic note from an investment and economic point of view. It has been a tough few years and this is a welcome respite. The signs are there and we hope to see continued progress and growth next year.

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