May 2024 Update
F&A Monthly Update | MAY 2024
What an incredible few weeks its been in SA. This keen mix of nerves and hope as we went to the polls, followed by a devastating and deserved loss of outright control by the ANC, a stunning move towards a Government of National Unity and now the various steps towards co-governance. The current teething problems are both well documented and to be expected. The next few days will be met with interest as negotiations reach conclusion and Ramaphosa announces his various ministers.
Amongst all this noise it is important to remember that coalition government was being touted for SA in the late 2010s, with polling (then) showing ANC dropping below 50% in 2029, with substantial losses thereafter. It is quite amazing that it has happened; 1. a term early and, 2. so comprehensively. Other data around liberation movements and their reign averaging a 3-decade lifespan sheds another interesting snippet on a remarkable period for our country from 1994 – 2024. What is certain is that coalition governments are very likely to be our new order in SA. I would expect to see a good deal of noise over the coming years as ingrained corruption and non-performance is rightly brought to light and dealt with. This won’t feel good as it is likely to be accompanied by very uncomfortable events, led by desperate folk trying to stay undeservedly cushy.
My gut tells me that South African’s on the whole are some of the loveliest people on earth, agitated by corrupt governments (both pre and post 94’) as well as deliberate politicking around these wounds. The positives being the people, the negatives being the narrative which continues to force division, and unaccountable, corrupt and weak leadership. This wonderful piece from Gareth van Onselen shows the estimated spread of voters from various races voting for each of the major parties.
It is clear that historical wounds, repeatedly agitated and prayed upon by political players, will continue to hurt and motivate South Africa’s black population to vote for ANC / MK / EFF. In this respect, we can each play a positive and useful role going forward to denounce racism, and reinforce, through kind and caring actions that the pigmentation of our skin doesn’t divide us, but can instead unite us through our wonderful mix of cultures and talents. It is easy to be reminded of weaknesses, errors, and stereotypes, while forgetting just how special each person can be.
We have a country that is blessed and endowed with so much beauty and talent. We don’t need a perfect government, quite simply a functioning, corruption-free one.
I am optimistic about the outcome of the elections. I don’t have a perfect view on perfect politics, but I do believe in competition, and accountability, and the outcomes of this election and subsequent coalition governments should deliver on both. We have held onto a degree of fear because we have known about so much wrongdoing and experienced hardship, but seen differently, this awareness is an incredible positive. Consider how wilfully ignorant we were towards the beginning of Zuma’s terms versus how much we know now. It is both better, and more uncomfortable to know. That is a discomfort we should welcome.
We are at a watershed moment laced with opportunity. A chance for our political culture to really take a step forward and mature. The ANC have learnt that they are not invincible, and this should be the understanding of all leaders. No leadership position is owned, it is rented at the price of delivery.
What is fascinating from an investment, behavioural, sentiment perspective is just how difficult it is to predict events. Markets have already bounced favourably around SA and the Rand, with the coming months and years likely to continue to be volatile as the creases of South Africa’s past are slowly ironed out.
I remain firmly pro South African! Yes, we have a lot we could complain about, but our civil awareness of our government’s flaws, alongside our uniquely South-African grit and determination within us each makes us a formidable bet as a country for the long-term. There is nowhere I would rather be! This is home!
May 2024 Update
This month's piece is compiled by Liam Dawson, Portfolio Manager & Investment Analyst - PortfolioMetrix.
GLOBAL UPDATE
Inflation in the US continues on its downward trend, just at a slower pace than originally anticipated by the markets. This has led the US Fed to maintain rates at a higher level. Other central bankers however face slightly different challenges and as such have begun cutting rates in their economies. Despite the higher US rates and increased geopolitical risks markets continue to reward the A.I. themed rally benefitting the mega-cap US tech stocks such as NVIDIA and Microsoft. Global equities led returns in this environment.
Elsewhere, Chinese optimism has lifted ever so slightly in the midst of a confidence crisis and the UK heats up as they enter the runup to their elections in July. The Labour party lead the Conservative party in the polls.
LOCAL UPDATE
South African (SA) asset classes had a very muted response during the month of May, choosing a holding pattern after a very strong leadup into the election month. Uncertainty prevailed as the ANC has evidently lost its 30-year majority rule. What is important to recognize is that the elections appear to have been free and fair, and whilst turn-out of all eligible voters has been quite low we have observed a peaceful democratic process. All eyes now turn to the coalition phase of our democracy, a very important tone will be set by which parties form coalitions at both national and provincial levels. Given the cheaper valuations of South African asset classes we remain optimistic of good forward returns should some uncertainty settle.
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