Investors adopt wait-and-see attitude ahead of SA’s May elections, says Bank of America

A packed crowd of ANC supporters in this file photo, turn out to hear President Cyril Ramaphosa deliver the ANC manifesto ahead of the 2024 election at the Moses Mabhida Stadium. Picture: ANC

A packed crowd of ANC supporters in this file photo, turn out to hear President Cyril Ramaphosa deliver the ANC manifesto ahead of the 2024 election at the Moses Mabhida Stadium. Picture: ANC

Published Mar 20, 2024


South African investors have adopted a wait-and-see attitude ahead of the May 29 elections and would be banking on possible post-poll clarity on policy as well as expected US dollar weakness, which could act as sparks to further investment decisions, Bank of America’s emerging markets strategist, Morris John Stewart, said yesterday.

There was, however, less confidence in speedy resolution of port and rail logistics hurdles, he said. Despite some improvement in port volumes and backlogs in Durban, port delays were still afflicting South African businesses, especially those in mining, manufacturing and retail.

“Investors don’t see a swift turnaround in logistics although port volumes are up recently and the Durban backlogs have improved,” said Stuart, speaking after Bank of America hosted investors focused on South Africa. “Locomotives and spares procurement are very high hurdles for logistics.”

Although investors were seeing an attractive South African market with potential for returns, many of them have adopted a wait-and-see attitude on investment decisions pending the May 29 election. President Cyril Ramaphosa will be seeking a second term amid waning popularity for the governing ANC party.

Analysts say the ANC will need a coalition with smaller opposition parties to be able to retain its governing mandate, as it is expected that the party will perform badly in this year’s election. Analysts at Bank of America, however, believe that the status quo will prevail in terms of policy direction post-election.

“There are so many concerns that this is an important election for South Africa. In summary there won’t be any policy shifts so we are likely to see the status quo on policy outlook,” said Tatonga Rusike, a Bank of America senior economist focused on Sub-Saharan Africa.

The concerns over South Africa’s 2024 election were stemming from the possibility that the ANC could lose majority control for the first time since 1994. Although this was likely, it was also unlikely that any opposition would romp to victory as South African opposition movements are fragmented unlike in other countries such as Ghana, added Rusike.

Despite this election uncertainty, investors focused on South Africa have faith in strong corporate management and an attractive market that is showing resilience to the country’s headwinds that include depressed consumer spending, as a result of high interest rates and inflation.

“Investors see an attractive market and are looking for a spark for the economy and the market. A strong majority is in a wait-and-see mode (so) investors are going to weigh up what they do before the elections and they might wait and see what happens,” Stuart said.

South African equities, for example, were poised to spring up towards year-end, a period that Bank of America expects the rand to lift up, inflation to ease and interest-rate cutting to kick in. In 2023, the JSE had a rally when the dollar weakened from October to December.

Foreign investors on South Africa were also “more optimistic on the private-sector participation with the government that can move the needle and see better growth in the medium term”, than local investors.

“The trigger is post-elections and a weaker dollar for investors asking about the spark for South Africa,” added Stuart.

Rusike said South African rate cuts had been delayed, but not yet denied. Bank of America started the year bullish on rate cuts starting in July. However, Rusike said the South Africa Reserve Bank was “not yet ready to talk about rate cuts” as the apex bank remains hawkish on rate-cutting and was likely to remain so in next week’s meeting.