This optimism is being mirrored in the financial markets. The South African rand, although down 0.4% against the dollar on the day, is set for its best quarterly performance since December 2022. Additionally, South African stocks are enjoying their strongest third quarter since the “taper tantrum” of 2013. The FTSE/JSE Africa All Share Index has risen by nearly 10% over the past three months, achieving 13 record-high closing levels, outperforming the MSCI Inc.’s emerging-market equity index.
The rally in both the currency and stock markets is a reflection of confidence in South Africa’s fiscal policies, particularly the government’s commitment to economic reform and fiscal discipline under the new coalition government, which came to power in June after the African National Congress (ANC) lost its parliamentary majority for the first time since the end of apartheid in 1994. President Cyril Ramaphosa’s administration has made it clear that job creation and economic growth, especially through infrastructure investments like roads, railways, and dams, will be its top priorities.
The government’s fiscal discipline, including efforts to address power shortages and visa backlogs, has been positively received by investors. Moreover, the country is witnessing a wave of new investments, such as Anglo American’s $625 million commitment to iron-ore projects and Qatar Airways’ acquisition of a stake in South African airline SA Airlink.
The state-owned power utility, Eskom Holdings, has also managed to stabilize the power grid after facing record blackouts that severely impacted the economy in 2023. Despite these positive developments, challenges remain, including corruption, violent crime, and questions about the sustainability of the coalition government.
Strategists at Goldman Sachs, such as Kevin Daly, have suggested that the country’s fiscal policies will likely remain on course, with further reductions in bond yields expected as markets price in fiscal stability. They also recommend investing in the longer end of the yield curve, anticipating potential for further gains in response to the coalition’s focus on restoring credibility and economic stability.