What directions is South Africa taking under the new coalition government that encourages investors?
It has been over 100 days since the conclusion of South Africa’s general elections and the formation of a Government of National Unity (GNU). After losing 30 years of majority rule the ANC has, of necessity, gone into a national coalition with the more centrist and business friendly Democratic Alliance. This is buoying local markets, triggering bond surges and boosting the Rand by 5.8 percent.
Observers have commented this new coalition could lead to more stability and economic focus, opening opportunities for savvy investors. Financial markets have responded positively so far, anticipating structural reforms and policy continuity.
There is a cautious optimism in the air. What does this shift mean for the economy and investment in the country, especially amongst the business community and potential investors?
A recent survey commissioned by Bank of America found that a record number of fund managers see GNU reforms potentially delivering returns of over 10 percent within the next 12 months. It also showed that asset allocators expect average returns of 17 percent on equities, 8 percent on cash holdings and 13 percent on government bonds maturing in 2035.
President Cyril Ramaphosa stated recently in his State of the Nation address that the new GNU has agreed to focus on creating jobs and boosting infrastructure and inclusive economic growth.
More jobs mean more tax revenue for the state which, partnering with the private sector, could be invested into much needed logistics and infrastructure and ramp up the delivery of materials, imports/exports and products into the economy. Also, on the GNU agenda is reducing the cost of living and building a capable and ethical state.
SA is hosting the G20 next year and electricity provision has been stable now for 200 days after years of challenging blackouts previously.
Recent local banks models show that inflation is under control and the investment floodgates could be poised to start opening if the promise of an investment friendly climate starts to be realised.
Will recent political developments have an impact for Ultra High Net Worth (UHNW) individuals and Trust companies that service them? How will it impact Banking, wealth management and capital controls? Follow these posts to find out.
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