Here’s why investor sentiment remains mostly positive ahead of the 2024 election

The rand has strengthened in the run up to the elections as investors have priced in a less risky outcome. File Picture: Karen Sandison / Independent Newspapers

The rand has strengthened in the run up to the elections as investors have priced in a less risky outcome. File Picture: Karen Sandison / Independent Newspapers

Published May 28, 2024


Local and international investors are waiting with keen anticipation for the outcome of South Africa’s most crucial election in three decades.

Yet, according to experts in the field, investor sentiment is not as negative as some might have feared, with many having factored in a lower risk in what is likely to be the country’s first national coalition government.

Sanisha Packirisamy, economist at Momentum Investments, told IOL that the international community appears to have lowered the probability of the ANC dipping below 42%, which would have increased the risk of a more “untenable” coalition with leftist parties such as the EFF or MK.

However, many businesses were still delaying investment decisions until after the election.

“The appreciation in the rand since the middle of April could be due to lower political risk pencilled in, alongside the recovery in South Africa's terms of trade, such as higher metals index and steady global oil prices.

“On the ground in South Africa, businesses have likely delayed non-essential investments to see the outcome of the elections first before deploying substantial amounts of capital,” Packirisamy said.

Peter Armitage, CEO of Anchor Capital, described business sentiment among the local and international investors as moderately positive.

“The concern would be a new government or coalition which includes participants that have ‘market-unfriendly’ policies like nationalisation. The voting polls seem to indicate that SA is not heading in that direction and that a more centrist government (the status quo) is likely to materialise.

“If the ANC is able to achieve near 45% it is likely that they could attract smaller coalition parties that would not derail their core objectives. So it’s a bet on ‘more of the same’. The business community is very concerned about SA’s low economic growth rate, but at this stage would be relieved if the election outcome does not put further pressure on this,” Armitage added.

Everest Wealth CEO Thys van Zyl concurred that markets have priced in a relatively positive election outcome, and the lack of load shedding ahead of the election had also improved business sentiment.

"The election has not been preceded by negative events, such as violence or protests, or negative sentiment. Furthermore, a reasonably positive outcome is also expected in next week's election, and if the streak of no load shedding can continue, it could bolster GDP growth in the second quarter," Van Zyl said.

High but steady interest rates are also having a positive influence on foreign capital inflows and, consequently, the local currency. Local interest rates are expected to remain unchanged when the monetary policy committee announces its latest interest rate decision on Thursday, May 30.

The rand was trading at $18.34 on Tuesday, May 28, as special voting got under way ahead of the main election event on May 29.

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