The best case scenario for South Africa in 2024

 ·30 Jan 2024

Those working in the financial sector are concerned about South Africa’s upcoming 2024 National and Provincial Elections – even if the worst of their fears are unlikely to materialise.

Francois Stofberg, Senior Economist at Efficient Wealth, said that South Africa faces two likely scenarios after the election.

In the first scenario, the ANC could lose enough votes to force it into a coalition with one of the bigger opposition parties – most likely the EFF. If not nationally, this will probably play out in key provinces like Gauteng.

Should this happen, South African markets are expected to face a bumpy ride, the economist said.

However, if the ruling party only loses enough votes to warrant a coalition with some smaller parties, instead of the EFF, market conditions will be more favourable.

This would see bonds, equities, and the rand outperforming a depreciating dollar.

I third scenario is also present – one where the ANC wins an outright majority of the vote. However, most polls do not point to this being the case, where voter turnout trends and soured attitudes towards the party point to it falling just short.

Bank of America (BofA) said that a coalition between the ANC and smaller parties is the most likely outcome in these scenarios – with very little change expected when it comes to how the country is governed.

Projected market improvements – particulatly with the rand – could be seen in BofA’s latest fund manager survey, where the rand is expected to end the year at R17.73/$.

An forecast decline in the dollar is expected to see more capital flowing to emerging markets, such as South Africa.

Respondents in the survey also said that local assets are expected to beat offshore returns this year, with over 45% expecting local bonds to outperform in 2024, while over 30% said that this was the case for local equities (All-Share Index).


Stofberg noted that the state’s finances are under extreme pressure, which should result in an “interesting” Budget speech next month.

“Overall, something radical will be needed in government to shift the policy focus in South Africa away from rent-protectionist, social-upliftment policies towards wealth-creative policies. This is the only solution for poverty and unemployment in our country. The solution is definitely not to lean more left,” Stofberg said.

However, besides no new taxes, BofA said that there will likely be little good news at the budget, with struggling state-owned enterprises likely to receive higher transfers, particularly Transnet.

Interest rate boost

Moreover, questions still remain around the interest rate trajectory in South Africa and the rest of the world.

“The question is no longer if the United States (US) will decrease interest rates but if they will be allowed to do so of their own choosing, or if a struggling economy will force them to do so,” Stofberg said.

“We are hopeful that the US will not delay in reducing interest rates because that will probably signal to our own South African Reserve Bank (SARB) that they can start cutting too.”

“We might see a 1% (100 bps) cut in interest rates this year, which means that each R1 million of household debt will cost about R800 less each month. More money to spend will be welcome news to struggling households in South Africa.”

With many of the upside risks to the inflation outlook having dissipated since last year, the Nedbank Group Economic Unit expects the SARB to cut interest rates by a cumulative 100 bps across 2024.

Although Nedbank’s economists expect the first 25 bps cut to be in the May meeting, they said that SARB could delay the first cut to July if the rand drops ahead of the South African elections, the USA eases its monetary policy later than expected and geopolitical tensions escalate further.

If those events take place, the SARB is only expected to cut interest rates by 75 basis points across the whole year.

Read: How much you need to be worth to be one of South Africa’s richest 1%

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