Boost for investors in South Africa
Things are looking up for the South African market, with industry statistics published by the Association for Savings and Investment South Africa (ASISA) showing some significant bright sparks.
These stem from investor anxiety that is seen to be easing after a period of stable conditions, including aconsistent power supply and a smooth transition to a ‘Government of National Unity.’
According to ASISA, investor confidence recovered in the third quarter of 2024, resulting in net inflows into the local Collective Investment Schemes (CIS) industry of R5 billion over the three months to the end of September 2024.
Additionally, existing investors reinvested income declarations (dividends and interest) worth R37.3 billion.
“This brings the total net inflows for the three months to the end of September 2024 to R42.3 billion and R86.0 billion for the 12-month period,” said ASISA.
The CIS industry statistics for the quarter and year ended September 2024 also show that assets under management increased to R3.80 trillion in the third quarter, a growth of 4.3% from the end of the second quarter of 2024, when assets stood at R3.64 trillion.
Over the 12 months to 30 September 2024, assets grew by 13.7%, driven primarily by stock market performance.
Sunette Mulder, senior policy advisor at ASISA, said that following the net outflows of R6 billion (taking into consideration reinvestments of R24 billion) in Q2, the Q3 recovery in net inflows was good news.
“Towards the end of the second quarter and early in the third quarter, much of the investor anxiety had worked itself out of the system following a solid period of no load-shedding, a peaceful transition to a Government of National Unity and the well-managed implementation of the two-pot retirement system,” said Mulder.
This comes on the back of recent positive developments.
Recently, South Africa’s prospects for a credit rating upgrade improved after S&P Global Ratings lifted the nation’s outlook on its debt to positive from stable.
“The positive outlook reflects our view that increased political stability following the May general elections and impetus for reform could boost private investment and GDP growth,” S&P said in a statement.
Investor trends
As of September 2024, ASISA statistics show that 19% of CIS assets were invested in South African Equity portfolios, while 30% were in South African Interest Bearing portfolios.
Half of all assets (50%) were allocated to South African Multi Asset portfolios, with the remaining 1% in South African Real Estate.
Over the 12 months to September 2024, the most popular category with investors was South African Interest Bearing Short Term, which attracted R40.7 billion of the R86.0 billion in net inflows.
In contrast, the South African Equity General category saw net outflows of R11.3 billion, with a modest net inflow of R1.9 billion in Q3.
Mulder noted that these trends are unsurprising given the uncertain investment climate that characterised much of the year.
She noted that, unfortunately, anxious investors missed out on a strong equity rally despite the volatility, leading to an average return of 21.8% for the South African Equity General category over the 12 months to September 2024.
In comparison, the South African Interest Bearing Short Term category delivered a more modest average return of 10.1% during the same period.
Mulder points out that the South African Interest Bearing Variable Term category, typically not a top performer, achieved a notable return of 24.3% over the year ending September 2024.
Despite this strong performance, only 6% of CIS assets are invested in South African Interest Bearing Variable portfolios.
Offshore focus
At the end of September 2024, locally registered foreign portfolios held R913 billion in assets under management, up from R899 billion at the end of June 2024.
This is a significant increase from R765 billion in September 2023.
These portfolios saw net inflows of R4.1 billion in Q3 2024, reversing the R2.4 billion in net outflows from the previous quarter, said ASISA.
However, over the 12 months to September 2024, they recorded net outflows of R2.6 billion.
Mulder emphasised that foreign currency unit trust portfolios, denominated in currencies like the dollar, pound, euro, and yen, are offered by foreign companies but must be registered with the Financial Sector Conduct Authority (FSCA) to be marketed to South African investors.
Local investors must also comply with Reserve Bank regulations and use their foreign capital allowance for investments.
Currently, there are 723 foreign currency-denominated portfolios available in South Africa.
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