Patience is key for South Africa

South Africa’s strong performance in 2024 shows that patience is key for the nation’s investors.
According to Old Mutual Wealth Chief Investment Strategist, Izak Odendaal, South Africans started 2024 with apprehension amidst heightened load shedding and political uncertainty.
However, the end of 2024 brought with it a very different mood.
Load shedding seems to be a thing of the past due to increased private production and operational improvements at Eskom.
Even if load shedding does return, which seems likely, it will not be as severe as it was in 2022 and 2023.
Although the ANC performed much worse than was expected in the election, it immediately accepted the results and began coalition talks.
A centrist government of national unity (GNU) was created, and it focused on growth-boosting structural economic reforms and ongoing gradual fiscal consolidation.
Odendall also noted that progress has also been made on a relaxed visa regime for skilled workers, while Transnet also published its Rail Network Statement a few days before Christmas, with private players to set to run trains on its tracks.
When it comes to Eskom, its century-old monopoly is coming to an end.
The GNU, however, is not out of the woods with the state of Johannesburg, the country’s economic hub, becoming a crisis.
Nevertheless, Odendall said that for the first time in years, there is a genuine reason to feel more optimistic about South Africa.
Lower inflation should also help South Africa, leading to further interest rate cuts in the future.
Inflation was also well below the Reserve Bank’s 3% to 6% target range in October and November.
“The Reserve Bank cut rates twice in 2024 and will probably cut two or three times again this year. The domestic inflation outlook is benign, but the Reserve Bank will keep a close eye on the trajectory for US rates,” said Odendaal.
“Reserve Bank officials will probably view the sudden weakness of the rand in December and early January as vindicating their gradual approach in an uncertain global environment.”
Although the rand fell 4% in December, the rand ended the year as one of the best-performing currencies against a globally strong US dollar, only losing 3%.
Although the currency broke through R19 to the dollar on Friday, this decline was on par with other currencies.
Looking at the data, South African asset classes had a good year across the board in 2024.
In rand terms, the FTSE/JSE Capped Swix Index returned 13% and the JSE All Bond Index delivered 17% – a double-digit return in real terms.
Listed property was the best domestic asset class, surging 30% during 2024 from depressed covid lows.
“The patience of South African investors has been severely tested in recent years, but it paid off in 2024,” said Odendaal.
“It is a reminder that long-term returns are always made up of a few really good years, interspersed with bad and boring ones. One has to sit through the latter to benefit from the former.”
“The good news is that valuations are still reasonable across domestic asset classes, which together with improvements in economic fundamentals, bode well for future returns.”
However, that doesn’t mean that 2025 will be another great year – there is simply no way of telling the future.
“Looking back, history always looks like a linear progression of events, but in fact, it is a giant tree, with branches sprouting off in all directions. That we’ve ended up at the end of a particular twig on a particular branch is not inevitable.”
“At the end of 2025, it will again be easy to say ‘we should’ve known’ but at its dawn, much is unknown and unknowable. It always feels trite to say this, but it remains true: the best approach is being patient, appropriately diversified and sticking to the long-term plan.”
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