{"id":789305,"date":"2024-09-03T10:00:00","date_gmt":"2024-09-03T08:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=789305"},"modified":"2024-09-03T09:44:57","modified_gmt":"2024-09-03T07:44:57","slug":"south-africa-picking-itself-off-the-ground","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/789305\/south-africa-picking-itself-off-the-ground\/","title":{"rendered":"South Africa picking itself off the ground"},"content":{"rendered":"\n<p>South Africa&#8217;s economy and financial assets are exiting a period of malaise and seeing growth, but this still falls short of levels seen only a few years ago. <\/p>\n\n\n\n<p>Izak Odendaal, Chief Investment Strategist at Old Mutual Wealth, said that inflation in South Africa has fallen faster than expected. At the same time, the medium-term outlook has also improved due to a stronger currency and stable global energy prices.<\/p>\n\n\n\n<p>The South African Reserve Bank is also set to follow the US Federal Reserve and cut interest rates when it meets on 19 September. <\/p>\n\n\n\n<p>Odendaal said that lower interest rates should help stressed consumers. <\/p>\n\n\n\n<p>Reserve Bank data showed that the share of after-tax household income used to pay off debt increased to 9.2% in Q1 &#8211; the highest level since 2010. <\/p>\n\n\n\n<p>Weak credit growth indicates a need to cut interest rates, with household credit growth at only 3.2% year-on-year in July. Corporate borrowing only advanced by 4.5% and barely kept up with inflation.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-wp-embed is-provider-businesstech wp-block-embed-businesstech\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"wp-embedded-content\" data-secret=\"K3fhswcv0B\"><a href=\"https:\/\/businesstech.co.za\/news\/finance\/789113\/the-worst-is-probably-over-for-loans-in-south-africa-nedbank\/\">The worst is probably over for loans in South Africa: Nedbank<\/a><\/blockquote><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;The worst is probably over for loans in South Africa: Nedbank&#8221; &#8212; BusinessTech\" src=\"https:\/\/businesstech.co.za\/news\/finance\/789113\/the-worst-is-probably-over-for-loans-in-south-africa-nedbank\/embed\/#?secret=J5Hl1y6UDF#?secret=K3fhswcv0B\" data-secret=\"K3fhswcv0B\" width=\"500\" height=\"282\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe>\n<\/div><\/figure>\n\n\n\n<p>An improved growth outlook could also raise the fiscal outlook as tax revenues start to increase. <\/p>\n\n\n\n<p>&#8220;The October Medium-Term Budget will update the fiscal projections, but declining debt risks mean investors should demand a smaller premium for lending to the South African government,&#8221; said Odendaal.<\/p>\n\n\n\n<p>&#8220;This translates to somewhat lower bond yields, all else equal, which further reduces the debt burden and lowers borrowing costs in the private sector, potentially further stimulating the economy.&#8221; <\/p>\n\n\n\n<p>Interest rate-sensitive sectors, such as banks, life insurers, retailers, and listed property, have been the major winners of domestic equities. <\/p>\n\n\n\n<p>That said, not all local sectors have benefitted from resource shares, except gold, are under pressure. <\/p>\n\n\n\n<p>&#8220;After the rally in domestic assets, it\u2019s reasonable to ask whether more juice is left in the tank. Expectations of a global soft landing are probably largely priced in, while the national unity government&#8217;s positive surprise is similarly reflected in local markets, as are the looming SARB rate cuts.&#8221; <\/p>\n\n\n\n<p>&#8220;Further rallies require more positive surprises, either globally or locally, while disappointment on the pace and extent of rate cuts could still unwind some positive sentiment.&#8221; <\/p>\n\n\n\n<p>That said, valuation remains favourable for South African assets, while other economic improvements, such as lower interest rates, can snowball positively. <\/p>\n\n\n\n<p>&#8220;We\u2019ve already seen growth forecasts by major banks being upgraded in recent months. Future upgrades should provide fresh impetus to local market valuations,&#8221; said Odendaal. <\/p>\n\n\n\n<p>Although most South African GDP outlooks for 2024 are roughly 1.0%, many analysts and economists have upped their GDP projections for 2025 and beyond to over 2%. <\/p>\n\n\n\n<p>Fund managers in the Bank of America survey said that logistics and electricity transmission reforms should increase South Africa&#8217;s GDP by 2.0% to 2.5% in the next three years. <\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-wp-embed is-provider-businesstech wp-block-embed-businesstech\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"wp-embedded-content\" data-secret=\"aXbpYolGHe\"><a href=\"https:\/\/businesstech.co.za\/news\/finance\/788846\/south-africa-shouldnt-let-a-good-crisis-go-to-waste\/\">South Africa shouldn&#8217;t &#8216;let a good crisis go to waste&#8217;<\/a><\/blockquote><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;South Africa shouldn&#8217;t &#8216;let a good crisis go to waste&#8217;&#8221; &#8212; BusinessTech\" src=\"https:\/\/businesstech.co.za\/news\/finance\/788846\/south-africa-shouldnt-let-a-good-crisis-go-to-waste\/embed\/#?secret=GGoJTU5g3v#?secret=aXbpYolGHe\" data-secret=\"aXbpYolGHe\" width=\"500\" height=\"282\" frameborder=\"0\" marginwidth=\"0\" marginheight=\"0\" scrolling=\"no\"><\/iframe>\n<\/div><\/figure>\n\n\n\n<p class=\"has-medium-font-size\"><strong>Off a low base <\/strong><\/p>\n\n\n\n<p>&#8220;<strong>It is always natural to anchor off the lows, making current levels seem very high. <\/strong>Take the rand, for instance,&#8221; said Odendaal.<\/p>\n\n\n\n<p>&#8220;Compared to a level of almost R20 to the dollar in May last year, the end-August close of R17.76 seems very strong. But not that long ago, in August 2022, the rand traded between R14 and R15 to the dollar, around 20% stronger than today.&#8221;<\/p>\n\n\n\n<p>&#8220;Similarly, despite the rally in South African bonds this year, the All Bond Index has not returned to pre-Covid levels yet. Of the 12% year-to-date return, 5% was due to higher bond prices, with the remainder being interest income.&#8221;<\/p>\n\n\n\n<p>&#8220;Even if the improvement in bond prices stall, yields are still high enough to offer solid real returns to patient investors. <\/p>\n\n\n\n<p>Thus, patience is crucial, as markets don&#8217;t go up or down in straight lines. <\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-large\"><a  data-lightbox=\"post-image\" href=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/05\/Izak-Odendaal.jpg\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/05\/Izak-Odendaal-1024x576.jpg\" alt=\"\" class=\"wp-image-773779\" srcset=\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/05\/Izak-Odendaal-1024x576.jpg 1024w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/05\/Izak-Odendaal-300x169.jpg 300w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/05\/Izak-Odendaal-768x432.jpg 768w, https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/05\/Izak-Odendaal.jpg 1200w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><\/a><figcaption class=\"wp-element-caption\">Old Mutual Wealth investment strategist Izak Odendaal<\/figcaption><\/figure><\/div>\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p><strong>Read<\/strong>: <a href=\"https:\/\/businesstech.co.za\/news\/finance\/789113\/the-worst-is-probably-over-for-loans-in-south-africa-nedbank\/\">The worst is probably over for loans in South Africa: Nedbank<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The rand and bond yields may have rallied in South Africa, but they still fall short of levels seen a couple of years ago. <\/p>\n","protected":false},"author":95,"featured_media":656435,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26,1110],"class_list":["post-789305","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline","tag-old-mutual"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/789305","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=789305"}],"version-history":[{"count":2,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/789305\/revisions"}],"predecessor-version":[{"id":789319,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/789305\/revisions\/789319"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/656435"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=789305"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=789305"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=789305"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}