South Africa Lures Investors with New Government

Johannesburg, South Africa – South Africa’s political shift has triggered a welcome change of heart among foreign investors. Following the formation of a more market-friendly cabinet and Cyril Ramaphosa’s re-election, billions of Rands are flowing back into the country’s stocks.

This marks a sharp reversal from the previous trend. Uncertainty surrounding the elections led to seven consecutive quarters of net outflows, with foreign investors dumping South African assets.

The creation of a new coalition government, balancing continuity and change, appears to have appeased investors. The reappointment of respected Finance Minister Enoch Godongwana, who oversaw the country’s first primary budget surplus in 15 years, was particularly well-received.

Reduced load-shedding, the chronic power outages that plagued South Africa, has further boosted investor confidence. Bank of America predicts the country’s GDP could grow over 2% annually for the next few years if this trend continues. JP Morgan and other major banks are also taking a more positive view of South Africa’s future, increasing their exposure to local assets.

Investor confidence is reflected in the JSE data. Over the past two weeks, foreign investors have pumped a net R9.1 billion into South African stocks. This significant inflow comes after a period of sustained outflows.

The positive sentiment extends beyond the stock market. Reserve Bank data shows non-resident companies are also investing directly in South African businesses. However, the bank cautions that some of this may be due to share repurchases by foreign companies already listed in South Africa.

Despite the recent surge, it’s important to note this is just the beginning of a long road. Over the past decade, foreign investors have withdrawn over R700 billion from South Africa. Year-to-date figures for 2024 still show a net outflow of R80.8 billion in equities, higher than the previous year.