36ONE’s smart bet on South Africa pays off

Cy Jacobs

Many investors were concerned that South Africa’s elections would result in a doomsday coalition and avoided the local market. 36ONE was more optimistic, and it paid off in a big way.

On 29 May 2024, South Africans headed to the polls for one of the country’s most pivotal elections since 1994.

Before the elections, most polls indicated that the ANC would lose its majority for the first time in 30 years, forcing the ruling party to form a coalition to remain in power.

Many were concerned that the ANC would choose far-left parties like the EFF or MKP to establish a so-called doomsday coalition that would have had a severe negative impact on the economy.

Research from Oxford Economics before the elections showed that an ANC-EFF coalition could see the rand reaching R21.50, escalate inflation and fuel prices, and potentially lead to a debt crisis.

Oxford Economics predicted that the weaker currency would also lead to fuel price increases and that transport inflation would steadily raise the consumer price index (CPI). 

It forecasted that CPI inflation would average 5.6% in 2025, compared to 5.0% in its baseline forecast.

The research found that inflation expectations would become unanchored, and after 2026, inflation would settle at a higher equilibrium level of around 6%.

Amidst the uncertainty and expectations of a negative election outcome, many investors and asset managers pulled back their investments in South Africa.

High-profile analysts and fund managers said they opted for cash because of the uncertainty linked to the 2024 election outcome.

However, 36ONE saw this as an opportunity to double down on South African assets – and this bet paid off.

“We took a decision two months ago that market valuations were discounting a poor election result, namely the ‘doomsday’ coalition, an ANC/EFF/MK coalition,” 36ONE co-founder Cy Jacobs told Daily Investor.

“We believed this to be very unlikely and felt a more constructive result would materialise.”

Jacobs said the polls showed the ANC at approximately 40% at the time, which proved accurate. 

36ONE felt the ANC would prefer a more market-friendly, centrist coalition like the Government of National Unity (GNU) that is now being formed.

“We also know that most institutions have, over time, invested more funds in rand hedge equities away from domestic South African companies as there has been little growth in South Africa,” he said. 

In addition, Regulation 28 under the Pension Fund Act allows retirement funds to invest up to 45% of a portfolio offshore, and most balanced funds have gone close to this allowance. 

“We felt that any positive result would leave most institutions significantly under-invested in South Africa, and there would be a buying frenzy like we saw at the time of ‘Ramaphoria’ when Ramaphosa narrowly won the presidency,” Jacobs said. 

“So we realigned our portfolios by bringing funds back to South Africa, selling commodity shares and rand hedges, and buying domestic sectors, like South African banks, retail, insurance, property and industrials.”

This decision proved hugely successful for 36ONE. After the past week of positive GNU discussions, the market has begun to discount a new era for South Africa.

This saw a stronger rand and a very strong domestic equity bias, which resulted in many sectors already being revalued by 20% or more. 

“This has resulted in our funds significantly outperforming benchmarks and our competition, and we are confident that South Africa has begun a new journey,” Jacobs said. 

“We have also witnessed a massively improved Eskom, a better Transnet, and many arrests regarding past corruption practices starting to take place.”

“We are excited and hope this new GNU works together to rebuild South Africa.”


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