Best news for South African investors in years

South African assets are on the march despite uncertainty in global markets over the outcome of tariff negotiations.

The Johannesburg stock index is nearing a record 100,000 level mark, benchmark bond yields are hovering near a three-year low, and the rand is at its strongest levels in six months.

The upswing comes after a months-long budget impasse strained relations within the country’s 10-member ruling coalition and a fraught meeting between President Cyril Ramaphosa and his US counterpart Donald Trump left a question mark over the future of relations between the two countries. 

South Africa’s 10-year bond yield dropped below 10% for the first time in more than three years on Wednesday as investors bet the so-called government of national unity will be successful in its third attempt at corralling support for the budget.

“Now we have a budget supported by all the GNU parties, which can provide certainty to bond treasury issuances, and guidance on fiscal deficits that are more realistic, together with more realistic outlooks” on gross domestic product, said Andrew Dowse, a portfolio manager at Merchant West Investments. 

“There is still a negative picture with regards to the debt-to-GDP ratio, particularly with the downgrade to GDP expectations,” he said.

“But the stricter fiscal spending and pragmatism about where we see the GDP level in the future has given the market more certainty that the Treasury is realistic and understands the need to address spending.”

Over the past 30 days, the rand has gained 3% per dollar, the biggest gain among 23 emerging-market currencies after the Colombian peso and the South Korean won.

The South African currency rose 0.5% against the greenback to trade at R17.73 per dollar as of 4:20 p.m. in Johannesburg, the strongest in six months.

A benchmark gauge of South Africa’s stocks rose 0.7% as of 5:00 p.m. in Johannesburg, hitting record highs and outperforming a similar index of emerging-market stocks.

Precious metals and mining shares led gains, with Gold Fields Ltd. contributing the most to the index advance. Valterra Platinum had the largest gain.

“We have also seen a decent rally this year in certain key commodities specific to SA — like platinum and rhodium,” Dowse said.

“This should support some recovery in profitability for PGM miners and therefore a rebound in tax revenues from these businesses.”