Naomi Waistell, emerging market equity portfolio manager at Newton Investment Management
“On 8 May, South Africa will vote in national elections which mark 25 years of democracy. The ruling ANC party which led the march to freedom have governed the country ever since and are widely expected to win again. What is important this time around, is that their support is diminishing, diluted by the competing rhetoric of far-left populist party the EFF who appeal to what is one of the world’s most unequal societies, with persistently high levels of unemployment, corruption, poor services and a new, younger generation who are less engaged with the ANC’s legacy.
“South Africa’s economic fundamentals have been very weak for a very long time. They continually walk a tight-rope between fiscal prudence and maintaining social harmony, under the watchful eye of the credit agencies. Following the elections, the country will be at a cross-roads. President Cyril Ramaphosa who took office in February 2018 has predictably failed to live up to the hype his succession to Zuma ushered-in. A new term will offer him a chance to shake-up the cabinet and oust the old-guard, start to restore business confidence, solve the Eskom crisis and begin to implement much needed structural reforms.
“Unfortunately, as long-term investors we cannot feel optimistic about the outlook for South Africa given the number and scale of the challenges ahead. Improvements may come gradually, but also not in a straight line. It’s tough to get excited about the investment potential of a country struggling to grow 2% and likely to see its debt level swelling. However, there will still be idiosyncratic stock ideas for active stock pickers, like ourselves, despite this.”