After the Bell: SA Inc and the hint of positive whisper

With all of the positive noise around our country one of the more interesting questions of the moment was posed by Bloomberg as part of its Bloomberg Africa Business Summit on Tuesday, 18 November:

“Where would you invest a million rand?”

One of the joys of this question is that it gets to the heart of how you really feel. You can’t invest your entire heart in one place, no matter how angry you might feel about that non-red card on Saturday.

It makes you think with your head about where your money will grow the most, along with the question: where will it be safest?

I was not surprised to see some of the panellists being so bullish about South Africa.

If you look at the good news of the past few days – the ratings upgrade by S&P Global Ratings, the positive Medium-Term Budget Policy Statement, the virtual non-reaction to the decision to lower the inflation target, and so much else – it would be foolish to not keep a lot of your money here.

As Chantelle Marx, the head of investment research at FNB Wealth and Investments, puts it, “you do want some offshore exposure, but locally there is a lot of value at the moment. I think particularly in some of the unloved sectors that are SA Inc-specific, so South African banks, South African retailers, maybe skip the clothing retailers for now, but I think keep some powder dry there”.

Like every analyst she will remind you about the power of diversification, which is why none of them is ever going to say that you must keep all of your money here. 

For various reasons, some of our stocks are relatively cheap. The problem is that there might be a reason for that. And the reason is that political risk still remains. 

For the moment it would seem that the parties of the left are incredibly weak. 

But there are two real questions. 

The first is obviously whether the national coalition will continue in its current form. Up until this morning that question seemed to really be a conversation about the ANC. The DA would stay in the coalition almost no matter what, meaning only internal debates in the ANC could break it up.

But now, with Rebecca Davis’ revelation about John Steenhuisen’s personal finances, I’m not so sure. It seems to me the risk is that it might appear that Steenhuisen removed Dion George as environment minister in retaliation for George taking away his DA credit card.

If that narrative takes hold, the claim would be that Steenhuisen was messing about with the Cabinet just to settle personal scores and because he can’t manage his own finances.

I can’t see how he could stay on as DA leader if that happened.

Certainly, if an ANC MP was accused of misusing a government credit card one imagines the DA would call for their head.

A DA leadership election would immediately lead to a debate about the coalition in the party.

Meanwhile, there seems to be, once again, speculation that some in the ANC might try to remove President Cyril Ramaphosa early. 

These two rumbling issues might well keep some of our stocks “cheap” for some time to come.

Another question is whether the changes at the top of our economic structure will lead to real change for most South Africans. Change that helps only the top 1% means nothing – we need something more fundamental than that.

For the moment, though, I keep hearing what I would call a positive whisper. You know, the type, just before the second whiskey, when someone turns to you and says: “You know, I don’t want to say it too loudly, but things are looking up.”

At some point, the removal of load shedding and the very real attempt to deal with load reduction, along with the improvements at Transnet, must make a difference.

And the very real improvement in the government’s finances and the lower bond yields will now start to really help the government repay debt.

The point is, if we are about to turn, and more money is invested into our economy and thus it grows and we create more jobs, when would be the time to put your money in?

As always with booms, the earlier you invest the more you get out.

But the road to a very poor retirement is strewn with people who thought they saw the next boom before everyone else.

So, I can’t tell you what is going to happen. But I can tell you that for the first time in a very long time, many things are aligning in the right direction.

A lot can happen to make things go wrong from this point. But there really does seem to be momentum, and if it keeps building, eventually, in the next couple of years, it will become irresistible.

If that happens, the timing would be wonderful.

It would be just before our elections. DM