Foreign investors upbeat on SA’s growth

JOHANNESBURG-Foreign investors are more optimistic about SA’s growth prospects than local investors, according to the Bank of America Merrill Lynch SA.

This emerged from its annual investor conference this week at Sun City in North West.

The conference played host to 164 investors from 70 institutions and other stakeholders including the World Bank, the IMF and credit rating agency S&P Global.

Foreign investors’ growth expectations were much higher than those of South Africans: 3%-4% compared with 2% -2.5%. "Last year, foreigners feared a worse outcome. Before the ANC elective conference the view was Nkosazana Dlamini-Zuma [as ANC president] and shame for SA, but there’s been a turnaround, which has caused excitement around SA," said John Morris, a strategist at Merrill Lynch.

He said that sentiment had played a huge role in the euphoria in the markets and there would certainly be an improvement in growth.

There has been a $5bn in- flow into SA since the middle of November 2017 when the ball seemed to swing in President Cyril Ramaphosa’s favour.

Concern, however, remains about wage talks and the debate on land reform, Morris said.

In February, the National Assembly adopted a resolution brought by the EFF to begin a process to amend the Constitution and allow land expropriation without compensation.

"Land is a concern for foreign investors and how the issue should proceed. They are watching that very closely," said Morris, adding that despite the excitement the environment was still muted.

"We’re still waiting for earnings to come through, so this is a 2019 story rather than a 2018 story," he said.

On Wednesday, the RMB/ BER Business Confidence Index (BCI) rose from 34 to 45 points on the back of recent political developments.

This reflected sentiment following the improved political situation in SA rather than a marked improvement in the underlying business landscape, said Ettienne le Roux, chief economist at RMB.

"It is only when the increase in the BCI is sustained that we are likely to see a convincing rise in private sector fixed investment, and so ultimately faster economic growth," he said.

BMI Research, a subsidiary of ratings agency Fitch Ratings, also said Ramaphosa’s election had substantially bolstered investor sentiment towards SA, but disagreement within the ANC may hamper policy change and deter investors.