Ninety One portfolio manager Malcolm Charles believes investors will talk much less about load shedding by January 2025, and investors were underpricing the amount of private sector generation added to the South African grid.
‘About 15% of the generation is non-Eskom from about 3-4%. South Africa [in future] will be slightly better placed and higher on the emerging market table as an investable universe,’ he said during a function where Alexforbes launched its new discretionary fund manager.
Charles is excited about South Africa’s elections on 29 May and believes they will result in a ‘pragmatic outcome’ and ‘a slightly better country’.
‘It will keep the ruling party more honest than they’ve been,’ he said. ‘If you read all of the parties’ manifestos, 80% are centre left or centre right. In South Africa, that is where the debates are happening.
‘I think we’re a democracy in inaction. It’s true democracy. The centre is holding. That’s where most of the discussion is happening.
‘If I look at some developed democracies, that centre voice has been shut out. It’s been told to shut up, and either the extreme left or right is making the noise. That’s not a healthy situation.’
Charles (pictured below) said investors had priced too much political risk into the local markets.
‘You can get a 13.5% yield in South Africa. If you look at us relative to our peers, we are 1% higher than we should be. There’s opportunity. I’m quite excited, both for democracy and the asset class.’
Charles said the elections would not be nearly as bad as everyone feared.
‘But the reality is, it’s all about the [US] Fed. All in all, the outlook for South Africa [investments] is constructive. The global environment is supportive. It’s not an obvious risk-on trade for emerging markets just yet, but it will support us.’
He added that ensuring investors do their research was becoming more critical.
‘Too many people, unfortunately, are getting emotional with their money. They read the headlines, watch Carte Blanche, read the Sunday Times and The Star, and if you do that, you will make the wrong decision.’
‘The sub-editors, etc, are looking for a punchy headline. You can turn on any TV to a breaking news story, and that [will result in] a terrible [investment] outcome if you follow it.’
‘We’ve got a saying in our team: “Follow the trend lines, not the headlines.”’
He said investors would never take risks if they let their anxiety about the water and load shedding get in the way of their investment decisions.
‘We can get panicky about elections and coalitions, but at the end of the day, what is priced into South African [assets]? [Investors need to] understand that the asset prices are here and the news is there.
‘It’s about doing the research, doing the real hard work to ensure you don’t get caught by emotions.’
