EVENTS | 23 JUNE 2021

The Case for Investing
in South Africa


Quintus Kilbourn

Head of Equities, Absa


South Africa has a positive investment story to tell, and foreign investors are ready to listen. That’s the resounding message from the SA Tomorrow Virtual Conference, held in mid-June 2021.

South Africa has a positive story to tell, and foreign investors are ready to hear it. That’s the takeout from the SA Tomorrow Virtual Conference, held in mid-June 2021 and co-sponsored by Absa, Citi and the JSE. Listening to the conference speakers – which included South African President Cyril Ramaphosa, Finance Minister Tito Mboweni, Public Enterprises Minister Pravin Gordhan, Reserve Bank Governor Lesetja Kganyago and Eskom CEO André de Ruyter – there was a real sense of positivity.

“The tone from the top has changed,” says Quintus Kilbourn, Head of Equities at Absa. “The message from the President and other critical stakeholders, is that South Africa has to be pro-investment. We have to listen to investors, engage with them, and tell our story. There’s a sense that South Africa understands that it needs to change its story to get back on the investor radar; and investors have noticed that.”

Reading the virtual room

With SA Tomorrow being a virtual conference, Kilbourn says that it was a little hard to “read the room”. “You really miss the sidebar conversations,” he says, “but a couple of the foreign investors who I spoke to said that they’ve been running such large structural underweights on South Africa for so long, that when they started looking at the market again, they were very impressed by the opportunities. Some were also a little disappointed because they were so late that the names they wanted to buy were screening expensive compared to some emerging market peers. That’s something they haven’t seen in ages.”

In recent years, foreign investors have tended to be net sellers when it comes to South African equities. “They’ve run large structural, tactical underweight positions on South Africa,” says Kilbourn, “but now they’re looking at South Africa and saying: ‘Wait a minute, there’s value there. We need to look at South Africa in a different light.’”

There were, of course, concerns about South Africa’s economy, particularly given the impacts of the Covid-19 pandemic. “Everyone is worried about South Africa’s jobless rate,” says Kilbourn. “But commodity prices have rallied, and that unexpected response to Covid is good for South Africa in the sense that we could see a global growth spurt that will put emerging markets back on the radar.”

Politically, the sentiment was also positive. “It looks like the President now has a clear mandate,” says Kilbourn. “He is dealing with some of the corruption with some wins to date, and there’s a sense that post-Covid – with a clean slate and an ability to deliver faster – the benefits to the South African economy could surprise on the upside.”

Positive sentiment for Africa

South Africa’s unique position as an investment gateway to Africa was high on the agenda. Kilbourn believes that the rest of the continent will benefit as money comes into emerging markets. “It’s the old problem you have in the frontier space: money first flows into general funds, and then into frontier funds,” he says. “But Africa is still on the investment radar. Investors are watching it, staying close to it, and there’s a long-term upshift that could come.”

Regarding South Africa, the investment mood is cautiously optimistic. “Foreign investors can see that a lot of damage was done, but they can also see the positive changes,” says Kilbourn. “They compare us to other emerging markets, so for them it’s all relative. They know that our banks are well governed, that our retailers are well positioned, and that our industrial corporations are attractive. They’re saying, ‘South Africa is so cheap, we just can’t ignore you anymore – plus, you’re taking positive action to address some of the political and corruption issues.’”

That positive mood was a pleasant change from the prevailing gloom of recent years. “It was refreshing,” says Kilbourn. “There was interest and engagement from a broad spectrum of investors at the SA Tomorrow Conference, and that speaks to the fact that everyone wants to get closer to South Africa’s story.”

Quintus Kilbourn

Head of Equities, Absa

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