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South Africa’s strong market performance and improving fiscal metrics have created a window of opportunity for investors, but sustained progress will depend on disciplined policy execution and political cooperation.
This is the view of Hendrik du Toit, founder and CEO of Ninety One, who spoke alongside Jeremy Gardiner (director) and Clyde Rossouw (head of quality) at an investment outlook function in Cape Town on Tuesday.
Where does SA stand?
Journalist and media personality Bronwyn Nielsen asked Du Toit where his optimism about South Africa currently stands.
“Two years ago, you were at seven out of 10 – that was your level of enthusiasm. Can I say eight and a half now?” she asked.
He replied: “No, I would say it’s harder as you get close to execution. I would say six and a half.”
Du Toit argues that favourable conditions in South Africa – such as a stronger rand against the dollar and a year of good market returns – will only translate into lasting growth if South Africa avoids self-inflicted setbacks.
“We’ve stopped at the abyss. Whether we’ll be a 5% economy – that’s the question … but we can change the economy to a 2%-3% economy.”
A shifting global investment landscape
Du Toit’s discussion with Nielsen placed South Africa’s outlook within a fast-changing global financial order, which he describes as moving away from US dominance towards a more multipolar system.
“We are at the end of a single superpower-dominant world. Opportunities and power are distributing around the world,” he said.
Despite talk of diversification away from the United States, he warns against excluding it from portfolios. “The most expensive decision you could make is to write off America.”
Large sovereign wealth funds are beginning to “marginally shift capital out of US assets”as geopolitical tensions and the heavy use of sanctions encourage the development of alternative financial networks.
Du Toit points to Middle Eastern and Asian markets that could channel capital into “dollar equivalent assets that do not touch the dollar”, potentially reshaping global asset allocation over time.
He expects the dollar to weaken cyclically rather than collapse.
“We’re in a dollar down cycle. It won’t collapse, but you won’t live in the age of a super dollar until the world shifts.”
ALSO READ: Standard Bank sees brighter future for SA economy – but these issues need to be addressed first
Market metrics support cautious optimism
Gardiner provided a snapshot of recent market performance that underpins improved sentiment toward South Africa, highlighting strong returns across several asset classes.
“In SA, we’re not used to good news, so we’d better learn how to fly. 2025 was a great year for SA,” he said.
Among the standout figures are:
- Bonds up 21%;
- Rand/dollar up 12%; and
- Gold up 50%.
He said fiscal metrics are also improving, noting that government debt relative to GDP is stabilising and commodity-driven revenue gains could reduce pressure for tax increases.
“A tax increase is therefore unlikely in the upcoming budget.”
Looking ahead, the consensus expectation is for three more interest rate cuts in SA, he said.
South Africa could also regain investment-grade status within a few years if reforms hold. “National Treasury hopes that we could get back to investment grade by 2028.”
Global outlook mixed
Turning to global markets, Gardiner said US interest rates are expected to decline, while “the dollar is bearish, but not as much as in 2025”.
Europe, he said, is “in a good space” with inflation under control and new trade agreements with China and India.
The UK, however, faces ongoing fiscal strain and is losing wealthy residents due to tax changes and the closure of investor visa programmes.
China has posted a record trade surplus despite tariff uncertainty, underscoring the resilience of global supply chains.
Gardiner believes the overall balance of risks for South Africa is favourable.
He cautions, though, that domestic policy mistakes – so-called “own goals” – could undo progress.
ALSO READ: Ramaphosa warns ‘no time to rest’ as SA progresses to economic recovery
Portfolio strategy in a low-return world
Rossouw focused on asset allocation and portfolio construction, arguing that investors face structurally lower returns and heightened uncertainty.
“We are living in a low- to mid-single-digit return world,” he said, adding that volatility is likely to rise.
He warns that many investors have become overly focused on benchmark tracking rather than true risk management. “The only risk people seem to try and solve is how far away are you from the index.”
South African equities, he argues, have once again become competitive with global equities.
Bond markets also stand out due to elevated yields. “We think the one area that still looks relatively attractive is bond markets – with yields still high in SA.”
Rossouw cautions that commodity-driven optimism may fade, suggesting that the precious metals rally is “probably very nearly over” – even as gold’s longer-term fundamentals remain supportive, according to Gardiner.
Rossouw emphasised that investors should broaden their search for returns, adding that technology giants may not dominate indefinitely.
“I don’t think the hyperscalers like Alphabet and Meta … will necessarily be the best performers for the next decade,” he said, predicting stronger prospects for healthcare due to AI-driven drug discovery.
He also highlighted opportunities in cybersecurity and data protection, emphasising that AI depends on existing software ecosystems.
Opportunity Fund asset allocation
Rossouw detailed the positioning of Ninety One’s multi-asset balanced Opportunity Fund as at 31 December 2025 as follows:
- Commodities – 3.9%;
- Global property – 1.3%;
- SA bonds – 17.3%;
- SA cash – 9%;
- Global cash – 4.2%;
- SA listed local equities – 11.1%;
- SA listed global equities – 18.5%; and
- Global equities – 34.6%.
While global equities remain the largest allocation, he says there are “select opportunities” in SA equities.
Prepare for volatility
Rossouw stresses the importance of diversification and disciplined decision-making in a year in which market volatility is very likely.
“This is the year in which you must consider a range of different outcomes,” he said, warning of “more uncomfortable months” ahead after a relatively calm 2025.
Gardiner echoed this message in the context of currency strategy, saying investors should refrain from making reactive decisions during periods of market stress.
With the rand currently stronger, he suggests it may be an opportune moment to gradually increase offshore exposure rather than acting in panic during a downturn.
This article was republished from Moneyweb. Read the original here.
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