A softer inflation pulse, supportive precious metals prices and continued interest in the country’s bonds provide a constructive backdrop for ‘selling’ the SA investment story to international and institutional investors, but subdued growth remains a millstone – driving some equity investors to look elsewhere and many corporates to get creative with their business models in pursuit of value and growth.
These were among the key takeaways from Investec’s annual CEO Conference, which connects top management (primarily CEOs and CFOs) from leading listed companies with institutional investors in small-group and one-to-one meetings to discuss the challenges and opportunities of the current investment environment.
Held in London and now in its 24th year, the 2025 edition included two days dedicated to South African corporates.
Investec hosted 25 management teams from SA, facilitating approximately 250 meetings between these teams and more than 70 institutional investors, who showed particular interest in learning more about the country’s financial services and retail businesses.
“We use platforms like our CEO Conference to connect leading South African corporates with global capital pools, and to advocate for fuller valuations and a healthier SA equities ecosystem,” says Jarrett Geldenhuys, head of Equity Capital Markets at Investec.
“Global institutional investors are asking how best to access the strongest parts of South Africa’s listed universe at a time when the macro backdrop is improving, but growth remains scarce,” he adds.
“As a dual-listed SA and UK business with deep roots in both markets, Investec is uniquely positioned to ‘own’ this corridor, bringing together South African corporates and a broad range of global and domestic institutions for focused, high-touch engagement. Over the years, the conference has become a key fixture for Investec and the broader SA-UK equities universe.
“We continue to see London as a critical source of both existing and marginal capital for South African equities,” Geldenhuys adds.
“This makes hosting the conference in the city a natural fit, and a powerful way to keep SA corporate stories in front of decision-makers who can deploy meaningful capital.”
The lay of the land
Various shifts coincided ahead of the conference to make for a particularly supportive macroeconomic backdrop for these conversations, says Will Ridge, head of Equities at Investec.
Tailwinds include the Financial Action Task Force’s decision to remove SA from the grey list, and S&P Global’s upgrade of South Africa’s foreign currency long-term sovereign credit rating to ‘BB’ and local currency long-term sovereign credit rating to ‘BB+’ with a positive outlook.
Moreover, the gold and platinum group metals (PGMs) ‘super-cycle’ is boosting government finances, the oil price is depressed, and inflation has eased somewhat. In combination, these have bolstered the rand and provided a significant rally in bond yields.
“Our bonds continue to solve a problem for some of the biggest global asset allocators,” says Ridge.
“We offer some of the best real yields in the world, and for all these reasons, the underlying promise of the ‘South African story’ has firmed up.”
Picking up the thread, Geldenhuys notes that for Investec’s equity and fixed income clients, the task now is to translate this improved environment into investable opportunities. The goal is to ensure that the strengthening South African narrative is reflected not only in bond allocations but, over time, in equity valuations as well.
Chasing growth in emerging markets
The case for SA, however, is not without its challenges and complexities.
The key concern – particularly for investors looking to emerging markets for growth, is our relative lack of it.
Strong GDP growth is desperately needed to tackle SA’s persistent unemployment and inequality.
Although talk of public sector reform is landing on receptive ears, institutional investors want to see tangible progress, and discussions at the conference framed both this and policy indecision as persistent headwinds. As a result, domestic equities face stiff competition from alternatives in higher-growth global emerging markets.
Against this backdrop, Geldenhuys stresses that Investec’s ambition is to keep South Africa’s best corporate stories in the global conversation, promoting SA narratives that can support fuller valuations for quality businesses and, ultimately, contribute to the health and depth of the broader SA equities market.
Financial services silver linings
SA banks remain standouts that continue to produce credible performances even in a lower-growth environment.
They are well capitalised, with a consumer base demonstrating decent credit health, as reflected in credit loss ratios at the lower end of long-term ranges.
Ridge notes that the banks – with their direct insight into consumer finance health – struck a comforting note at the conference, and pointed to early signs of improvement in vehicle finance and mortgage books, and perhaps even the beleaguered Johannesburg property market.
Management across South Africa’s corporate and retail landscapes is still tending towards caution, with many sitting on significant capital but lacking the confidence to deploy it into productive assets that could fire up the growth engine.
“We continue to favour lower-risk sectors including banks, insurers and real estate investment trusts [Reits], although they have already outperformed,” says Ridge.
“We were looking for a reason to rotate into late-cycle retailers, given their depressed valuations, but didn’t find one.”
Caution, competition and creativity
Another factor is the increasing overlap between certain industries at a time of intense competition and very little volume growth.
Telecom companies, retailers, and financial services firms, for instance, are offering competing payment solutions, digital wallets, credit products, virtual mobile services, e-commerce marketplaces, and more – providing similar solutions and ultimately contending for the same, limited customer pool.
Current ‘top-line winners’ have either market-leading efficiency (such as Premier Group) or have adopted a creative, multifaceted strategy – a product flywheel in which clients, products, partners, and shareholders work together to create value.
This looks different in every sector but can include rewarding engagement and expanding ecosystem. Capitec is a case in point – for example, partnering with Boxer to offer discounts on purchases made with a Capitec card, as well as its new Dis-Chem loyalty discount.
Tactics like this are a win with cost-conscious consumers. They can also be a differentiator in the banking customer-acquisition bunfight, while simultaneously boosting shopper (and data) volumes for retailers and sales volumes for fast-moving consumer goods (FMCG) companies, with the associated costs shared.
SA banks have an advantage in the competition for consumer attention thanks to their banking apps, which enjoy engagement levels far surpassing those of telecom, insurance, or retail apps.
Ridge says this may drive more non-banking, consumer-facing businesses with large client bases to look to enter the banking world.
“One is now forced to use every tool at one’s disposal to show clients that you are saving them money, and using this to drive volume growth, data collection, and ultimately scale, in order to build moats around a self-reinforcing ecosystem.”
In this environment, Ridge says he ascribes outsized weight on top-line growth.
“Profitability is going to be a lagging indicator of success here, and I think margins are going to remain under sustained pressure as management teams prioritise top-line growth and cross-selling. One has to invest in price discounts to grow volumes, and partnerships are being used to spread the investment load.
“Investors are going to have to take a longer-term view on who the ‘ecosystem winners’ of tomorrow will be, and there are many emerging market precedents to draw clues from.”
Building on this, Geldenhuys adds that, through forums such as the CEO Conference and Investec’s ongoing dialogue with both issuers and investors, the equities franchise aims to channel capital towards those balance sheets and business models that can build value – for businesses and shareholders – even in a low-growth environment
Signal-finding in a time of noise
These insights provide a silver thread for international investors, which is why the CEO Conference – hosted by the equity sales team – remains an in-demand event for Investec year after year.
For now, Ridge believes the sectors that are more closely correlated with SA bond yields are best placed, while “it’s a scramble elsewhere”, with companies making dramatic adjustments to their business models and appetite to form partnerships in order to drive top-line growth in the current no-growth market.
Looking across the landscape, Geldenhuys argues that relative to many global markets, South Africa still offers access to well-run, cash-generative businesses at undemanding valuations, with deep pockets of capital already following the leaders.
“The opportunity is real,” he says. “But in a low-growth economy, the strategies required to unlock higher growth – whether through partnerships, consolidation or capital deployment – will demand patience from management teams and investors alike.
“Investec’s role is to sit at the centre of this,” Geldenhuys adds, “leveraging our SA/UK corridor, our dual-listed status, and forums like the CEO Conference to showcase leading South African businesses and help clients identify and back the ecosystem winners of tomorrow.”
Brought to you by Investec.
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