<\/p>\n
A softer inflation pulse, supportive precious metals prices and continued interest in the country\u2019s bonds provide a constructive backdrop for \u2018selling\u2019 the SA investment story to international and institutional investors, but subdued growth remains a millstone \u2013 driving some equity investors to look elsewhere and many corporates to get creative with their business models in pursuit of value and growth.<\/p>\n
These were among the key takeaways from Investec\u2019s 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.<\/p>\n
Held in London and now in its 24th year, the 2025 edition included two days dedicated to South African corporates.<\/p>\n
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\u2019s financial services and retail businesses.<\/p>\n
\u201cWe 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,\u201d says Jarrett Geldenhuys, head of Equity Capital Markets at Investec.<\/p>\n
\n\u201cGlobal institutional investors are asking how best to access the strongest parts of South Africa\u2019s listed universe at a time when the macro backdrop is improving, but growth remains scarce,\u201d he adds.<\/p>\n<\/blockquote>\n
\u201cAs a dual-listed SA and UK business with deep roots in both markets, Investec is uniquely positioned to \u2018own\u2019 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.<\/p>\n
\u201cWe continue to see London as a critical source of both existing and marginal capital for South African equities,\u201d Geldenhuys adds.<\/p>\n
\u201cThis 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.\u201d<\/p>\n
The lay of the land<\/strong><\/p>\n
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.<\/p>\n
Tailwinds include the Financial Action Task Force\u2019s decision to remove SA from the grey list, and S&P Global\u2019s upgrade of South Africa\u2019s foreign currency long-term sovereign credit rating to \u2018BB\u2019 and local currency long-term sovereign credit rating to \u2018BB+\u2019 with a positive outlook.<\/p>\n
Moreover, the gold and platinum group metals (PGMs) \u2018super-cycle\u2019 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.<\/p>\n
\n\u201cOur bonds continue to solve a problem for some of the biggest global asset allocators,\u201d says Ridge.<\/p>\n<\/blockquote>\n
\u201cWe offer some of the best real yields in the world, and for all these reasons, the underlying promise of the \u2018South African story\u2019 has firmed up.\u201d<\/p>\n
Picking up the thread, Geldenhuys notes that for Investec\u2019s 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.<\/p>\n
Chasing growth in emerging markets<\/strong><\/p>\n
The case for SA, however, is not without its challenges and complexities.<\/p>\n
The key concern \u2013 particularly for investors looking to emerging markets for growth, is our relative lack of it.<\/p>\n
\nStrong GDP growth is desperately needed to tackle SA\u2019s persistent unemployment and inequality.<\/p>\n<\/blockquote>\n
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.<\/p>\n
Against this backdrop, Geldenhuys stresses that Investec\u2019s ambition is to keep South Africa\u2019s 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.<\/p>\n
Financial services silver linings<\/strong><\/p>\n
SA banks remain standouts that continue to produce credible performances even in a lower-growth environment.<\/p>\n
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.<\/p>\n
Ridge notes that the banks \u2013 with their direct insight into consumer finance health \u2013 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.<\/p>\n
Management across South Africa\u2019s 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.<\/p>\n
\u201cWe continue to favour lower-risk sectors including banks, insurers and real estate investment trusts [Reits], although they have already outperformed,\u201d says Ridge.<\/p>\n
\u201cWe were looking for a reason to rotate into late-cycle retailers, given their depressed valuations, but didn\u2019t find one.\u201d<\/p>\n
Caution, competition and creativity<\/strong><\/p>\n
Another factor is the increasing overlap between certain industries at a time of intense competition and very little volume growth.<\/p>\n
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 \u2013 providing similar solutions and ultimately contending for the same, limited customer pool.<\/p>\n
Current \u2018top-line winners\u2019 have either market-leading efficiency (such as Premier Group) or have adopted a creative, multifaceted strategy \u2013 a product flywheel in which clients, products, partners, and shareholders work together to create value.<\/p>\n
This looks different in every sector but can include rewarding engagement and expanding ecosystem. Capitec is a case in point \u2013\u00a0for example, partnering with Boxer to offer discounts on purchases made with a Capitec card, as well as its new Dis-Chem loyalty discount.<\/p>\n
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.<\/p>\n
\nSA 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.<\/p>\n<\/blockquote>\n
Ridge says this may drive more non-banking, consumer-facing businesses with large client bases to look to enter the banking world.<\/p>\n
\u201cOne is now forced to use every tool at one\u2019s 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.\u201d<\/p>\n
In this environment, Ridge says he ascribes outsized weight on top-line growth.<\/p>\n
\u201cProfitability 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.<\/p>\n
\u201cInvestors are going to have to take a longer-term view on who the \u2018ecosystem winners\u2019 of tomorrow will be, and there are many emerging market precedents to draw clues from.\u201d<\/p>\n
Building on this, Geldenhuys adds that, through forums such as the CEO Conference and Investec\u2019s 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 \u2013 for businesses and shareholders \u2013 even in a low-growth environment<\/p>\n
Signal-finding in a time of noise<\/strong><\/p>\n
These insights provide a silver thread for international investors, which is why the CEO Conference \u2013 hosted by the equity sales team \u2013 remains an in-demand event for Investec year after year.<\/p>\n
For now, Ridge believes the sectors that are more closely correlated with SA bond yields are best placed, while \u201cit\u2019s a scramble elsewhere\u201d, 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.<\/p>\n
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.<\/p>\n
\u201cThe opportunity is real,\u201d he says. \u201cBut in a low-growth economy, the strategies required to unlock higher growth \u2013 whether through partnerships, consolidation or capital deployment \u2013 will demand patience from management teams and investors alike.<\/p>\n
\u201cInvestec\u2019s role is to sit at the centre of this,\u201d Geldenhuys adds, \u201cleveraging 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.\u201d<\/p>\n
Brought to you by Investec.<\/em><\/p>\n
Moneyweb does not endorse any product or service being advertised in sponsored articles on our platform.<\/em><\/p>\n<\/p><\/div>\n