To the least-worst, go the spoils!

The run up to Monday’s local government elections was succinctly summed up by Tom Eaton, columnist for the Business Day, as he provided us with a refresh of Standard 4 Afrikaans and ‘trappe van vergelyking’ (degrees of comparison, if South Africa’s most-contentious, indigenous language wasn’t part of your curriculum). Witnessing the degree to which parties are so removed from the realities faced by all too many of our fellow countrymen and women, ‘kak, kakker, kakste’ summed up the sentiments of the majority on the options presented!

As the reality of the final results are considered, the stunning drop in voters who turned out at the polls remains the hottest topic and focal point. Whether this can be attributed to apathy, indifference, frustration, or much of the population no longer buying into the democratic project, remains uncertain. But when the single, largest block of voters – far larger than in any election in post-1994 democratic South Africa – is the non-voters, the body politic ignore these silent voices at their own peril.

The ‘new kids on the block’, Herman Mashaba’s ActionSA, have established themselves as disrupters of the status quo, while the FF+ continued their exponential growth following the last national elections, heralding in an era of (hopefully!) better delivery and accountability as coalitions become the new normal in our political arena.

October ended with global markets breaching all-time record levels, and the month itself posting the best single-month’s performance since the Covid-correction of March 2020. Big Tech stocks listed in the US, led by Elon Musk’s Tesla posting staggering gains to propel the former Pretorian’s wealth to levels beyond the eye-watering $300 billion mark! (That’s billion with a ‘B’ – by comparison, South Africa’s entire GDP in 2020 amounted to $301.9bn!)

Locally, our JSE posted a more modest performance for the month as the potential timing of the SARB’s raising interest rates took center-stage. As inflation continues to rise across the world, the timing of central banks’ decisions to raise rates is becoming more critical. The Bank of England, the Reserve Bank of Australia, and a number of central banks across Europe are widely expected to pull the trigger as soon as this week and raise their benchmark rates. This shift sent our currency-markets into a tailspin with the Rand losing almost 4% against most developed market currencies in the past fortnight alone. The risk being that other emerging markets (against whom we compete for flows of foreign capital) have already raised their rates, while the SARB appears hesitant to increase the Repo rate amidst the backdrop of a fragile, weak, local economy that can barely withstand the pressures we’re facing, despite rates being at multi-decade lows…

Jeremy Gardiner, Director of Ninety-One Asset Management and a frequent guest on our webinars, has often said that roughly 70% of what happens to us, how we do and how we feel here in South Africa has nothing to do with ourselves – the majority of our circumstances are driven by how well the rest of the world is doing. And with earnings of companies across the world continuing to improve after the slowdown of last year, the prospect for equities to deliver as the best long-term hedge against inflation remains attractive.

Overall, the Octagon portfolios continue to post respectable figures, maintaining strong numbers over both shorter and longer periods. And while the dust settles on the local political landscape after a bruising election for some of the country’s larger parties, we hold high hopes that the realignment and novel partnerships will hopefully break the log-jam of the past decade’s trend of politicians constantly over-promising and under-delivering!

Wishing you all a successful last few months of the 2021 year as we approach the festive season for a well-deserved summer break.

Steve Crouse

Chief Investment Officer and Senior Advisor