The preservation of the government of national unity (GNU) is important to shore up investor confidence, despite the coalition’s “imperfections”, says the chair of the Public Investment Corporation (PIC), the biggest single investor on the JSE.
The instability of the GNU, and the DA’s inclusion in it, came under severe pressure after the vote on the budget framework last week, for which the ANC resorted to parties outside the GNU to reach the threshold to pass the bill, spooking domestic markets.
The selloff of SA Inc sped up after the US’s unprecedented tariffs risked a full-blown trade war between the world’s two largest economies and a global recession.
The JSE has shed nearly R2-trillion in the past three trading days, with the PIC as the largest investor on the bourse taking a hammering, bleeding billions of rand in assets under management.
The asset manager’s chair, David Masondo, who also serves as one of two deputy finance ministers, told Business Day most of the factors that drove the sell-off were outside the asset allocator’s control, but called for cool heads to prevail on the current GNU impasse.
“The US tariffs are being negatively felt by the global economy, including SA and indeed our securities markets… the impact of declining markets significantly erodes both investor confidence and investor wealth, which includes workers’ savings such as pensions,” Masondo said.
“The assets under PIC management have declined by more than R150bn since April 2, when the US administration announced the tariff hikes,” he said.
All of us should be committed to options and solutions that enhance the stability, growth and competitiveness of our securities markets, including the preservation of the current government, albeit under certain preconditions.
“We have significant control of the domestic risks. I am fully aware of the domestic political risks triggered by sentiments around the stability of the GNU.
“All of us should be committed to options and solutions that enhance the stability, growth and competitiveness of our securities markets, including the preservation of the current government, albeit under certain preconditions.”
Business leaders have written to ask President Cyril Ramaphosa and his DA counterpart John Steenhuisen to smoke the peace pipe over differences between the two key parties in the GNU, with the former saying at the weekend that business can’t dictate to the parties.
The PIC’s largest clients are social security funds: the Government Employees Pension Fund (GEPF), the Unemployment Insurance Fund (UIF), the Compensation Commissioner Fund (CC), the Compensation Commissioner Pension Fund (CP) and the Associated Institutions Pension Fund (AIPF).
The PIC’s assets rallied to about R3-trillion in 2024 following renewed market optimism in SA assets after the formation of the GNU.
Platinum group metals (PGMs), in which PIC has significant exposure, last week took a hammering despite being excluded from Trump’s tariff list. This is because car exports to the US are included — with automobile production a big market for PGMs.
The US is a net importer of vehicles, with 55% of the vehicles sold in the US made abroad.
However, mining houses staged a comeback on Monday, led by PGM stocks.
The all-share index has shed more than 8% in the past three trading sessions, with losses on the local bourse broad-based and tracking international markets.
Herman van Papendorp, head of asset allocation at Momentum Investments, said the prospect of higher inflation complicates future US monetary support for the economy.
“For SA equities, even if previous profit growth assumptions are cut by an aggressive 25% to account for the potential decline in global and local economic growth forecasts, current valuations are around one standard deviation below historical averages, providing a margin of safety protection for future returns.
“Similarly, SA nominal bonds, inflation-linked bonds and cash provide attractive real returns across the board that should support future returns in diversified portfolios over time.
“For investors, the best protection against market turmoil is to have diversified exposure to a wide variety of asset classes and not be derailed from long-term investment goals by events that impact markets in the interim.”
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