High interest rates are now overwhelmingly seen as a drag on SA’s recovery, according to a survey of local fund managers by Bank of America (BofA)..
In the poll, conducted from May 2-8, 12 of the 14 respondents (86%) viewed current monetary policy as too tight, with most blaming politics for the squeeze. The level of consensus is the second-highest in the 25 years since the survey was first conducted.
The Reserve Bank is set to announce its next interest rate decision on 29 May. The central bank’s benchmark repo rate is currently at 7.50%, and respondents see the repo rate bottoming out at 6.75%.
BofA revised its monetary policy outlook for SA last week and now expects two more interest rate cuts this year.
“We see the policy rate at 7% by the end of July. The risk when it comes to rate cuts is skewed to more rather than less. Inflation is benign and likely to remain so,” said Tatonga Rusike, Sub-Saharan Africa economist at BofA.
According to the latest BofA survey, the pessimism is underpinned by a subdued growth outlook. Almost two-thirds (64%) of fund managers expect GDP growth to remain below 2% annually from 2025 through to 2027.
That aligns with several recent downward revisions of SA’s GDP growth forecasts for 2025, including the IMF (1.0%), the Bureau for Economic Research (1.5%), and Moody’s Ratings (1.5%).
Despite these concerns, risk appetite appears to be holding steady. A net 50% of respondents remain bullish on SA equities, forecasting a 12-month total return of 14% — matching expectations for the long-dated R2035 government bond. If global appetite for emerging markets strengthens, the return could climb to 17%, BofA’s survey found.
Fewer fund managers now believe SA shares and bonds are trading below fair value — suggesting that recent price gains or a weaker outlook have reduced the assets’ appeal.
A clear theme emerging from the survey is the shift in sector preferences. Fund managers are tilting away from traditional heavyweights such as mining and favouring more domestically exposed stocks.
Sectors identified as most attractive include banks, apparel retailers and software companies, which are seen as better positioned to benefit from cyclical recovery or shifts in consumer behaviour.
By contrast, real estate, chemicals and telecommunications were listed among the least favoured.
There’s also been a notable shift into cash, now overweight for the first time since before the 2024 elections. Though few managers are selling local assets many are signalling an intention to invest cash offshore pointing to lingering political risk.
At the same time, the shift in sector preferences — from miners to banks, retailers and software — suggests some managers see pockets of domestic opportunity, even in a weak growth environment.
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