Financial market analysts and regular humans alike kicked off 2024 with a feeling of uncertainty – and even a touch of trepidation. This was the big year for global elections after all, and not least was our general election here on South African home soil.
Voting day – May 29, 2024: the SA electoral outcome made history again
The African National Congress (ANC) lost their ruling majority for the first time since our country entered its democratic era thirty years ago. With no single party winning a majority vote, South Africa was navigating uncharted territory, this time in the form of inter-party cooperation and coalition politics.
After two weeks of negotiations behind closed doors, a Government of National Unity (GNU) was announced. This encompassed the African National Congress (ANC) and Democratic Alliance (DA) plus a host of smaller parties, with a total of ten parties represented (although not all were allocated ministerial or deputy ministerial roles in the Cabinet announcements).
The consensus of political analysts is that this is a grand coalition between the ANC and DA rather than a “true” Government of National Unity. Regardless of the political details and how that all shakes down, let’s take a look at the post-election outcomes produced so far along this Road-Not-Previously-Travelled.
South Africa needs change and May 2024 delivered a version of that
There is a sense of optimism in certain quarters, and with both ANC and DA ministers vying for credibility in the Cabinet for the first time, there is also the possibility of some good results arising if the “new brooms sweep clean.”
Certainly, consumer and business confidence in the South African economy has improved in the last five months. Thus far, the GNU has strengthened partnerships between the private sector and the government which may bode well for service delivery and solving certain tenacious problems facing the country. While the GNU is still in its infancy and certainly faces challenges, thus far its existence has been positive and a survey conducted in September 2024 by the Social Research Foundation, a think-tank focusing on public policy issues and the promotion of democracy, indicated that the GNU is broadly well regarded by voters.
The absence of loadshedding has also been a positive factor
We experienced a month without power cuts leading up to the elections, but most would not have staked their cash on the possibility of more than six months of a stable electricity supply to follow. However, here we are having enjoyed an uninterrupted national power supply since the end of March 2024.
What is the effect of all this on the JSE and the ZAR?
The combination of suspended loadshedding alongside the May election outcome has definitely contributed to an improvement in our local stock market in the following ways:
- The JSE All Share Index 40 TR has returned 18.61% to the end of October 2024, and most of this return came through after the election results in June.
- The rand has strengthened this year. It started the year around R18.30 to the USD and traded close to R17 to the USD in September, a level last seen in 2023.
This has contributed to improved performance by SA retirement funds
As a result of the market recovery, a South African retirement fund was one of the better performing investments over the last year considering both the market improvement and the tax benefits of Retirement Annuity savings.
A real-life example…
Let’s say you invested R1,000 a year ago, equally divided between three actively managed balanced funds.
- The return on these funds was 17.9% annualised to the end of October 2024, and this return is tax-free within a retirement fund.
- The R1,000 would have resulted in a tax deduction of R450 (assuming a 45% marginal tax rate).
- So, your total return would be R1,629 (R1,000 plus 17.9% plus R450), which is a 63% overall return.
After years of underperformance when compared with global markets, it is encouraging to see our local South African market improve.
Looking back, 2024 has been a positive year for South Africa, and while we still face many challenges and a long way to go to strengthen our economy meaningfully, there is currently a sense of increased optimism for the future.
If you are motivated to maximise your annual retirement savings by harnessing the relevant tax saving, now is the time to get the transactions and paperwork done and lock in the benefit before the tax yearend in February 2025.
Make an appointment with your CERTIFIED FINANCIAL PLANNER® professional in good time to clarify the maximum you can save – with the Taxman’s help.
By Lindsay Frost, CFP® CA(SA)
