A sign is displayed in the reception area of Goldman Sachs in Sydney, Australia. Picture: REUTERS
A sign is displayed in the reception area of Goldman Sachs in Sydney, Australia. Picture: REUTERS

Global investors are looking for the next hot emerging-market ticket and SA is the favourite candidate, given the potential for an economic revival under Cyril Ramaphosa.

So says a report by Goldman Sachs. It expects more market-friendly economic policies under new ANC president Ramaphosa, which should provide a tailwind to an economy showing signs of recovery.

Not only did GDP growth print higher than expected in the past two quarters, but retail sales and credit growth have been climbing and inflation is on a downward path.

While Goldman Sachs retains a healthy dose of scepticism about the speed at which policy change can occur, it notes that SA’s growth cycle is picking up after the recent downturn in investment growth.

"Investors are looking for the next big emerging-market story akin to Brazil in 2016 and Mexico in 2017," states the report.

"SA is at the top of the list of potential candidates, given the market-friendly ANC leadership vote outcome."

The investment bank’s view on SA’s economy has for some time been more constructive than the consensus, which is for GDP growth of 1.3% in 2018. It has argued that inflation is likely to revert to closer to 4.5% and that SA’s trend growth is not as weak as generally thought.

It recently revised up its 2018 growth forecast for SA to 2.3% from 1.5% and brought forward its expectation of interest-rate cuts to the first half of the year.

Several other economists are revising their growth forecasts upwards, or preparing to do so, on the basis that the stronger rand will depress inflation and buoy consumer spending, while greater political and policy certainty will raise confidence.

An indication that Ramaphosa’s new broom will sweep clean came at the weekend when the government announced that Eskom would install Business Leadership SA head Jabu Mabuza as its new board chairman, and former Treasury official Phakamani Hadebe as interim group CE.

The announcement came on the eve of the South African delegation’s departure for the World Economic Forum in Davos. "Davos delegates will be asking themselves if the Ramaphosa-led SA will prove to be the hot emerging-market story of 2018," said Goldman Sachs MD Colin Coleman.