In highly regarded investment circles the belief is that the 8 year bull run which we’ve enjoyed in South Africa is about to end. The theory is that we have benefitted from what is referred to as the democracy dividend and that, now that the euphoria has waned and reality is back, things will go back to normal. Also, local p/e ratios are no longer as attractive as those offered overseas and nor are our dividends yields. But is it that simple? Are the Western banking systems strong enough to survive? Will the sovereign debts crisis sort itself out quicker than expected?
With a huge interest rate differential in our favour and with the yields offered on our capital markets so favourable, and with no immediate change being evident, surely this influx of foreign money will cause a second round of pro-South African fervour. Or will this be spoilt by mis-management of the economy, by rising unemployment, by nationalisation and low productivity, by the proposed NHI which is quite possibly going to cause our tax rates to sky-rocket, or even by the NCA which surely needs to be reviewed? Which will it be? Which way will it go? Are we simply to experience a period of deceleration to be followed by another even greater surge of growth down the line if legislators keep policies sensible? The bull run may be ending, but it may not be the last bull run that we’ll see.