The year began with expectations of a relatively favourable environment for markets, only for the Iran conflict and resulting oil shock to push inflation higher, rates back into focus, and growth expectations off course.
But at a Discovery Invest media briefing on 18 August, Ninety One portfolio managers Samantha Hartard and Malcolm Charles offered something investors have heard relatively little of this year: good news.
The global economy has moved back towards Goldilocks conditions. Earnings growth is broadening beyond technology. Emerging markets are attracting renewed interest, while South Africa is beginning to stand out within the group.
The rand is trading more closely with the country’s underlying fundamentals, commodity exports are benefiting from higher prices and improving logistics, electricity availability has changed markedly, and Transnet is opening its rail and port infrastructure to more private-sector participation.
From Goldilocks to an oil shock
South Africa entered 2026 with inflation at 2.9% and expectations of at least two interest rate cuts. The Federal Reserve, European Central Bank, and Bank of England were also expected to ease policy. Global inflation appeared to be under control, and South African growth was expected to remain below 2%.
Then came the Iran conflict.
The resulting disruption to oil markets pushed oil and gas prices sharply higher. Charles said the shock became a “booster for inflation” and a drag on growth, while bond yields moved higher across major markets.
The change in interest rate expectations has since spread well beyond the United States.
Charles showed two-year swap rates against official policy rates in the US, Europe, the United Kingdom, and Japan. In each case, markets have been moving ahead of central banks, with the swap rate indicating that investors expect tighter policy.
In South Africa, the Reserve Bank is facing the same pressure. Inflation had moved back towards 5%, against a 3% target, and Charles expects one more rate hike in September to restore the SARB’s credibility. He sees that as a headwind for the rest of 2026, rather than the beginning of a prolonged tightening cycle, with average inflation expected to fall to about 3.5% in 2027.
The more unusual development is what is happening in developed markets.
Charles referred to what a US fund co-portfolio manager calls the “EMification of DM” – developed markets increasingly behaving like emerging markets did in the 1980s and 1990s.
The UK is one example. Its 30-year government bond yield has moved above Hungary’s. The US has issued its most expensive 30-year debt in 25 years. Japan’s market interest rates have moved well ahead of its official rate.
For investors who have traditionally regarded developed-market government bonds as the safer part of the global portfolio, the comparison is becoming less straightforward.
And that is drawing attention back towards emerging markets.
South Africa is beginning to stand out
Charles said sovereign wealth funds and large institutional investors are increasing their exposure to emerging markets, both equities and fixed income.
“South Africa is standing out there with a little flag that we are one of the better ones in emerging markets.”
The comparison is not simply about South Africa’s yields.
South Africa’s debt-to-GDP ratio is declining, while Charles noted that debt ratios in the UK, US, and Japan are moving in the opposite direction. South Africa’s 10-year government bond was yielding close to 9%, compared with roughly 3.5% for US Treasuries.
For an international investor looking for fixed income, that differential is difficult to ignore.
But there is another reason Charles is more comfortable with the rand than he has been for much of the past 15 years.
The rand is finally trading on the fundamentals.
He shared that he starts each morning by looking at South Africa’s terms of trade – essentially, the value of what the country exports relative to what it imports – and comparing it with the rand.
For years, the two measures moved in broadly the same direction but often diverged significantly. Political uncertainty, load shedding, and other domestic concerns could weigh on the currency even when the country’s export position was improving.
That relationship has changed.
“The rand, for the first time in 15 years, is trading in line with its macros.”
The February sell-off provides a useful illustration. Oil prices rose while gold fell, weakening South Africa’s terms of trade and sending the rand sharply lower.
As gold and platinum recovered, and coal exports improved, the terms of trade strengthened again. The rand followed.
South Africa exported about 15 million tonnes of coal last year, with roughly 60% to 70% going to India and China. India is the largest single buyer, and Charles said demand is increasing.
Improved throughput at Richards Bay has also allowed more of that coal to leave the country.
The rand was trading at about R16.20 to the dollar at the time of the presentation, close to the level suggested by Charles’s terms-of-trade analysis. It was also the fifth-best-performing currency globally over the preceding 12 months.
Gold and platinum are part of the same equation.
Gold, Japan, and the dollar
Gold’s rise is no longer simply a story about the price of gold. It is increasingly tied to questions about the dollar, government debt, and where investors look for safety when confidence in traditional reserve assets is tested.
Hartard shared a chart tracking gold against the US Dollar Index, which showed the two moving in different directions at various points through 2025 and 2026. Gold had risen sharply, while the dollar had not provided the usual inverse relationship. Ninety One had already locked in some gains on its gold and platinum exposure, but the longer-term view remained positive.
Hartard linked this to a combination of fiscal sustainability, central-bank behaviour, and concerns about the dollar. Global fiscal deficits are approaching 8%, while South Africa’s deficit is forecast at about 2.8% in three years. At the same time, central banks are increasing their gold holdings, with China among the largest buyers and European central banks also adding to their reserves.
Then came Japan.
By August, Japanese market rates had moved well ahead of the Bank of Japan’s official policy rate, putting pressure on the yen. Hartard referred to developments recently reported by the Financial Times, when the US had begun buying yen and selling euros to support the Japanese currency.
The concern was not simply the yen. Japan is one of the largest holders of US Treasuries. If pressure on the yen forced Japan to defend its currency by selling some of those Treasury holdings, it could put further pressure on US government bonds.
The US was therefore stepping in before that happened.
“The US having to stand up and say, ‘Oh, Japan, we’re going to support you. Let’s help you. We will help you before you start selling our bonds.’”
For Hartard, this was part of a broader shift in how investors were thinking about safe-haven assets.
“Actually, let’s move into gold. That is a safe haven asset.”
Gold had remained above $4 000 an ounce despite higher interest rates and rising CPI and was about 50% higher year on year at the time of the briefing. The latest slide, dated 17 August, showed gold still trading at elevated levels, while the dollar had recovered some ground. Hartard said gold had subsequently moved towards $4 400.
She described the renewed demand as part of the “dollar debasement trade” that had emerged before the war and was beginning to re-establish itself as the immediate shock receded.
Then there is the infrastructure story
Some of the more tangible changes are taking place away from financial markets.
In December 2025, South Africa had around 10GW of excess electricity capacity. Even during winter, there was about 6GW available, falling to about 3GW at peak periods.
There are now 19GW of renewable energy connected to the grid, with another 67GW expected. About 9GW of rooftop solar is already generating electricity.
Over the next decade, more than 14 000km of transmission lines are expected to be built at an estimated cost of R400 billion, with private capital expected to play a significant role.
Transnet is undergoing a similar shift.
Eleven independent companies have been given concessions to operate locomotives and trucks on the rail network. Traction has bought 46 locomotives, with the first due to enter service in August.
The additional investment could add 24 million tonnes of capacity to the rail network.
If a third of that additional capacity is used for coal, Charles estimates that another R50bn could flow into the economy and fiscus.
The Port of Durban has already attracted R11bn of investment from ICTSI, while other ports are opening tenders to private operators.
Mining companies are beginning to notice the difference. Hartard said management teams at several mining groups were reporting that their dealings with Transnet had become more collaborative and that they were seeing the changes on the ground.
The fiscal benefit of higher commodity prices
The benefit of higher precious-metal prices is already showing up in the fiscus.
Mining tax collections in December 2025 were 29% higher than a year earlier, with National Treasury attributing the increase to high platinum-group metals and gold prices.
By the June 2026 tax-revenue collection point, Charles said Treasury had collected a further R50bn more than expected. With gold around $4 440 at the August briefing, he estimated that another R50bn could flow into the fiscus by December if prices remained at those levels.
That gives the government more room to work with at a time when South Africa’s debt and deficit remain closely watched by investors.
It also feeds back into the investment case: stronger exports, higher mining revenues, better logistics, and improved electricity supply all influence the country’s growth prospects and the way international investors assess its assets.
The opportunities are not all in commodities
The global recovery is broader than the technology-led rally that dominated markets earlier in the cycle.
Ninety One’s data showed the global economy had moved from Goldilocks conditions into stagflation following the war shock, but by the end of July had moved rapidly back towards reflation and Goldilocks.
Global growth is tracking at 3.1%.
The latest earnings season has also been broad. More than 80% of European companies had beaten earnings expectations, compared with 77% in the US. Technology earnings were strong, but so were banks and industrial companies.
For Hartard, that broadening is important when assessing where the next phase of equity returns might come from.
Banks are one of her preferred areas. Global banks are benefiting from trading activity, mergers and acquisitions and stronger economic growth. South African banks are seeing similar benefits from commodities trading, equity-market activity, and mergers and acquisitions.
She expects South African bank earnings to grow by about 10% in 2027, with dividend yields of roughly 6% to 8%.
Artificial intelligence remains a major investment theme, but Hartard is less interested in trying to predict which AI model will win.
The infrastructure required to run the technology is easier to identify.
“You need a wafer… You need a data centre, and your data centres need electricity.”
That means semiconductors, data centres, construction, cooling, grid infrastructure, and the commodities required to build them.
Copper is one of them.
Copper prices have reached all-time highs, while global supply remains constrained. Hartard pointed to strong earnings revisions for companies exposed to copper and said the investment case was easier to assess where earnings were already being generated than where revenue depended on uncertain future AI monetisation.
“Don’t take a view as to which AI model is going to win.”
A different starting point for 2027
There are still risks. Interest rates remain a headwind in the short term, oil prices remain vulnerable to geopolitical developments, and the global policy environment can change quickly.
But the data presented at the briefing has shifted.
Global growth is running at 3.1%. Earnings are broadening. Emerging-market assets are attracting renewed interest. South Africa’s debt-to-GDP ratio is falling while several developed economies are moving in the opposite direction.
The rand is trading more closely with the country’s terms of trade. Coal exports to India and China are improving. Gold and platinum prices are supporting miners and government revenue. Electricity availability has improved. Transnet is opening rail and ports to private investment.
For Hartard, that leaves the global growth story looking strong enough to favour growth assets and equities for the rest of 2026.
For Charles, the South African fixed-income opportunity is becoming harder to overlook.
“It’s not a bad place to invest your fixed-income money.”
