Is SA’s Investment Tide Changing?

“Hulle weet nie wat ons weet nie.” (Dricus du Plessis, UFC champion fighter)

Last year was an extraordinary one for the South African stock market. The JSE All Share Index was up just under 40%.

That momentum carried over into the early part of 2026, although it has since stalled following the outbreak of war in Iran.

For more than 10 years, investment sentiment towards South Africa had been chronically pessimistic. But local and global investors have started to reconsider the South African story. This has been something of a vindication for those who have shown patience and stayed invested, but it also presents some complex new questions.

From laggard to leader

To appreciate the current upswing, one must look at the “lost decade” that preceded it. For much of the period between 2014 and 2024, South African equities and bonds consistently underperformed.

A stagnant economy, the 2021 social unrest, and the debilitating effects of state capture, meant that the JSE simply wasn’t appealing to many investors.

However, 2025 was very different. While the S&P 500 posted a respectable 17.9% return, the JSE delivered a staggering 61.2% return in US dollar terms, fueled by a combination of a surging rand and an interest in local stocks.

Changing sentiment

The likely primary catalyst for this shift in sentiment was the formation of the Government of National Unity (GNU) in mid-2024. For the first time in thirty years, a coalition-based approach to governance brought a sense of pragmatism and reformist energy to Pretoria. Several key factors have since sustained this momentum:

Fiscal credibility and signs that South Africa’s debt is being brought under control.
A focus on infrastructure through “Operation Vulindlela” and the suspension of load shedding.
Lower inflation and rate cuts from the South African Reserve Bank.
South Africa’s removal from the FATF grey-list and a ratings upgrade from S&P.

These are all positive signs that South Africa is on a better economic path. That has given investors more confidence to invest in local markets.

At the same time, many people have been looking for alternatives to the US. The shares that have been performing so well there over many years have become very expensive, and there are concerns about the trajectory of the economy and the impact of some of the current administration’s policies.

This led to money flowing to other parts of the world. And because South African stocks had become so cheap, they looked particularly attractive as good news about the country built.

The risks to the story

All of this suggests that there is more room for South African markets to perform. But the road is not without potholes (is it ever?).

South Africa remains highly sensitive to global shocks. As an emerging market, a sudden “risk-off” sentiment triggered by geopolitical tensions could quickly reverse rand gains. The war in Iran has already affected how much risk investors are willing to take, and the JSE has felt the effects.

If the fighting continues, it is also likely to have a growing impact on oil prices. That will push up inflation in South Africa, and hurt the economy. This will further dull sentiment towards local markets.

Still, South Africa is currently in a sweet spot where improving domestic fundamentals are meeting an undervalued asset class. For local investors, that means the era of simply hiding in offshore assets may be over.

While diversification remains essential, the case for a significant allocation to South African assets has not been this strong in over a decade.

Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.