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The Asset Class: Vivienne Taberer · Strictly Business Podcast

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  You're listening to Strictly Business Podcast with Lindsay Williams.
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  South Africa was bowling along very nicely at the macro level and also at the markets
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  level in 2025.
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  Both bond markets and the equity market doing very well.
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  We had the government of national unity still going along after a couple of bumps.
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  There'd been upgrades from rating agencies.
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  Everything seemed set fair.
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  Stability was the watchword.
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  And then came the war on Iran, the US and Israel war.
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  on Iran and doubts were cast as a result.
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  But is the worst over?
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  Was it just a blip?
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  With me is Vivian Tabor, a portfolio manager at 91 in Cape Town, speaking to us
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  from London.
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  Vivian, I think that it's been managed quite well in South Africa, given that the
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  South African Reserve Bank seems to be ahead
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  of the curve when it comes to inflation, because they've raised interest rates.
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  And that's the first point I'd like to make, the interest rate management of the
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  economy.
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  What do you think?
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  Yes, I think we do have a very credible central bank.
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  In fact, we've got one of the most credible central banks in the world.
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  And the way they have raised rates, they have been preemptive.
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  It hopefully means that there's a smaller cycle to come.
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  So this preemptive stance that they've taken will help contain inflation
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  expectations over the longer term, because that is what they
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  will be watching as we move forward.
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  So, yes, you know.
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  The war may be over.
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  I think it's still too early to say what the long-term ramifications are, but it's
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  definitely having an impact on energy
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  prices, and that is going to take some time to unwind.
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  Yeah, but one of the encouraging things is that despite the fact that South Africa's
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  CPI has gone from 3.1%
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  to 4.5% the last print, which is a really big jump, especially when 3% is the target
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  of the South African Reserve Bank, the fact is
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  that oil prices have come down from around 120 that they're...
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  peak.
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  They were missing around in the 90s for quite a while and now are between $75 and
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  $80 a barrel.
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  And also at the same time, the RAND is relatively stable as the interest rate
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  cycle seems to be either
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  stabilising or edging higher in South Africa.
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  So maybe the worst is over, as I said in my introduction.
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  Well, it does appear that, you know, the worst in terms of energy price spikes is
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  over, but there has been some
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  damage done.
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  if you look at where the market is pricing oil going forward into the end of this
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  year and end of next year, we will get some
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  unwind of energy prices coming through, but it's not going to go back to the
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  levels it was.
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  So that is going to take time to come through the numbers.
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  If you look at what we're forecasting, you know, with oil being back down at sort of
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  mid-70s by the end of this
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  year and averaging low 70s next year.
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  We start looking at average inflation for this year coming in at around 4.2% now on
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  our
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  latest forecast.
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  So that's still well above the SARB's target.
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  So they will be looking at what second round effects come through.
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  Are inflation expectations going to become unanchored?
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  And if that is the case, then they will have to react more strongly.
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  So, you know, it looks like we are going to get another interest rate hike.
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  Certainly the market is pricing that.
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  another hike in July of 25 basis points, and then almost another full hike by the
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  end of the year.
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  So the market is saying the Saab will move.
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  It will move to contain inflation expectations.
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  It does mean that it's a tougher time for the consumer because at the beginning of
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  this year, we were looking for three cuts of
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  25 basis points each.
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  So we're certainly moving in the wrong direction from that.
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  And it will have an impact on growth.
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  But both of those are manageable given what you said was the good place that we
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  started out in.
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  So South Africa has started this time at a much stronger place, in a much better
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  position to be able to
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  handle the global problems that have been thrown at us.
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  What about revenue?
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  The revenue side was fairly buoyant or rather fairly optimistic in the budget,
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  the 2026 budget of a few
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  months ago.
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  But now that the commodity cycle is looking slightly shakier when it comes to
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  PGMs and gold, and that obviously affects South Africa, is
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  that also something that needs to be factored in, Vivian?
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  I don't think so.
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  And if you look at the numbers that we have run, we think that the Treasury was
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  still very cautious in what they were looking for in
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  terms of excess revenue coming in from the commodity boom.
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  So they have got some wiggle room there.
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  And if you look at the numbers over the last couple of months, You know, revenues
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  continue to surprise on the upside.
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  So the budget balance that's come through this last month is looking very good.
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  And that's expected to continue.
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  So we continue to see that this fiscal consolidation that we've seen is going to
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  continue as we go forward into the latter
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  parts of this administration.
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  That means that our debt to GDP is peaking.
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  We'll start to gradually come down.
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  As that happens, we'll end up with lower long-term interest rates as that risk
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  premium comes down.
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  Less money gets spent by the government on paying interest bills and more money can
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  be used to get growth going.
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  Has the war and its after effects, which will continue, as you've just said, has it
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  changed your attitude towards
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  fixed income?
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  Has it changed your portfolio construction or potential portfolio construction?
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  You know, as we came into this year, we were very positive on what was going to
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  happen in terms of short-term interest rates and the longer-term
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  impact that that would have on the bond market.
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  And what has happened now is we've seen that that positiveness has been pushed
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  out.
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  It's not been derailed.
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  So.
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  we continue to be positive over the longer term in terms of the way that we see South
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  African fixed income performing.
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  Vivian, thank you very much for your time.
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  Vivian Tabor is a portfolio manager at 91 in Cape Town.
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  The views and opinions expressed in these podcasts are those of Lindsay Williams and
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  rethinking at any time.
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