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Invest in South Africa: what you need to know about the best emerging market

By Capital.com Research Team

12:44, 11 November 2019

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In this article:
EUR/ZAR
EUR/ZAR
18.73458 USD
-0.04266 -0.230%
EUR/ZAR
EUR/ZAR
18.73458 USD
-0.04266 -0.230%
MDCl
Mediclinic
4.990 USD
0.005 +0.100%
USD/ZAR
USD/ZAR
17.20983 USD
0.02685 +0.160%
USD/ZAR
USD/ZAR
17.20983 USD
0.02685 +0.160%

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invest in south africa

If you are looking for emerging markets stocks to add to your portfolio, then South Africa should be on top of your list. This African country is among the best in the continent and provides excellent investment opportunities to international investors. 

South Africa’s advanced economy and strategic location at the tip of the continent makes it a gateway for investors looking to venture into Africa. It is also ranked among the world's largest emerging economies, which include China, India, Brazil and Russia. 

Invest in South Africa

South Africa boasts of a wealth of natural resources such as gold, iron, ore, coal, platinum, uranium, chromium, and manganese nickel. It is no wonder that this economy has attracted the majority of the world's biggest exploration companies, mostly in the oil and gas sector. Read on for more reasons to invest in South Africa. 

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South Africa economic forecast

Is it a good time to invest in south africa? While the South African economy has experienced a slowdown in recent years, analysts predict that it will rebound in the next five years. The World Bank has recently cut the country’s growth forecast for 2019 to 2021 due to weak investor sentiment and looming policy uncertainty. 

south africa emerging market

However, the South Africa emerging market has shown resilience in the last three months, defying analyst predictions and showing stable growth. Data from Stats SA shows that the economy has grown by 3.1% in the last two months. This is an indication that there is a possibility of the future economy going against the gloomy forecast. 

Investment opportunities in South Africa

Foreign direct investment in African countries is expected to explode as China leads the way in funding infrastructure. 

Why invest in South Africa? Being the economic powerhouse of the content, South Africa is likely to attract the most investment. In 2018 alone, FDI into South Africa grew by 446% to 7.1 billion. Data from CEIC shows that FDI into the country increased by $1.8 billion in Jun 2019, compared with an increase of $837 million in the previous year. 

The robust growth of the FDI is a clear sign of the positive sentiments held by foreign investors about this economy. However, even as capital flows in, the future of the South African  stock market is still experiencing a slowdown mostly due to global economic issues. 

South African rand (ZAR) performance

How invest in South Africa? The South African Rand has also shown stability over the years hence making the economy more attractive to investors. When compared to the USD and the EUR, the Rand has been holding itself well even as the global uncertainty resulting from the Brexit and US trade wars with China escalates. 

On Tuesday, October 31, the USD/ZAR currency pair increased 0,86% to 15.1216 from 14.9920 in the previous trading session. In terms of historical price action, South African Rand reached the record high of 17.83 in January 2016. The USD/ZAR record low of 2.71 happened  in July 1992.

South Africa economic outlook

South Africa has the most developed stock market in Africa. The Johannesburg Stock Exchange (JSE) is the oldest and the largest stock exchange in Africa. 

BTC/USD

23,103.50 Price
-0.090% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 60.00

XRP/USD

0.42 Price
+0.570% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.00337

US100

12,164.80 Price
+1.340% 1D Chg, %
Long position overnight fee -0.0179%
Short position overnight fee 0.0070%
Overnight fee time 22:00 (UTC)
Spread 3.0

ETH/USD

1,602.50 Price
+0.020% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 5.00
Founded in 1887 during the first South African Gold Rush, JSE is arguably among the world's oldest stock exchanges.

JSE is ranked as the 19th largest bourse in the world by market capitalisation. The stock exchange lists both local and international companies.

JSE has been on a rollercoaster for the last few years but has shown promising growth in the best part of 2019. Data from Trading Economics shows an 8.35% growth on JALSH-All-Share since the beginning of 2019. For the record, the JALSH-All Share is an index that is the barometer for the performance of the South African stock market. The companies included in the JALSH-ALL Share index make up the top 99% of the market cap of all companies listed in JSE.

How to invest in shares in South Africa

Although the economic decline is associated with the ongoing global uncertainty and the sluggish South African economy, this is a great time to shop around for undervalued stocks.

Short term investors should trade the South African stock market cautiously, given that it is expected to slow down until 2021. However, the future of the South African economy looks bright meaning that value investors have an opportunity to buy low and hold. 

According to South African economy overview, the mining sector is the most lucrative and has the best future outlook. This means that investors are likely to get the best return on their money out of mining stocks. Top stocks in this sector include the African Rainbow Minerals Ltd, Assore Ltd, and Kumba Iron Ore Ltd. You can also explore other promising stocks such as Mediclinic (MDC)

reasons to invest in south africa

Mediclinic (MDC) is an international hospital group, headquartered in Stellenbosch, South Africa. The company operates across the UAE, South Africa, Namibia and Switzerland. MDC shares are listed and traded on the London Stock Exchange and forms a part of the FTSE 100 market index.

According to the Walletinvestor, Mediclinic stocks can be regarded as an acceptable long-term investment. According to the latest forecast, the MDC will experience a long-term growth and will reach the price of $65.973  by the end of October 2024.

investment opportunities in south africa

In the end

The South African market is an attractive destination for traders all over the world. One of the largest emerging economies, South Africa is one of the most sought after investment options for those looking to enter alternative stock markets.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

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