Wednesday was election day, and I spent a wonderful morning at Buffalo Bay after voting.

Our country’s natural beauty is truly a treasure that we should never take for granted. It’s no wonder tourists from around the world spend so much to visit our shores.
South Africa isn’t alone in having elections this year. In fact, 2024 is set to be the busiest election year ever recorded, with many of the world’s most populous countries holding national elections.

Here’s another view with population size of each election country. South Africa made the top 20, but imagine managing an election for a population as large as India’s 1.4 billion.

This election is particularly significant for South Africa. For the first time since Nelson Mandela was elected in 1994, the ANC might lose its majority.
The party has faced criticism for widespread corruption, high unemployment, deteriorating public services, and rampant crime. This raises concerns: will the ANC form a coalition, and how will this impact their policies? Could it lead to more extreme measures?
Media tends to focus on worst-case scenarios because fear sells. Instead of speculating, let’s examine how the international investor and business community perceive the importance of this vote through a data point: the South African 10-year bond yield curve.
The 10-year bond yield curve reflects the interest rate investors demand to lend money to South Africa. If they see us as a risky investment, they require a higher return, and the yield goes up. Think of it like a personal loan: the riskier the borrower, the higher the interest rate.
So, the yield curve serves as a proxy for how the international community views our risk. If the yield rises, they see us as riskier. If it falls, they see us as less risky.
Recently, there has been a slight jump in our yield, but it’s not significant when compared to past spikes, like during the Covid-19 pandemic. Over the past five years, the primary driver of our yield has been high interest rates from central banks worldwide to combat rising inflation.

To understand if our yield curve is influenced more by local events (like our elections) or international factors, we can compare it with the US 10-year yield curve. If our yield curve diverges significantly from the US curve, it indicates local factors are at play. If they move in tandem, international factors are the main drivers.
The chart below shows the overlay of South Africa’s 10-year yield curve with the US 10-year yield curve. The yields have moved in tandem since the start of 2024, even in the past few weeks. This indicates that international factors, particularly inflation and interest rates, are driving both curves, and not the local elections.

In other words, the international community doesn’t seem worried about our election results affecting our risk level or our ability to repay debts. If there were a significant divergence and our yield curve rose much faster than the US curve, then I’d be more concerned.
Our local elections do not appear to be a major concern for international investors. Their primary focus is on global inflation and economic growth. The recent rise in our yield mirrors the US curve, indicating no additional perceived risk in South Africa due to the elections.