Has the tide finally turned on the South African economy? While early days, it seems that the new business-friendly coalition government has wrested back control of economic policy from the suffocating clutches of Luthuli House. Investors are cautiously optimistic.

Listen to this article 6 min Listen to this article 6 min The market indications are clear. First, South African government debt has been a winning investment since the change of government. South African bonds have already returned a world beating 9.3% in dollar terms this year, more than any other local-currency sovereign debt. According to Bloomberg data, the average return for other similarly rated emerging markets have been a miserly 0.1%.

The yield on the benchmark 2035 South African government bond has dropped about 140 basis points since the election in May, to abouyt 11% (bond prices move inversely to yields). After a hiatus of several years when South African bonds were ignored by foreign buyers, offshore investors finally seem to be moving back into the market. They have been net buyers of the nation's debt to the tune of R23.4 billion ($1.3 billion) this year -- on track for the largest annual inflow since 2019, according to the JSE.

Foreign exchange markets have also cheered the change in government. While less pronounced than the shift of investor sentiment in the bond market, the ZAR is almost 5% stronger against the USD since its pre-election weakest point in April...