February 29, 2024

Investment Manager’s Comprehensive Review of 2023

Executive Summary

In the year 2023, the global and various national economies demonstrated varied performance levels, influenced by factors such as inflation, monetary policy adjustments, and sector-specific developments. The following report provides an broad view of these dynamics as they relate to our investment holdings, offering insights into their implications for investors and the broader market landscape.

Analysis of the Global Economic Environment

The global economy is estimated to have expanded by 3.0% over the course of 2023, with projections indicating a modest deceleration to 2.7% for 2024. Notably, the Asia-Pacific region, despite a less robust recovery in China than previously forecasted, is expected to have made a substantial contribution to this global growth. However, the persistence of core inflation across many nations, despite a decline in headline inflation driven by reduced food and energy costs in the first half of the year, remains a concern. This stubbornness of core inflation necessitates the possibility of further monetary policy tightening, including sustained higher interest rates, to mitigate inflationary pressures.

In response, central banks have initiated monetary policy tightening, evidenced by increased policy rates and the subsequent rise in borrowing costs for both corporate and residential mortgages. This monetary policy adjustment aims to moderate inflation through controlled demand suppression, albeit at the risk of dampening economic activity.

South African Economic Landscape

The South African economy presented a mixed outlook for bond investors in 2023. Positive strides were made in the electricity sector, with investments in new generation capacity and the growth of small-scale generation, buoyed by dropping solar costs and government incentives. Despite these advancements and a display of economic resilience to electricity service non-delivery, concerns linger over the pace of renewable energy projects and essential reforms within Eskom. The logistics sector faced significant challenges, notably in port backlogs, impacting export-oriented industries and economic growth projections. Furthermore, the healthcare sector’s uncertainty, particularly regarding the National Health Insurance Bill, poses potential delays in investments, affecting both private and public health systems.

For equity investors, the positive developments within the electricity sector and broader economic resilience offer optimism. However, logistical challenges and regulatory uncertainties in the healthcare sector necessitate a cautious investment approach until clearer regulatory implications emerge.

The United States Economic Outlook

The U.S. economy experienced growth in the third quarter of 2023, albeit at a rate revised downward from initial estimates. Consumer spending, traditionally a pivotal growth driver, increased at a slower pace, hinting at an economic deceleration as the year concluded. Contributing factors to this slowdown include tighter credit conditions, sluggish employment growth, and sector-specific disruptions, notably in the automotive industry. The manufacturing sector’s weakening, as indicated by a PMI below the expansion threshold, alongside concerns over sustained high interest rates, has led to bond market volatility and equity market challenges, despite a late-year rally prompted by inflationary data and central bank communications suggesting potential rate cuts in 2024.

Namibia’s Credit Ratings

Fitch Ratings affirmed Namibia’s Long-Term Foreign-Currency Issuer Default Rating at ‘BB-’ with a Stable Outlook. This affirmation reflects strong governance and a robust non-bank financial sector, albeit tempered by fiscal and economic challenges, including high government debt and moderate growth prospects. While Namibia demonstrates resilience through its economic recovery and financing flexibility, fiscal consolidation efforts and external vulnerabilities underscore ongoing risks to its financial stability.

Information Technology Sector Review

The year 2023 marked significant advancements in the information technology sector, notably the rise of generative AI, immersive technology developments, quantum computing progress, the deployment of the Frontier supercomputer, and the expansion of 5G networks. These developments indicate robust investment opportunities across AI, immersive technology, quantum computing, supercomputing, and connectivity solutions, positioning the sector for continued growth and innovation.

Eurozone Market Performance

European stock markets exhibited remarkable resilience and growth in 2023, with the Eurostoxx 50 index and several key companies, including Unicredit SpA, Stellantis, and Ferrari, leading the charge. This performance underscores the diverse sectoral growth across the region and sets a positive tone for 2024.

Global Dividends Perspective

Global dividend equities faced challenges in 2023, with notable dividend cuts in the oil and mining sectors impacting overall growth. Despite these challenges, certain regions and sectors demonstrated resilience, highlighting the need for strategic portfolio reassessment to align with evolving market conditions and investment objectives.

Japanese Equity Market Dynamics

The Japanese stock market’s historic gains in 2023 were driven by corporate reform initiatives, foreign investor interest spurred by high-profile visits, and strategic overseas acquisitions. Despite potential risks associated with yen appreciation, the market’s outlook remains positive, buoyed by ongoing corporate and economic reforms.


As portfolio managers, we maintain a positive outlook on the information technology sector and Namibian bonds, albeit with a prudent approach towards the latter. Our analytical models have prompted a strategic withdrawal from global dividend equities, as their performance has deteriorated below our investment criteria. Our recent allocations towards Japanese and Eurozone equities have proven judicious, reflecting favourable market dynamics and strong performance indicators in these regions.

In contrast, South African industrials have not met our expectations, underperforming against our benchmarks. In response, we are exploring a reallocation towards the South African financial sector. This strategic pivot is planned for late February, aiming to bolster growth and optimize returns within our domestic exposure. This adjustment is particularly relevant for portfolios where domestic investment minimums are mandated by Regulation 28, ensuring compliance while striving for enhanced portfolio performance.

Our team continues to monitor global and local market trends closely, adjusting our strategies to navigate the evolving investment landscape effectively. Our commitment to rigorous analysis and strategic flexibility underpins our approach to maximizing returns for our investors.