IMF Special | Signals from Washington

Skip to the sections you're most interested in

00:00 – Introduction 

Jeremy: The world now finds itself riding a narrow ridge, trying to sustain growth amid escalating debt, geopolitical tensions, and eroding fiscal buffers. That was the refrain echoing through the halls of this year's international monetary fund and World Bank meetings in Washington as finance minister, central bankers and institutional investors grappled with the uneasy balance between growth and stability.

Hello, I'm Jeremy Mags, and in this special Monday edition of No Ordinary Wednesday, we join Investec’s leadership at the epicenter of global economic discourse. On the sidelines of the meetings, Investec hosted its annual IMF breakfast - a convening of more than 100 global financiers, where group chief executive Fani Titi sat down with the South African Reserve Bank governor Lesetja Kganyago, to explore South Africa's position in an uncertain world.

From Washington, I'm joined by Cumesh Moodliar, chief executive officer of Investec South Africa and Ruth Leas, chief executive officer of Investec UK and together we'll pick through the signals from this year's meetings, and they'll share insights from another week that has shaped how investors, policy makers and institutions are thinking about the road ahead.

Ruth and Cumesh, welcome back to No Ordinary Wednesday.

01:20: What themes dominated conversations at the 2025 Investec IMF Breakfast?

Jeremy: So Cumesh, you've just stepped out of Investec’s annual IMF Breakfast, an institution in its own right at these meetings. So, for our listeners, maybe just remind us of what the purpose of the gathering is and what themes have dominated the conversation this year.

Cumesh: It's been a very interesting few days in Washington. The Investec IMF breakfast that we host, usually on the last day of the calendar event for the IMF World Bank meetings is a gathering where we invite all our correspondent banks and international counterparties that we deal with to this annual breakfast. What is really good about this year's breakfast is that we had a very focused South African theme. We had Lesetja Kganyago as our special guest, who was interviewed by our group chief executive Fani Titi. I think what's been interesting about the discussions was as much as we are living in a world where there's a lot of perhaps uncertainty and significant debates around tariffs etc, one consistent message has been around the need to engage, the need to continue with bilateral and multilateral relationships, and that in many ways outside of the media narrative, there's a key central shed thematic about people wanting to grow the regional and global economies. And these are insert parties who hold the same views and who've built long-term relationships. So, with all of the volatility, with all of the changes in relationships, I think there's been a consistent theme that there are parties with a single vision about how you want to drive growth forward, not just on a national basis, but on a global basis. And this forum gives you the opportunity to engage with like-minded parties.

02:57 : What’s top of mind for global investors and banking leaders

Jeremy: Cumesh beyond the IMF breakfast, you and your team have met with global investors and banking leaders on the sidelines. Maybe just tell us what is top of mind for them and maybe their most pressing concerns.

Cumesh: I think this year it's really been dominated by what we call the three Ts – Trump, technology and tariffs. And I think, if you look at the global situation, many people are on a daily basis being guided by or influenced by what you're reading in terms of the news headlines, what's coming out of the US and the pace of change in various areas of both economic trade and political alliances shifting at a rapid pace. So, I think that's some of what people have looked at.

And then similarly around technology, the conversation's not just been around AI, it's been around quantum computing, biotechs and fintechs which are all new technologies and not so new technologies. They could rapidly influence the global economic environment as well as the employment environment and change some of the narratives as you look into the economies that could be significantly influenced by this, and that also talks to employment patterns and skills that are going to be needed as well.

Thirdly, a discussion around tariffs. I think being in Washington, no meeting is going to happen without that t-word entering the conversation. And what we've seen has been a level of almost taking a view of many of the economies operating through the cycle as the world adjusts to some of these tariffs, many of these are potentially going to be renegotiated or traded differently. But there's almost a realignment that's taken place since the announcement of these tariffs, and some of them have really come into operation, but the debate has really been, if people have already, for example, front loaded order books, some of the initial impact of tariffs may have been diminished in the short term, but in the longer term, as those order books then empty out and new goods have to be ordered on the new tariffs, what would be the impact. And all of that impact is not yet clear, Jeremy. I think the other point is that you also seeing a realigning of global supply chain with, again, the outcomes not being significantly clear yet because it's still early days in the way some of these are playing through. Then obviously the tensions that are really being created by some of the economic giants in the room and the current tension between the US and China. So, as I said, those are the three thematics that really have dominated a lot of the discussions.

Jeremy: Ruth, let me bring you into the conversation now. From your viewpoint leading Investec Northern Hemisphere business, what themes have stood out most in your discussions?

Ruth: Talking to global banking leaders, what's top of mind really is a divergence that's emerging between the approaches of the United States and that of the UK and Europe from the perspective of financial deregulation. We've heard both the UK and the US talk about financial deregulation, but we are seeing the US taking steps to move towards this much quicker, and we are seeing Europe really lagging far behind in this regard. The banking landscape overall has really become exceptionally competitive and actually many of the competitors coming from outside the banking world being in the non-banking financial space. So, it remains to be seen who takes the first moves in financial deregulation, and that looks to be the US moving first, which leaves the UK and Europe editors advantage relative to the United States banks and this could lead to different forms of competition going forward.

06:31: The IMF has raised its global growth projection to 3.2% for 2025, how does this shape the mood among international investors?

Jeremy: Ruth let’s widen the lens. The IMF has raised its global growth projection to 3.2% for 2025 from 3% in July. Now this is the second upgrade in success of forecast rounds. What's behind this change of view and how does it shape the mood among international investors?

Ruth: It's certainly good to see GDP revised upwards, albeit just a little. Don't think we're actually seeing coordinated and synchronised growth across the world. Definitely pockets of growth in some areas and slow growth in others. Having said all of that, there is growth momentum, which is good to see, and international investors are generally optimistic interestingly enough, having spent a couple of days with them here in Washington.

07:17: Is there more confidence among investors in the UK or is caution still the prevailing mood?

Jeremy: Ruth, zoning in on the UK. The IMF now expects it to be the second fastest growing advanced economy in 2025, yet inflation while cooling remains stubbornly above the Bank of England's 2% target. So, is there more confidence among investors, or is caution still the prevailing mood?

 

Ruth: That's really a difficult one, Jeremy. I would say that most investors would really love to see interest rates coming down sooner and by more than is actually being anticipated by the forward curves. We have seen interest rates reduce somewhat over the recent year or so. But we do need further rate cuts to stimulate more activity, which will benefit both corporates, and private clients around the markets in which we operate. So, inflation staying a little higher than everybody would like is holding the central banks back from reducing rates, and this is slowing down the recovery, and we'd prefer that rates come down sooner.

08:17 – How seriously are investors taking IMF global debt warnings?

Jeremy: Now Cumesh, one of the most pressing themes of this year's meeting has been global debt. The IMF warning that global public debt could exceed a 100% of GDP by 2029 and possibly more in adverse scenarios. So, here's the question - how seriously are investors taking this warning? And do you in any way foresee a shift in capital allocation as debt levels climb?

Cumesh: Jeremy, I think the IMF has for a while actually been urging both advanced and developing countries to reduce their debt levels, cut deficits, and build buffers. I think that discussion is also influenced on the same basis the need for these fiscal buffers. With that said, just to give some perspective to this, if you look at what I call the rich or developed market economies, there are a number of them that already have public debt levels exceeding a 100% of GDP. It's the US Canada. France, China, Italy, Japan, and a number of others. The immediate risk to some of these rich or developed market economies is lower than I think would be initially perceived due to the fact that they have access to deep sovereign bond markets and more policy choices. The broader risk, I think, is for emerging markets where there are fewer resources and opportunities as you would have in the more developed markets. The risk is that these emerging markets could then be burdened with much higher borrowing costs. So, I think the IMF warning is prescient, and it does talk to the importance of fiscal consolidation and fiscal responsibility. I do believe that over the coming period you would see a change in capital allocation b that is potentially impacted by what's happening in terms of tariffs and steps that economies would've to take to create a level of economic stability and price stability in the economies. And that, to my mind, the view a bit, that it's not as easy to say how the capital allocation changes will come into place as economies are already a adapting to a number of other headwinds, but certainly an issue of concern and that has to be considered.

10:37: What message did SARB Governor Lesetja Kganyago deliver to the global financial community and how was it received?

Jeremy: Cumesh, let's bring it home to South Africa. At the Investec IMF breakfast that we were talking about at the beginning of the conversation, the spotlight fell on SARB Governor Lesetja Kganyago. What message did he deliver then, to the global financial community and how was it received?

Cumesh: The governor delivered a cautiously optimistic and positive message around the South African economy, and it was really a fact-based approach. It was that it's not just about sentiment and talking about change in sentiment. It was looking at the improving South African economic environment. One of the factors he mentioned was that the last week, the ZAR was the second-best performing currency. You also going through an upward commodity cycle where commodities are on the rise. You've seen gold price breaking through new barriers. On the back of that, you also seeing inflation in South Africa being relatively contained at the midpoint of the target set by the National Treasury and the South African Reserve Bank. You've also seen bond yields coming down in South Africa. And for the last two years, we've had a primary budget surplus. So, all of those things are actually impacting the overall economic narrative very positively. I think the message that the governor delivered is that the structural reform program under Operation Vulindlela has actually has had a positive effect and some of the initial constraints to growth, if we go back two to three years when we are in an energy crisis and we were all talking about number of load cheating days, we are now living in a period where there has been a high level of energy stability. We also seeing progress in terms of the road and transport networks, including rail and ports. So still again, we'd like to see a faster pace of progress, but there are definitely green shoot and positive steps that have been taken through the work streams under Operation Vulindlela. So, the message was one overall of saying that South Africa with a GDP growth forecast on the SARB estimates of 1.2% is actually hopefully on an upward trajectory and we should be targeting between three and 5% over the medium term. I think that's been the message that has been delivered. The caution that I would add to that, Jeremy, is that we need to continually focus on areas of crime and corruption that could potentially knock investment confidence and also impact negatively on many of the structural reforms that are being undertaken. But balance, very strong fundamentals starting to shift, and good monetary policy with a sense of some fiscal anchors being in place as well.

13:10: What was Investec’s message about South Africa to international financiers?

Jeremy: So, some positive messaging from SARB governor Lesetja Kganyago. I presume you then amplified that to international financiers that you would've met in Washington during the course of the week.

Cumesh: Yes, absolutely. When we were here last year, this time, I had the sense that people appreciated that we'd just come through the election – a government of national unity had been put in place, but it was seen to be early days and there was a high level of caution about how it would all still play out. In engaging with both investors and financiers of the last few days, our sense is that there's been a move to formal positive sentiment from cautious optimism to positive sentiment to what I believe will lead to an improvement in capital allocation by investors to South Africa over the coming period.

13:58: Is investor sentiment on the UK is improving?

Jeremy: Ruth, earlier we spoke about the spectre of global debt. Now the UK government, like many advanced economies. Is facing tough fiscal choices, but there are some indications of improving sentiment among UK consumers. So, from your interaction then with international investors, do you think investor sentiment on the UK is improving?

Ruth: We have seen interest turning towards the UK, particularly as investors look to reduce their concentration to the United States for everything that everybody says about the UK and doom and gloom and increased tax and all sorts of other difficulties that are going on here. This is still a major financial centre in the world. We see many immigrants coming in to build businesses – fintech, scientific developments, and growth in many different businesses. So, while the political state is difficult to navigate and to adapt to, we are seeing optimism and a focus on growth in UK corporates themselves, taking advantage of the opportunities that they see, and international capital coming in to make investments in certain companies.

15:12: What signals are you picking up about investment appetite in the UK and Europe?

Jeremy: And Ruth, you've been in a number of bilateral meetings this week. What signals are you picking up about investment appetite in the UK and Europe? Are investors looking for opportunity in this uncertainty, I wonder, or just simply seeking safety?

Ruth: Jeremy, I would say that over the past few years or so, we've faced uncertainty from different things almost every day of every year. So, corporates and individuals have really learned to navigate through this and to adapt to the uncertainty, and there's no doubt that they are looking for opportunities. Those whose balance sheets are in healthy shape and those who have strong capital behind them are definitely optimistic about the future and able to take advantage of various opportunities that are presenting themselves even in a challenging macro environment.

15:57: Is there evidence that SA’s reform narrative is gaining traction?

Jeremy: The IMF forecast for South Africa's growth in 2025 is1.1% and 1.2% in 2026, as you referenced. Now, that's little change from estimates earlier in the year. Again, from those interactions this week, I wonder if there's any evidence that the reform narrative is starting to gain traction or that external tailwinds perhaps might surprise us all?

Cumesh: I genuinely do believe there's the potential for us to be surprised on the upside, Jeremy. As I said earlier in our discussion, there definitely has been a shift in change in sentiment from one of cautious optimism to a sense of now investors getting into a lot more detail about wanting to look at where the actual opportunities to invest would be, and a clear understanding that South Africa has actually, as much as we could get caught up in the noise in some of the headlines, on the economic fundamentals, the improvements we've seen in terms of inflation, reducing bond yields, tight monetary policy, a level of fiscal discipline in certain areas, and a primary budget surplus - so if you take all of those factors into account, we think that the fundamentals are showing a shift, and that South Africa does represent an attractive investment opportunity. The investors have also noted, for example, that the operating license for the port in Durban - that the legal process has been finalised and that a public-private sector partners are coming on board, as well as some of the initiatives from Transnet on the rail side, we 11 concessions have been allocated. All of those are driving, I think, positive sentiment. Together with the fact that SA corporates and individuals in many respects, but particularly SA corporates, are sitting on surplus cash and with high levels of liquidity, the opportunity to deploy should the right investment case present.

17:59: Is the global economy on a more stable footing?

Jeremy: Ruth, despite the turbulence of the past few years, the global economy has shown remarkable resilience. So, as we look forward to 2026, do you think the global economy is on a more stable footing?

Ruth: Considering all the meetings we had in Washington over the last number of days; I would definitely describe the overall mood as optimistic. I do believe that corporates and institutions and banks have become quite used to navigating and adapting to the overall macro challenges, political challenges and geopolitical challenges. Balance sheets are in good shape; there is a lot of capital and liquidity waiting to be invested. So overall, yes, I think everybody's looking forward to taking advantage of opportunities and just moving through whatever challenges they have to face.

Disclaimer

Focus and its related content is for informational purposes only. The opinions featured on the site are not to be considered as the opinions of Investec and do not constitute financial or other advice. The information presented is subject to completion, revision, verification and amendment.

Although information has been obtained from sources believed to be reliable, Investec Securities Proprietary Limited (1972/008905/07) or its affiliates and/or subsidiaries (collectively “ISL”) does not warrant its completeness or accuracy. Opinions and estimates represent ISL’s view at the time of going to press and are subject to change without notice. Past performance is not indicative of future returns. The information contained herein is for information purposes only and readers should not rely on such information as advice in relation to a specific issue without taking financial, banking, investment or other professional advice. ISL and/or its employees and/or other Investec Companies may hold a position in securities or financial instruments mentioned herein. The information contained in this document alone does not constitute an offer or solicitation of investment, financial or banking services by ISL. ISL accepts no liability for any loss or damage of whatsoever nature including, but not limited to, loss of profits, goodwill or any type of financial or other pecuniary or direct or indirect or consequential loss howsoever arising whether in negligence or for breach of contract or other duty as a result of use of the reliance on information contained in this document, whether authorised or not. This document may not be reproduced in whole or in part or copies circulated without the prior written consent of ISL.

Full Investec Bank Limited disclaimer