March 2026
Executive Summary
As we entered 2026, our outlook for Emerging Markets—and South Africa specifically—was broadly constructive. A combination of structural improvements, infrastructure investments and increased policy momentum supported this positive view.
Recent geopolitical events however, particularly the escalation involving Iran, the US and the Strait of Hormuz, have introduced significant volatility into global markets. Oil prices have spiked sharply, investor sentiment has deteriorated and we’ve seen a predictable shift toward traditional safe‑haven assets such as the US dollar and gold.
This memo provides a balanced assessment of these developments, with a focus on:
- South Africa’s improving macroeconomic foundations
- The role of infrastructure investment in unlocking long‑term growth
- The evolving global geopolitical landscape
- A critical analysis of gold’s recent performance and prospects
- How Cannon continues to navigate risk and opportunity
Despite current uncertainty, our investment philosophy remains anchored in valuation discipline, fundamental analysis and the ability to act decisively when markets misprice assets.
South Africa’s Investment Landscape
At the start of the year, we identified several positive developments supporting a constructive outlook for South Africa:
- Removal from the FAFT grey list (Oct 2025)
- S&P’s upgrade of South Africa’s sovereign credit rating to BB (Nov 2025)
- Improvements at Eskom, notably grid stability and financial performance -
- Progress at Transnet related to port efficiency (R127bn infrastructure upgrades over next 5 years)
- Rollout of infrastructure investments (in particular in the Western Cape). SA Government is budgeted to spend over R1 trillion on infrastructure between 2025 and 2028
The ramp up in investment spend in infrastructure and the broader economy, is critical in unlocking economic growth and the underlying latent potential in business South Africa.
These improvements are not merely cosmetic—they materially affect the operating environment for businesses and, in turn, investor sentiment.
Why Infrastructure matters
South Africa has historically underinvested in infrastructure. From 2014 to 2024, total investment as a percentage of GDP has average 16.7%, well below the 30% target outlined in the country’s National Development Plan (NDP).
If South Africa moves meaningfully toward the NDP’s investment target, we expect:
- Improved export competitiveness
- Lower operating costs for businesses
- A re‑acceleration of economic growth
- Renewed interest in long‑term capital formation
Mining: From Sunset Industry to Revival?
Over the last 15 years, the South African Mining industry has often been viewed as a declining or “sunset” industry. The industry has been one that is managing aging projects, gradually losing market share and jobs, rather than a vibrant exciting industry that is attracting investment and unlocking new opportunities. This directly contradicts the global clamour for critical minerals, of which South Africa has a rich endowment. Recent announcements from mining majors like Exxaro and Rio Tinto may signal the start of a renewed investment cycle.
A review of South Africa’s economic fortunes highlights that the country is directly linked to those of the commodity cycle, in a similar manner to many South American countries. Chart 1 below, showcases that the peaks and troughs of both the South African and LatAm Real GDP growth correspond with the peaks and troughs of the commodity cycle. Our view at Cannon, is that we are exiting the bottom of the commodity cycle and the supply side investment interventions that South Africa is focused on, will be critical in fully realising the potential economic uplift from a commodity price rally.
Chart 1: LatAm and RSA Real GDP vs Commodity prices
Global Geopolitics: The Strait of Hormuz Shock
In our last investment memo, “The central theme of the decade”, we highlighted the shift to a multipolar world, accompanied by rising policy uncertainty across developed markets. We noted:
- The US now exhibits policy variability driven heavily by electoral outcomes
- The Federal Reserve’s independence is increasingly questioned
- The European Union faces periodic integration risks
- Global markets have entered a regime of higher inflation, more protectionism and more frequent conflict
The events of early 2026 have reinforced these themes.
The Israeli and US attack on Iran and the subsequent retaliation and escalation from the Iranian government on US military and economic partners throughout the Gulf region of the last few weeks, highlight the difficulty of investing in an unstable geopolitical environment. Much like the Ukrainian Russia war, the current conflict has provided a sobering reminder of fragility of human life and interconnectivity of the global economy. I would wager that most people, at the beginning of the year were unfamiliar with the Strait of Hormuz, a stetch of ocean 33 km wide between Oman and Iran. This body of water sees 20% of Global Oil supply travel through it and as a retaliatory strategy, Iran has shut down all shipping activity through the strait, sending the global energy markets into chaos. Consequently, the price of oil has gone from $60 a barrel at the beginning of 2026, to at the time of writing this memo over $90 a barrel.
Gold: A Safe Haven, but How Safe Now?
At times like these the investment community typically switches to risk free assets, the US$ and Gold as a hedge against an increase in risk, in both the real economy and in financial markets. A key question we ask ourselves in 2026 is” “Are the US$ and gold currently risk free?” Gold in particular is an important question to answer given than gold stocks currently constitute over 20% of the All-Share index, after a spectacular rally in 2025. On average the gold miners listed on the JSE experienced a over 200% increase over the last 12 months. So, let’s discuss Gold.
2025 was a Golden year for the price of Gold, it started the year at $2633.47 per ounce and finished the year at $4118.09, marking a 56% increase. Indeed, the gold price has rallied 99% over the past two years. These returns mark the 4th best and 5th best 1-year and 2-year price appreciation for gold. In fact, this is the best performance of Gold since the 1970s which saw the collapse of the Bretton Woods system and the US$ unpegged from gold. The recent rally in the gold price has been ascribed to two drivers, a pursuit of “a safe haven asset” in an environment of geopolitical uncertainty and a movement from central banks to increase their holdings in Gold to offset the dependence on a US$, that is underpinned by increasingly uncertain policy making.
Chart 2: Gold Price
Source: LSEG Workspace
Through the centuries, gold has been the safe haven for investors fleeing crisis. Theoretically, as investor fears ebb and flow, gold prices should fluctuate. Research conducted by NYU’s Professor Aswath Damodaran highlights that gold’s protective role in crisis’s seems to be at its most effective during potentially catastrophic economic events. It is however worth noting that his research found the change in investor risk sentiment is a relatively poor predictor of the performance of gold.
Chart 3: Sources of Gold Demand
Source: World Gold Council
Over the period 2010 to 2025, the demand for gold increased by 1.0% per annum and the price over the entirety of that period increased by 7.4% per annum. The thesis that central banks across the globe have significantly increased their holdings in gold is back by data: over the 15 years, central banks demand for gold increased by 17.3%, in comparison to jewellery demand 1,61%, technology -2.4% and investment demand 1.9%. It is therefore clear that central banks have driven the demand for the precious metal over the period.
2025 however saw a significant shift in the source of demand for gold. The 56% gold rally corresponded to an overall 0.8% increase in its demand. Central banks reduced their gold demand by 21.0%. Beyond central banks, the jewellery and technology segments also saw a 19.2% and a 1.0% reduction, respectively, in their demand. To put the incredible nature of the 2025 gold rally into perspective, sectors that constituted 69% over the gold demand at the end of 2024, saw an 18% fall in their demand and the price still rallied by levels not seen since the 1970s. The driving force behind the rally was an 83.5% increase in investment demand (largely via gold ETFs). This analysis of the drivers of gold demand, coupled with the sheer force of the price appreciation makes us wary for the outlook for the gold price given that the investment demand for gold has historically been quite volatile.
Despite this relatively bearish outlook for the gold price, our view is that there remain some gold stocks that showcase attractive valuations, even in an environment where there’s a correction in the commodities price.
Our Investment Stance: Vigilant, Cautious, and Opportunistic
At Cannon, we consider ourselves valuation‑based investors. We allocate capital based on:
- Underlying fundamentals
- Intrinsic value
- Identifiable mispricings
- Long‑term return potential
In environments like today—characterised by uncertainty, volatility, and strong reactions to geopolitical shocks—this approach becomes even more valuable.
We remain:
- Vigilant: monitoring global developments closely
- Cautious: avoiding areas displaying excessive speculative behaviour
- Opportunistic: ready to act when markets misprice risk or opportunity