Page 191 - Profile's Unit Trusts & Collective Investments - September 2025

Fund manager interviews Chapter 9

„ Fiscal risk premium (Fiscal policy): This reflects concerns about the government’s overall
fiscal health and ability to service its debt. This premium encompasses both direct fiscal
concerns – persistent budget deficits, high debt-to-GDP ratios, and ongoing SOE bailout
pressures – as well as economic growth concerns that affect the government’s capacity to
generate tax revenue. With growth forecast at just 0.9% for 2025 and citing “persistent supply-
side problems”, weak economic prospects compound fiscal sustainability concerns and
maintain upward pressure on this risk premium.
If we start to see structural reforms gain traction – from energy sector improvements to logistics
modernisation and SOE governance – alongside improved economic growth, we could see
significant compression in the fiscal risk premium. Combined with the SARB’s successful anchoring
of inflation expectations, this would create conditions for sustainably lower interest rates and a flatter
yield curve.
The ultimate trajectory will depend on the interplay between these two policy domains, with
meaningful progress on both fronts required to achieve the SARB’s vision of sustainably lower rates.
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