South Africa’s commodity windfall is expected to seep into the broader economy, boosting banks, retailers and property stocks as stronger prices improve the fiscal outlook and support lower interest rates, according to Old Mutual Investment Group.

“The surge in precious metals prices has already lifted corporate tax receipts and dividends, creating positive second-round effects for the consumer economy,” OMIG Chief Investment Officer Siboniso Nxumalo said at an event in Johannesburg on Tuesday. “Historically, when there’s been a commodity boom, there are spillover benefits into the economy, which then benefit consumer markets.”

South Africa, the world’s biggest source of platinum-group metals and the 12th largest gold producer, is riding a commodities upswing fueled by metal shortages, heavy central-bank bullion buying and safe-haven flows, and improving domestic rail-and-port export capacity.

The jump has contributed to FTSE/JSE Africa All Share Index heading for its best annual performance since 2009, led by mining stocks. In the last commodity upcycle in 2021, the mining industry made up roughly half of South Africa’s corporate tax revenues, Nxumalo said.

“We’ve benefited from holding precious-metals companies,” Nxumalo said. “Now we’re looking at clothing retailers,” as the wealth effect spills over and gross domestic product typically rises about 0.6% within 12 to 18 months of a commodity upswing, he added.

The improved fiscal outlook could pave the way for monetary easing and possible credit rating upgrades, according to Alexander Forbes Group Holdings Ltd. Chief Economist Mpho Molopyane.

“The surge in commodities, particularly gold” will bolster revenues, she said. “We anticipate a positive medium-term budget policy statement, with deficits declining faster than previously expected. With inflation moderating, there could be an additional 100 basis points of interest rate cuts ahead.”

Finance Minister Enoch Godongwana will deliver his budget update on November 12.

Lower borrowing costs would lift rate-sensitive sectors such as banks and property, while a stronger fiscal position and potential rating upgrades could support the rand and local bonds, Molopyane said.

Molopyane and Nxumalo also said the positive outlook is being reinforced by reforms and a more stable macroeconomic backdrop.

A report from National Treasury last week outlined that nearly half of the government’s 30 priority reform measures, such as restoring passenger rail services and expanding the transmission network, were either completed or on track.

“This year seems to be different,” Nxumalo said. “We’re beginning to see progress on structural reforms, and the macro policy space is improving.”