The end of free insurance for investors

For years, investors operated in a world where bad news often became good news.

If markets fell hard enough, central banks would soften their tone, governments would open the fiscal taps, and asset prices would recover before the economy had fully absorbed the shock.

The result was a powerful habit: ‘buy the dip’, because policymakers would not allow the dip to become a crisis. This habit may now be dangerous.

The world has not become less interventionist. In fact, the opposite is true.

Governments are everywhere. They are subsidising energy, protecting strategic industries, tightening trade rules, funding defence, restricting critical minerals, screening foreign investment and rebuilding supply chains.

But, this is no longer the old safety net designed mainly to calm financial markets. It is a new, more political form of state capitalism. This distinction matters.

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More selective policies

Old policies were broad, fast, and market friendly. They supported liquidity, restored confidence and pushed investors back into risk assets.

New policies are narrower, slower and more selective. They do not save everyone. They favour industries considered strategic, companies with political weight, technologies linked to national security and sectors justified under the language of resilience, energy transition, or sovereignty.

Europe shows this shift clearly.

Once a defender of open competition and strict state-aid rules, it is now debating how much public money is needed to keep steel, energy-intensive manufacturing and green technology alive.

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The argument is understandable. European firms face high energy costs, subsidised Chinese competition and an America that has embraced industrial policy with enthusiasm.

But, the risk is equally obvious. If Germany and France can subsidise more aggressively than smaller member states, Europe may protect industry from China while weakening its own single market from within.

China, meanwhile, is playing a longer game.

It is not only exporting cheap goods but also exporting overcapacity, buying consumer brands, controlling critical parts of supply chains and using its industrial base as strategic leverage.

Its domestic economy is under pressure, but its companies are increasingly becoming global competitors in clothing, electric vehicles, batteries, consumer brands and technology-enabled retail. This is not simply commerce; it is economic power looking for new channels.

Then, there is also the security dimension. Japan is rearming because China is more assertive, while China condemns Japan’s military spending even as it continues to expand its own defence budget year after year. Taiwan remains a persistent flashpoint.

Rare earth minerals are no longer just inputs; they are bargaining chips. Shipping lanes, energy corridors, and semiconductor supply chains have become investment variables.

What does this mean for SA?

First, we should stop assuming that globalisation will remain neutral and based on rules. The world SA trades with is becoming more transactional, subsidised and geopolitical.

Market access, energy security, logistics performance and diplomatic alignment will matter more, not less.

Second, we cannot copy Europe’s subsidy model. We do not have the fiscal space. A South African subsidy race would probably protect incumbents, reward political proximity and deepen the debt problem.

We need fewer permanent handouts and more disciplined, performance-based support.

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Third, our real industrial policy is not a speech, a master plan or a slogan.

It is electricity that works, ports that move goods, rail that lowers costs, crime control that reduces risk, and regulations that allow private capital to invest with confidence. Without these basics, any subsidy is just an expensive decoration.

For investors, this new world requires a different mindset.

The question is no longer only whether central banks will cut rates or whether governments will intervene. The sharper question is: who will they intervene for, who will be left exposed, and who will pay?

The old world rewarded faith in rescue. The new world is more likely to reward resilience – strong balance sheets, pricing power, policy credibility, and the ability to execute effectively.

For SA, the challenge is clear: we cannot afford to build an economy that survives only when global markets are generous, commodity prices are kind, or government finds another temporary support package.

Read: The global economy is shifting, but are we ready?

Our advantage must come from fixing the basics (electricity, logistics, security, regulation, and investment confidence), so that growth depends less on rescue and more on performance.

Dr Francois Stofberg is a financial well-being economist at the Efficient Group.