Schalk Louw gives an overview of the last decade and his take on whether the country is a good investment destination.
We recently listened to President Cyril Ramaphosa’s fifth state of the nation address (SONA), which in general
came across as cautiously optimistic. In my experience,
however, the average South African is all but optimistic and in most cases, they just do not have enough conviction to invest their
hard-earned capital in South Africa. When I ask them about it, the standard
response is: “Look around you, Schalk, we keep moving backwards every
day”. This is usually followed by “SA is going nowhere”.
I also hear a lot about how the rand is going nowhere and that the JSE remains one of the worst investment destinations in the world. Well, those who know me, know that I live by the saying that if you can measure it, you can manage it. Emotions have no place when it comes to the management of investments. So, what has happened since 2017 when Ramaphosa found himself in the audience for the last time when SONA was presented, before delivering those speeches himself?
President of SA
In 2017 President Jacob Zuma was president. It was expected shortly
before the ANC’s 54th election conference that took place in December
2017, that his ex-wife, Nkosazana Dlamini-Zuma, would take his place. But
we all know what happened after that. Ramaphosa won the ANC election
and was sworn in as president in February 2018.
Many will argue that way too little progress has been made since he became president, especially with regards to addressing corruption. In response to this statement, I always ask myself if Ramaphosa would still be in the number one position if he did act faster and more aggressively?
Minister of finance
In 2017, the extremely important position of minister of finance was held by the controversial Malusi Gigaba. But when Ramaphosa became president, the removal of Gigaba from this position was one of the first changes he made. Today, this position belongs to the highly competent Tito Mboweni.
Is he so outspoken that he often aggravates people within and outside of
the ANC? Absolutely. But that he is incredibly competent and certainly
one of the best people for the job, is undeniable.
National Prosecuting Authority (NPA)
2017 saw Shaun Abrahams leading the NPA. This caused a storm
cloud, simply because so many people considered him as a so-called
co-conspirator to help President Zuma avoid alleged corruption
charges. The other storm cloud surrounded his appointment, which was
only confirmed in August 2018, and which rendered his original prior
appointment invalid. Today, Shamila Batohi occupies this position.
How can we forget Brian Molefe’s emotional speech when he resigned
as CEO of Eskom in November 2016 after being implicated in the Public
Protector’s (at that stage Thuli Madonsela) state capture report? In
2017, Matshela Koko was appointed CEO but resigned in 2018 after
being implicated in awarding contracts to a company that was tied to
his stepdaughter. Today we have Andre de Ruyter as CEO of Eskom. Is everything hunky dory now? It’s definitely not, and the reality is that the
struggle may still continue for some time to come.
The hard truth is that SA needs electricity to achieve economic growth
and from the graph the available electricity supply has moved only one
way since 2010, and that is down. So, here is the bad news: In December 2020 SA had 581 GW per hour less electricity than in December 2017,
which represents a 3% decline. The good news is that we had 320 GW per hour more electricity compared with December 2019.
In November 2017, shortly before Ramaphosa was elected as ANC president, the rand traded at R14.50 against the US
dollar. On 14 February this year, it is not only trading at the
same level, but even stronger than five years ago (R15.85/dollar on 14 February 2016).
There is no excuse to be made for local shares because it is no secret that
they took a severe beating during the five-year period until 2020.One should not forget that SA relies heavily on a positive demand for
resources, something that completely disappeared in 2015/2016. Over
the past few months, however, we have seen how this resource demand
trend has started to improve, and this of course helped to make local
Of the 54 MSCI Developed and Emerging Countries Indices, the MSCI
South Africa Index now (up to 14 February) finds itself in second place for
2021 and moved into 14th place over 12 months.
I want to conclude by pointing out that SA has an exceedingly difficult decade behind it, and the country does not come without risks. Government debt is still incredibly high and economic growth globally is under severe pressure.
But when you consider the abovementioned facts, to say that we have made no progress, would not be correct. While we are making progress, SA cannot be ignored as an investment destination.