finweek

Should one opt for SA?

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Schalk Louw is a wealth manager at PSG Wealth Old Oak.
Schalk Louw is a wealth manager at PSG Wealth Old Oak.

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

President Cyril Ramaphosa in Parliament replying to a debate on his address to the National House of Traditional Leaders. Photo by GCIS

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

Minister of finance, Tito Mboweni.

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)

Shamila Batohi is a South African prosecutor and the national director of public prosecutions at the National Prosecuting Authority.

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.

Eskom CEO

Eskom CEO Andre de Ruyter
Eskom CEO André de Ruyter

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.

SOURCE: Stats SA

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.

The rand

SOURCE: Tradingview

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).

In fact, amongst the other BRICS countries, the rand is the strongest currency over a five-year period.

Local shares

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 shares shine.

SOURCE: MSCI

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. 

Read more
This article originally appeared in the 4 March edition of finweek. You can buy and download the magazine here.


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