Bad news around power outages, the rand, public sector shortcomings and the industrial relations climate is drowning out an important message for local investors … South Africa is still a good place to invest if you know where to look.
So says Bruce Williamson, Chief Investment Officer at Imara Asset Management South Africa, a member of the pan-African Imara financial services group.
Williamson says South Africans “are great at propagating bad news”, but often miss key developments with the potential to build personal wealth, secure inflation-beating returns and create better on- and off-shore balance across a portfolio.
He explains: “A good example of the pessimistic mind-set is public reaction to the World Economic Forum Global Competitive Index for 2014-2015 in which South Africa ranked in the bottom 30% for 22% of the 115 indicators.
“Almost all the attention fell on the fact that we’re among the world’s worst for maths and science education while co-operation between labour and employers is abysmal.
“Yet look closely and we see that we ranked in the top 30% for 40% of the indicators. We’re tops globally for corporate reporting and securities regulation and among the world’s best for financing on local equity markets and R&D investment.
“Our banks are world class, we have robust systems for settling disputes and we can rely on good quality professional management.”
Even areas of concern had a flipside that highlighted new opportunities.
“Public sector failures often create gaps for our innovative private sector,” notes Williamson. “For example, educational challenges create demand for quality private education, resulting in the growth of some well-managed education businesses.”
A wave of world class South African businesses had emerged since 1998 when the barrier between banking and stockbroking had been lowered. This saw a number of foreign banks take positions in South African stockbroking businesses, which have greatly assisted local corporates in internationalising their operations.
This created a phalanx of local businesses with a growing inflow of foreign earnings.
“Previously, rand-hedge stocks were concentrated in resources,” Williamson points out. “Not any more. A pharmaceutical firm like Aspen operates in more than 100 countries. Insurers like Sanlam and Old Mutual have strong bases offshore. Discovery recently completed the purchase of 100% of the UK insurer, Prudential.
“Billiton and Anglo are global. Omnia, the chemicals, explosives and fertiliser business, earns over 30% of its profit in Africa. Investec is reportedly the third largest UK asset manager. Sasol and Mondi are big international players. So are Woolworths, Standard Bank etc.
“Yet South Africans focus on Eskom.”
A broader view highlighted areas of opportunity – not only for big business, but retail investors and savers.
“Our best companies have strong management teams,” he says. “Their businesses earn a living in euros, dollars and sterling as well as rands.
“You can achieve international diversification and build your personal wealth without turning your back on South Africa. It’s good to remember that now and again.”
Article credit: http://www.fanews.co.za/article/investments/8/general/1133/investing-in-sa-is-still-a-good-plan-imara/18299