Your money wants to bank on South Africa, do you?
Whether you’re an investor aiming for more certainty, more return or more impact, STANLIB has a fund solution for you. The STANLIB Your Money Can Do More podcast series hosted by Bongani Bingwa and STANLIB’s Chief Economist Kevin Lings features experts who will help potential investors navigate and plan for tomorrow, today.
In this episode, Bongani and Kevin host political analyst, author and speaker, Melanie Verwoerd and political expert at Geopolitical Intelligence Services, Dr Ralph Mathekga to discuss how the current economic, political and social state of the country will impact investments and whether you should bank on a recovering South Africa.
Like most countries, South Africa is in the process of bouncing back from the Covid-19 pandemic, hoping to rebuild our economic status and provide work opportunities for those who have lost their jobs during this period. STANLIB’s Chief Economist, Kevin Lings says that mending the unemployment crisis will take a few years, but the slow progress we’re currently making will be worth it.
We’re still not at that point where we’re really accelerating growth meaningfully, and therefore making a big difference in people’s lives in a very visible way. It all just feels like it’s gonna take a lot longer.Kevin Lings, Chief Economist at STANLIB
The country’s workforce has decreased by over 1,5 million people since before the pandemic, and we’ll need to employ about 600 000 people annually to keep up with the population growth, says Lings.
It’s not only our employment rate that needs change, our political status has also come under fire over the past year with corruption and levels of uncertainty on the rise. This too is improving at a seemingly slow pace but according to Dr. Mathekga, the problem is deeper than we realise and small changes are vital.
I think that it all has to do with how realistic our expectations are… and it has a lot to do with how we understand the depth of the problem that we have encountered.Dr. Ralph Mathekga, Political Expert at Geopolitical Intelligence Services
We have had nine wasted years where corruption was actually cemented across almost all government sectors except notably, the judiciary that stood tall and pushed against that.Dr. Ralph Mathekga, Political Expert at Geopolitical Intelligence Services
As a result of political uncertainty and a need for jobs at a record high, the country faced yet another problem – social unrest. The recent riots showed that people are desperate and frustrated. Even though this put another dent in our economy, it could have been much worse, says Verwoerd.
She also mentions how saddened she is by how harshly South Africa is often judged by many first world countries, linking to an afro-pessimism that is held by both international and domestic investors. Despite all the bad press following the riots, Verwoerd believes that there is a silver lining to be seen beyond the chaos.
The good thing that it showed through all of that was that the whole country did not go up in flames. It easily could have but it didn't… The social fabric helped the way that the social communities got back involved and said ‘we are not allowing this country to burn down completely to the ground’… I think that is also a very good sign that despite the challenges that we faced in terms of these riots - that the rest of the country actually helped.Melanie Verwoerd, Political analyst, Author and Speaker
Is South Africa still a winning bet for foreign investors?
To answer this, we’ll have to split foreign investment into two parts. The first, being foreign direct investments, where investors arrive in South Africa, use their money and expertise to produce goods and export those goods.
This is the ideal type of foreign but sadly, we don’t attract that kind of investment because South Africa, by international standard is considered one of the more complicated places to do business with.
On the flip side, there’s foreign portfolio investment, where a foreign investor simply invests in our stock market and government bond market.
As Lings explained in the previous episode, foreigners invest a significant amount into South Africa’s government bonds because they get a good return. Now, 30% of corporate and government bonds are owned by foreign investors, so we don’t have a problem attracting investment in that area.
It's invaluable to talk to a foreign investor who invests in emerging markets and ask them to put South Africa in that context and then you hear a different perspective, you hear a perspective that says ‘you know what? South Africa’s not too bad' when you consider the competitive set.Kevin Lings, Chief Economist at STANLIB
As a country, we tend to measure ourselves against the United States, the UK and many parts of Europe in terms of investment. Regardless of this unfair comparison, we are still an emerging market for investors even though we are flawed.
One way that South Africans can invest in our country while we are still recovering is with STANLIB’s Fixed Income Fund, managed by a dynamic and highly experienced investment team at STANLIB. The dynamic and highly experienced team aims to achieve returns by identifying investment opportunities in fixed income assets based on the term of the investment, the yield opportunities and the interest rate and inflationary cycles.
To find out more about how STANLIB is helping and preparing their clients’ investments for the future, visit www.STANLIB.com/more now!