South Africa: A country where honesty is a scarce commodity

Are our economists failing us?
Economists need to put themselves out there and talk honestly – people buy currency, homes, make investments and even go into business on the strength of their forecasts. Image: Moneyweb

I have in front of me a media report that deals with the forecasts of 30 economists who participated in an annual forecasting ‘competition’ on the various economic variables for South Africa for the year ahead. Forget for a moment the absurdity of even having such a competition, but rather look at the forecasts themselves.

The competition ended January 2018, not so long ago.

Consensus forecast for growth this year was 2%.

The consensus forecast for the rand/dollar exchange rate average for the year was R12.55 and the rand/euro average R14.73. And so on.

All the forecasts have been hopelessly over-optimistic thus far.

Around about the same time, Goldman Sachs and its MD Colin Coleman, who is regularly seen at ANC charity events, was tipping SA to be this banking behemoth’s “emerging market winner of the year”, forecasting growth at 2.5% for the year. This forecast received widespread coverage and, if I am not mistaken, was the lead story on the business pages of the Sunday Times.

Even allowing for bankers, asset managers, and economists to be wholly engulfed by ‘Ramaphoria’, which was peaking at the time, their forecasts were blatantly over-optimistic, to such an extent that one has to question whether these economists are more interested in remaining within the ‘consensus’ parameters than actually speaking their minds.

Fast forward to August and the consensus on GDP growth from the 30 wise men and women has been adjusted marginally downward to 1.6% and a rand exchange of R13.05 to the USD. Heck, there was even one economist still forecasting an average rate of R11.95 to the USD at the end of August.

Less than a month later, on September 4, comes the news that the economy is in a ‘technical’ recession, whatever that might mean. The rand has blown out to R15.50 against the USD and almost R18 to the euro. The Purchasing Managers’ Index (compiled by the Bureau for Economic Research and sponsored by Absa) has plunged from 51 to 43. At the same time, the JSE remains the weakest major stock market for the year, continuing this trend for over five years now.

I could find no local economic forecast warning of a further decline in the economy in the second quarter. If there was, it was very well hidden. I did find one foreign bank sounding the warning though: global banking group HSBC. At the beginning of August, it warned that it was expecting the SA economy to decline into a recession, measured by two consecutive quarters of negative growth. I could find no report about this on any local media site.

It’s not technical, it’s very real

Even president Cyril Ramaphosa got into this horribly disingenuous act of calling the recession ‘technical’. It shows a lack of sympathy for the 37% unemployed and the millions of other South Africans battling to make ends meet.

There is nothing technical about this recession and it is nothing but an abused euphemism used by our embedded media to conceal how bad things really are, making them equally complicit in this national collusion to appease our political masters, who are to blame for this unfolding disaster.

Manufacturing is in the doldrums, the construction sector has been decimated and in August our bond market recorded the highest ever outflows, an amount of $2.5 billion. 

How is it possible, I ask myself, that not one of this group of 30 even remotely pencilled in a recession or the possibility of the rand succumbing to the emerging market meltdown that was already in full swing. This has been discussed endlessly on global websites such as the WSJ, The Economist, Bloomberg or even Marketwatch. Imagine asking your bank economist for a view on the rand in order to place a large export order or whether you should bring in a large amount of money into the country? The losses must be big.

The tragedy of it all is that business people, ordinary savers and investors place a lot of credence on these forecasts. I am often asked to comment on the forecasts from one of these economists, most times when it differs from my own. People buy currency, homes, make investments and even go into business on the strength of these forecasts, which, over a long period of time, have been over-optimistic and quite frankly wrong.

The same goes for the annual forecasts by National Treasury and government officials about the country’s expected growth rates. I have in the past written about the creeping tendency to make optimistically-sounding forecasts at budget time – which are lapped up by an unquestioning popular media but then have to be adjusted downward when the realities of our economic trajectory set in. This fact has already been admitted by Treasury, barely five months into the fiscal year.

When I tried to warn about the financial tsunami heading our way in several articles in 2016 and early 2017, I was shut down by some of our esteemed economists who called me “cynical and ill-informed”. One particular economist predicted a growth rate of 4% for 2017 and no further downgrades!

Even colleagues in the media had a go at me, with one Sunday columnist, about a year ago, urging his readers to remain invested in the JSE and to disregard my advice to move some money offshore. He used the Afrikaans word “twak” and we all know what that rhymes with.

Today, a year later, the JSE is up 5% for the year compared to the S&P 500, which is up 40%. In US dollar terms the JSE is down 24%.

SA now weakest in the OECD universe

Take a look at the following chart compiled by Dwaine van Vuuren, technical analyst from Sharenet, showing the SA economy now to be the worst major economy in the world. I am quite sure that this knowledge has been doing the rounds in the various economic departments at Treasury and in banks and assurance companies, but it took an independent analyst to have the guts to do the work and publish it for all to see.

Source: Sharenet

We have a long history where our big companies and government are in some sort of unholy alliance, especially the banks and large insurance companies.

Banks want to sell you mortgage finance and car loans. Insurers want you to remain invested or invest even more. Economists from these two industries are particularly guilty of painting the future while wearing rose-tinted glasses.

Step out of line with a forecast that does not suit the company/government narrative and you get slapped down or fired. Think Andrew Canter from Futuregrowth who had parent company Old Mutual jump on his neck when he dared criticise the inner workings of state-owned enterprises.

Chris Hart was fired by Standard Bank for a fairly innocuous tweet that did not suit the bank’s political masters.

At least Mike Brown, CEO of Nedbank, had the courage to warn in parliament last week that, if handled badly, expropriation without compensation (EWC) could lead to a banking crisis. Savers and investors need to take note and consider their risk to local banks. The most astounding admission made in parliament is that even if a property owner loses their property to EWC, the bond repayments still remain their responsibility.

So, dear reader, whenever I read and listen to some kind of economic forecast, I first ask who the forecaster works for. In many cases, the answers tell me what I am about to hear or read before the actual event. The few brave economists whose views are more pessimistic simply don’t get media exposure or, rather, they prefer not to get involved in the social media condemnation that invariably follows.

Ferrari portfolio

It is now six months since I started what I lovingly call my Ferrari portfolio. This is the Ferrari I was fortunate to have won in a lucky draw competition two years ago at Val de Vie in the Western Cape. I sold the Ferrari for a net price of R2 500 000 and created a proxy portfolio worth R250 000, one-tenth of the amount I received. The objective was to see what would do better: a portfolio or the Ferrari?

Read: The advisor who sold his Ferrari

This amount was invested at full fees (plus advice fees) on the Investec platform on March 8. I originally started with a spread of developed and developing market funds, but when I noticed the building storm in emerging markets mid-March I moved my funds into the Sygnia 4th Industrial Revolution fund.

I am convinced that the underlying thinking of this fund – artificial intelligence, robotics, internet-technology – is an essential component for most SA investors on the basis that we simply don’t have any local companies that offer the growth potential of these sectors.

Several years ago Stanlib had a technology fund called the Stanlib Technology Fund, but it was discontinued some three years ago on the basis that there was no demand for it. Pity, as technology has been the best-performing sector in the world over the past eight years. Even allowing for a slow start, the Ferrari portfolio was up 26.8% on Friday last week. Not bad, and possibly leaving the real Ferrari behind.

That said, it doesn’t smell and sound the same as the real thing …

* Magnus Heystek is investment strategist at Brenthurst Wealth. He can be reached at for ideas and suggestions.


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I totally agree with you, as with all events like the Recession announcement they occur well before the news papers have the information printed. The media creates hype so that the “unaware folks” think it’s happening right now, by that time the analysis investors have already pulled put.

The June 2008 financial crisis actually started in June 2006 and it eventually bottomed out in June 2012.

The Southern Africa Spring started in 2016 and it will officially occur in mid October 2018.

Keep your bucks offshore or in BTC, give it 2 to 4 years to bottom out then go purchase a house for half the price you would normally have to pay.

It has mostly become scarce in the last 10 years.

Hopefully a 500% dosage of President Ramaphosa and his new administration can help rectify these perceptions of the country.

We don’t need the precautions to be rectified. What we need is the leadership to rectified as well as the average voters mind set.

Our country has an abundance of resources, it’s the political failure which has put us in this position.


A hint at….”mid October 2018″ ??

(Full junk status? SARB starts printing money on toilet paper? Rand tanks?)

Some outstanding points in this article. Firstly the recession is very real. People are struggling to make ends meet. Businesses closing and unemployment rising. We have no growth and high inflation ie stagflation. Property prices are falling and the rand weak.

But probably the best point is how hopeless economists are at forecasts and how disgusting people like colin coleman are….worshiping the anc gang who brought this misery to our broken and failing country

The overly optimistic forecast has been happening for years. At the beginning of the year the economists give an optimistic forecast and during the year they modify it downwards every few months. A person in any other field would loose his job if he was so useless in doing it. For years I had the feeling that these highly paid “experts” are actually creating two different forecasts, an overly optimistic one for public consumption and a more realistic secret one for strictly internal use.

To forecast share markets correctly is actually impossible , but somehow it fascinates humans to keep themselves busy with this futile exercise . However as an investor i am also forced to take some long term view of the markets i invest in . I prefer to look at the society i invest into . Look at how they govern themselves , how inventive they are , and their track record in achieving outstanding results over the long term . These criteria , rather than market movements are a safer indicator for deciding where to invest in the long term . So where do i invest …well Warren Buffett said , it is a brave man that bets against America .

Personally I think that is what Magnus has done with SA. His assessment was that the government was unprincipled and its appointees largely either incompetent or crooked, often both and so foresaw that, regardless of the twittering background noise, this would sooner or later, lead to the wheels coming off. I took a slightly contrary view to him and am paying the price, most lately of EWC.

Sad thing is, it could so easily have been different and opposite. Too late now methinks.

@PK-I fail to see on what rational basis you could have taken a ” contrary view ” to Magnus’ predictions and comments which were/are based on facts and common sense. Unless of course your emotions clouded your judgment and you did not want to.

I know it’s silly and pointless to reply to my own post but it is for LuluAlert below noting that I stayed in property (after a family decision not to emigrate in 2001); specifically a farm as my pension, rather than sell, pay CGT and invest in say, a Steinhoff etc.

I did move some cash in US$ but nowhere near enough. Not happy times.

Excellent article, thanks for the reality check and the tip on the Sygnia fund.

Another enjoyable read from MH!

Chris Hart was fired from STD Bank also because he was an “embarrassment” to that esteemed fin institution. Well, now STD is an embarrassment to me 😉

No economist that’s employed by large corporations (banks & asset managers), can just say want they want and “talk their Hart out” (pardon the pun, Chris)….it’s not fitting for the company’s “image & PR”.
So the public needs to read between the lines…

Economists inability to forecast accurately is a function of anyone’s ability to predict the future. This theme is consistent world wide and not specific to South Africa.

Anyone who believes that they can absolutely predict what is going to happen, consistently, doesn’t know that they don’t know. They are ignorant. A broken clock is right twice a day.

Easy to criticise, not so easy to come up with a better proposal.

“Prediction is difficult, especially about the future.”

– attributed to Niels Bohr, atomic physicist, Nobel prizewinner, father of quantum mechanics, colleague of Albert Einstein. Probably made a greater contribution to atomic physics that any other person in history.

Let’s not all be so clever about others’ inaccuracies, when we can’t do much better ourselves.

Exactly! What I am saying is that if we know that prediction is difficult/impossible should we keep trying to do it? Or rather should we acknowledge that we don’t what will happen and act accordingly?

Remaining diversified and not taking one way bets. Never in history has someone consistently called the market correct, many have in one instance, and then to gone on to lose money buy taking concentrated one way positions again. John Paulson, Crispin Odey, Hugh Hendry et al.

If forecasts is such a futile exercise then no-one should take note of forecasts. Problem is that economists is always too positive. You could almost make the correct forecast based on their predictive over optism.

Oh stop panicking!

The Chinese are swiftly moving into Africa, they already run the Zambian economy and within a decade will be running the SA economy.

Soon there will be full employment and factories running 24/7 with Chinese supervisors and exports going to the rest of Africa at dirt cheap prices. The Rand will be linked to the Renminbi and Chinese shipping will command the Southern Atlantic and Indian Ocean from the ex SA Navy Base of Simon’s Town.

So start your Mandarin lessons now and learn from the Australians who are already a Chinese province where multinational CEO’s all speak it. As a t’ai chi practitioner I am way ahead of the rest and will soon be in high demand in consulting on Chinese protocol!

Don’t forget you heard it here first!

In many of the African countries that I go to, consulting for the UN, I find locals now often prefer to learn Mandarin than English or French.

“It’s the new language of trade, commerce and communication in the future. How can we deal with the Chinese if we don’t understand their language?” is a typical response I get.

+beachcomber… you can predict this “oasis” happening?

I would like to believe the Chinese will rescue SA too but I doubt it will be the “natives”’of SA who get the first helping on the plate

To think that all your naysayers (tried) to condemn you for being cautious and that your caution was backed up with real data. Not the snap, crackle and pop variety. Goes to show you “Merda taurorum animas conturbit”. Where are those people now? Are they going to explain the “now what” scenario? Are they going to be able to back up their future claims with real, palpable data? Or is it more smoke and mirrors for the so called leadership to siphon off into their pockets/offshore bank accounts/failing SOEs all of the above etc. RSA is coming in for a hiding; you cannot keep using political rhetoric to paper over the cracks or to fuel your political survival from taking from those that worked, paid and earned their keep. It’s criminal in itself that some of the learned economists are very creative with the truth so as not to offend the oligarchy.

All true as ever, Magnus. our late friend Hugh Squair would be proud of you.
That is why I never read the lamestream media, but keep current with you in SA and for US and global news.
Thank our lucky stars for the Internet, otherwise we would all be victims of the corporatist/globalist monsters who feed us liberal slop through their control of MSM.

It is due to the fact that the economic forecasters are trained together with the weather forecasters, they always hopelessly wrong and bring misery to the farming community. They need to separate the faculty.

It is very fascinating that many people put all there money overseas in safe places while themselves and there family remain behind? Do we not maybe all have it the wrong way?

To me a lucky draw is a meat hamper, but to others a lucky draw is a farrari, does this just not sum up the situation perfectly in South Africa!

Thanks for the great article.

Most people can not emigrate however much they would like to for different reasons. I remember reading an article a few years ago which estimated that between 70 and 90 percent of the whites in SA do not qualify as immigrants into the popular destination. They might be too old or do not have the right qualification. Do not forget that nearly a million whites have left the country, they were the ones with the right passports or qualifications. This does not prevent the ones stuck here from getting their money out, legally or illegally, this way taking care of their financial future.

Agree with you ‘TH’

For those who has the suitable (in demand) qualifications for NZ, Oz, UK, etc, it will be a matter of perseverance to obtain work abroad and apply their needed skills.

For others that plan their retirement abroad (i.e. not going for work-VISA reasons), unless you’re a HNWI, one can forget to retire in the popular English-speaking western countries, and still keep the same standard of living with our poor rand. One will research those less popular nations for cheaper retirement…perhaps those nations that mainly speak 中文, or русский, or ქართული, or ไทย, or Tiếng Việt, or Espanol, or Bosanski, or Română 😉

It is not ‘scare’ it is non-existent. In the culture of today ‘honesty’ is seen as a weakness and something to be exploited by others.

I don’t read horoscopes, inspect tea leaves, dissect the entrails of an animal for guidance from the gods, or listen to economists. Having been at university with a very prominent economist and having formed an opinion on his singular lack of any higher thought, I’d rather just chuck darts at random answers and go with that ..

Exactly. See the Delphi method of prediction: An aggregate of many random (uneducated) opinions tends to be closest to the outcome, than scientific algorithms.

Good point and I see it as trying to please political masters (I vaguely remember one JP Landman telling us what super stars for the economy Manuel and Mbeki were – next thing he gets appointed to the President’s council and the economy crashes). Then they are using what is essentially systems developed and calibrated in the first world to try and predict third world behaviour. That is never going to work.

I have one question in all of this…

What in the hell ever happened to Robert in Sydney?

And Gemini…. you are very quiet lately. I wonder why? Ohhhh wait is it maybe because MH was right all along?

I think you owe MH an apology.

End of comments.



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