Registered users can save articles to their personal articles list. Login here or sign up here

Don’t say you haven’t been warned

Hell hath no fury like a vested interest threatened.

It’s a common lament that when an investment scheme collapses the victims always try to find someone to blame. How often have we heard the mournful cry of thousands of investors, now badly out of pocket and in some cases penniless, that “someone should have done or said something before the collapse”.

The most recent case was that of Steinhoff, an event that has cost investors an estimated R200 billion and counting. In the same category one could include the Resilient property funds and, going back in time, Sharemax and Pickvest, the two failed property syndicates that were all the rage some 10 to 15 years ago.

Read: SA’s most spectacular case of corporate capture

More than a decade ago I found myself almost in a fist-fight with the spokesman for Pickvest in the studio of RSG, the Afrikaans radio station. My sin was that I was trying to warn the investing public to stay away from Pickvest as well as Sharemax, as they fell into the same category of investments that I would not recommend.

But what I was doing pales in significance when compared to what Deon Basson and Vic de Klerk did over many years, issuing similar warnings. Basson wrote many articles in Finweek about these schemes and was even busy with a book on Sharemax when he died. I was given most chapters of this book barely a week before he died. I can understand why the Sharemax people paid his estate R400 000 in order to ensure it was never published.

The outrage from the promotors against people like myself, Basson and De Klerk, was predictable. Lawyers’ letters, insults – ‘You are too stupid to understand how this scheme works’ (as I was not an accredited advisor to these schemes) – to a pathetic attempt to try and bribe me with R500 000 in a brown paper bag on condition that I stopped talking and writing about Sharemax. I protected myself from potential lawsuits by simply sticking to a simple strategy, which basically said “I will never invest my own money into this scheme nor the money of any of my clients”.

Hard as they tried, the litigious promotors could not get around this freedom of speech to legally prevent me from saying what I said for as long as I did.

I sometimes feel I should’ve tried harder to get this message out to more unsuspecting members of the public. I console myself with the fact that many people did heed my warning (and those of Basson, De Klerk and also forensic accountant Andre Prakke) and that more people didn’t invest in either of these two failed companies.

It’s still a mystery to me that neither the Financial Services Board (FSB) nor the SA Reserve Bank (Sarb) stopped these schemes earlier. I still have on record an email I sent to Gerry Anderson, a former executive at the FSB, in which I tried to alert him to my concerns about Sharemax in particular. His response: “I take note of your concerns.” A similar email to Michael Blackbeard, then at the Sarb, had a similar response.

The future is not what it used to be

This brings me to a much larger issue than simply one or two failed investment schemes. Here I am talking about the slowly unfolding economic and financial disaster in South Africa.

Here too I have spoken my mind over the last five years or so. I have been trying in my own little way to at least bring another perspective to the slow but relentless destruction of the personal wealth of the average and perhaps not-so-average South African investor.

In fact, my first ever column on Moneyweb had the headline “Is it time to panic yet?” quoting from the delightful little book, A Handful of Summers by tennis player Gordon Summers.

This wasn’t the feel-good-alles-sal-regkom-type of columns the financial press in South Africa normally tends to produce. And very soon my earlier warnings about the unfolding unravelling of our country’s finances – and everyone invested in them – elicited the predictable responses from the various vested interests threatened.

Over time, and depending on the contents of my articles, I’ve been called “cynical and ignorant” by economist Dr Rudolf Botha, “misguided” by the FW de Klerk Foundation,”ill informed” by Mmusi Maimane from the Democratic Alliance and “sommer a Figjam by more than one commentator on Moneyweb. Phew, and I don’t even get a cup of coffee for my efforts … 

But I reserve a special mention of my experiences on a TV show on kykNET some four years ago, following my article, the death of the rainbow nation. In the studio to discuss the warnings contained in my article was Moneyweb editor Ryk van Niekerk, and one Dr Piet ‘Kopdoek’ Croucamp, a political scientist from the University of Johannesburg at the time. Croucamp is well-known for his predilection for wearing a kopdoek on TV, the kind cyclists wear under their helmets.

Never having met him before, I tried to greet him and shake his hand before the event, but was brusquely ignored. I knew then that it wasn’t going to be a fun interview. The discussion kicked off with me giving my views on the trends in the economy and my recommendation to consider offshore investments. I could see from the corner of my eye that Croucamp couldn’t wait to verbally body-slam me, which he promptly did when given the chance.

“Commentators like you must stop talking about South Africa going the way of Zimbabwe. That is absolute rubbish as the government is busy rolling out the National Development Plan and SA will soon be on another growth plane.”

Not once did he even look my way, continuing to ignore me as if I had an incurable disease.

Croucamp, as a final aside, left the studio without once looking at me or even deigning to greet me or the other guest in the studio.

Today, four years later and considering what has since happened (credit downgrades, the firing of Nene, economic slowdown, state capture) it is clear to me that any political scientist (a total misnomer in any way) who works for a state-funded university does not have the freedom to criticise government policy, especially if they happen to be white.

The financial and economic events since then have tended, by and large, to support my views and the slowly unfolding financial disaster affecting each and everyone in the country, with perhaps the exception of the very rich who have all or most of their wealth offshore or linked to offshore asset classes.

Just how bad are things?

Recently Carol Paton, roving editor of Business Day, wrote an article which clearly signalled this publication’s ending of its infatuation with Ramaphoria, when she asked the question: “When will president Cyril Ramaphosa and finance minister Nhanhla Nene let the public in on the news of just how bad a state the country is financially?” Not long thereafter Peter Bruce, emeritus editor of the same publication, wrote a similar article entitled The End of the Beginning. The article received several hundred comments on the website, a record for this column I would venture.

Elsewhere Dr Frans Cronje from the Institute of Race Relations warns about a certain grouping within the ANC NEC that is prepared to endure a dramatic collapse of wealth in order to achieve its ideological objectives.

But from the vast investment industry I could not find even one article that tried to spell out the financial implications for the average investor whose money is entrusted to these esteemed gentlemen. The one comment I did see was Old Mutual’s Johann Els saying that expropriation of land without compensation (EWC) would be positive for the country if a change to the constitution provided much needed clarity on the ANC’s policy. But he would say that wouldn’t he, is an expression that comes to mind.

I would therefore like to pose the same question to our country’s asset management companies who act as custodians of the nations savings pool. I think I read more than most and have, over the years, attended more asset manager presentations than I could care to remember. Very rarely have I found a local fund manager or asset manager with the ‘testicular fortitude’ to get up in front of an audience and tell it like it is, namely that SA is in a very precarious place and that the oft-predicted rosy investment outcomes, often regurgitated by more gullible journalists, are unlikely to be achieved.

Can we really be talking about investment returns “reverting to mean” when such an assumption assumes a certain kind of predictability of economic and political variables? Or when a fund manager writes about “based on long-term valuations, stocks are currently the cheapest they have ever been”, all in an attempt to drum up business despite the losses investors may eventually suffer.

It is almost impossible to make any long-term forecasts for most of SA’s business sectors today. This goes for mining, construction, medical services and others; all of these sectors and more have been badly affected by previous government intervention (mining, construction) and soon the medical field.

And it’s quite clear from recent government initiatives that it intends increasing its hold and control over ever-larger fields of the economy, with – in my view – fairly predictable results for those sectors involved. The extent of wealth destruction in the gold and platinum mining and construction industry over the last 10 to 15 years, as an example, has been nothing short of spectacular.

I think it is decidedly dishonest of the asset management business to exhort ordinary South Africans to save more for retirement when they themselves know the outcome is likely to disappoint, perhaps even greatly.

It is also up to the very large but often pliable investment advisory community to start having an honest conversation with their clients and to consider alternatives which might not make them popular with their banking or insurance employers.

Don’t say you haven’t been warned

The returns on Regulation 28-controlled retirement funds have not beaten, on average, the inflation rate over one to four years. When costs are included, the returns are negative over five years now. Send me an email if you have read any article in SA on this critical issue, on any website, apart from my own on Moneyweb.

The returns of the JSE have been last or second to last when compared to most major regions of the world over periods now ranging from one to 10 years. The JSE is minus 1% for the year while the S&P500, the broadest measure of the US economy, is plus 15%. It’s almost the same with Europe, Japan, Far East and the world.

Against its peers in the Emerging Market Index, the JSE is also trailing poorly (see graph).

The poor performance of the Top 40 index also does not tell the whole story. For a closer look at what is happening in the broader economy, consider mining, construction and manufacturing. When have you ever read or heard any of the large asset managers recommending increased offshore exposure?

In fact, as I wrote in December last year, Allan Gray reduced its offshore allocation to 25% within its living annuities as it had no more capacity, a function of exchange controls and Regulation 28. I understand this has now been increased to 60%, but that is still not enough.

This is how the interests of our asset managers come before those of their investors. Earlier this year was probably the best time in a long while for investors to get more offshore exposure, but this was not to be. I think the local investment industry is too scared to recommend direct offshore investing lest the money end up with other asset managers who charge much less than the local managers.

Fidelity last week announced the first ever zero-management fees for two newly launched funds, the start of what could be a major trend.

The residential property market is in a deep bear market and prices are down 22% in real terms since 2008. Property prices across the board, Cape Town included, are now failing to grow at more than 1-3% per annum, depending on location and province. But if you read the nauseatingly optimistic press releases from the property marketing companies, you would swear that EWC is going to be good for the property market and a great time to buy. It’s not, dear reader, and the latest steps by the ANC to proceed with EWC will depress the residential property market even more. Farmland prices have crashed, together with those of exotic game and especially buffaloes, until recently also locked in a manic price bubble. That too, dear reader, has crashed spectacularly.

I simply don’t believe the regular dial-a-quote political commentators used by the popular media that EWC is only rhetoric and that it won’t happen. I think the chances of it happening are very real and that the ANC simply does not care how much wealth will be destroyed by such a disastrous course of action. As Julius Malema, leader of the EFF, said last week: “There is no turning back for the ANC and the country as far as land reform is concerned.”

There is simply no way that EWC will not lead to economic uncertainty, slower growth and possibly food shortages a year or two down the line.

Now you can differ with me dear reader, call me names no doubt, but I simply don’t care. What I care about is my own future, but more importantly, about that of my children, grandchildren and anyone who takes the time to read such a long article. If we continue down this path chosen by the ANC, ignoring warnings from the IMF, World Bank, Wall Street Journal and many other influential financial publications, it will end poorly. And it will be ordinary investors who pay the price. Not the rich or the government elite, but the rest of us.

In short: I will not invest in it, nor do I recommend that you do. Don’t say that you have not been warned.

* Magnus Heystek is an independent investment advisor (magnus@heystek.co.za).

AUTHOR PROFILE

COMMENTS   89

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

As always I enjoy your articles, I do presume that you also have a vested interest as if I had money to put offshore I will definitely be in contact with you and use your products!

As a layman, will it make sense to follow in the foot steps of the respected Oom Paul Kruger almost 120 years ago and convert my savings to Kruger rands? Even he must of invested offshore as I think he died in Switzerland. Is the Gold price not determined offshore? No management fees! Easy to convert to cash in any currency! No banks! No advisors! Easy to pass down! It is almost a guaranteed version of a crypto currency. You are also investing in South Africa and a long history back to Oom Kruger days and the ox wagons! Its a win win situation for everybody.

Finding some good news is like finding a needle in a Heystek!
Forget economics and investment. Climate Change is bigger than any threat from an incompetent, naive and corrupt government.

Climate change wil affect SA leds severely because the economy will already be in ruins.

….a report states from year 2035, SA will experience higher demand than available water sources. Woeful investment into water infrastructure from Govt & combination of crumbling supply-maintenance and waste-water works & uncontrolled population growth.

A water Armageddon is slowly building up.

@MichaelfromKlerksdorp, care to share that report please? Would love to read…

I agree with your view to convert some savings to Kruger Rands. Can someone please elaborate on how to do this safely? FNB has a platform where it can be done quite easily. But here is my problem. With EWC imminent, it doesn’t make much sense to have Kruger rands at an institution when it can be so easily expropriated.

You can ask them to deliver it (the coins) to you?
Buy it directly from a shop?

You will have to store it yourself then, would be the problem.

This is how you do it. Buy directly from an overseas supplier. You can store it at any off shore bank of your choosing. But the point is to do this every month as this will average out what you layout. You can buy directly and it’s put into your safety deposit directly. No problem and no issues.

Search for: buy gold singapore

Or any place you feel has a safe economic infrastructure.

All I can say is if you had enough of this type of news then do plan A. Just like the A team. Cheers A

If you really want to know how SA Funds perform any period up to 5 years then this should really shock you to know. SA are treated like carp.

https://us.spindices.com/spiva/#/reports

Look under S.Africa.

5 Years – our fund under performed 93%, which means after 5 years we losses way before we get to retirement. The industry in not to help you and Magnus says it clear and simple. Invest off shore. It’s really easy to do.

Yes I’ve been gone offshore since 2009 and that is that. Good Luck.

Readers take heed. My motivation for promoting the externalisation as much of ones investment assets as possible, over and above the investment return potential (positive or negative) – is that South Africans should let their money and assets shout out loud to the government, the ANC and other wanna bees like boet Julius, that this country is on the wrong path and that the ANC are busy destroying the economical foundation of this country. The very best way of transmitting this message loud and clear is to let your money do the talking in two ways –
a) actively making legal plans to absolutely minimise your tax obligations (i.e. buying a second hand car to avoid VAT, etc) and
b) by investing your hard-earned money offshore (even if through means of a Rand denominated S.A. domiciled fund that invest all moneys off shore by means of an asset swap transaction).
It took exactly eight years to bankrupt S.A. (the country has already been bankrupt during the Zuma tenure) but it will take 3 times that period being 24 years with a very focused and collaborated effort to rebuild and undo the damage done after the Mbeki and Trevor Maneul period.
The best vote one can cast is by steering the money power out of this country. Just do it.

Dear Magnus. Full disclosure, I do my own investing and as such, have no dealings with your company. However, from 2012 I have paid attention, and externalised a lot of my savings already….and have benefited massively. Your message has been heard by a number of people I know, who have also chosen to save offshore. Please continue to warn people, and let the negative comments flow over you like water. Each year under this crazy goverment proves you more and more correct, and that will continue to drive the ‘ commentators’ nuts. I laugh as I read the increasing number of articles trying to convince people to stay invested in this sinking ship, as if land expropriation and 60% unemployment under a restless and under educated youth with a goverment displaying strong communist tendencies is somehow a great long terminvestment oppurtunity. If i ever bump into you, the whiskey is on me. A big Thank you.

Magnus your concerns mirror those of thousands of investors in South Africa – I’m pretty sure of that and I agree with you on all comments.
The question is, what is one to do?
There is a world wide recession on at the moment – inspite of what the US markets are showing – they are in their own little bubble that has to burst sometime
And what can one do if you are a 14th generation South African with no hope of being able to pack up and start again somewhere else?
We have no choice really but to vasbyt and soldier on. In my mind, there are three strikes before we really need to panic…
Strike 1 – if the Constitution is amended in any way for any reason
Strike 2 – if the SA Reserve Bank is nationalise
Strike 3 – If CR is assasinated or dies within the next 4 years
So far so good apart from .strike 1 which is on shaky ground!
Lastly, the previous comments on gold are not a bad idea. This country was built on it and it’s never let us down yet…inspite of the scrapping of the Gold Standard! Buying gold supports employment, it’s a portable asset and is legal tender internationally.
Panicking is not going to help anyone. Trying to keep our institutions stable is the only choice we have. Vasbyt.

Great article and I agree 100%… already planning my families and my exit out of SA!

Likewise. It’s gone from idle daydreaming to implementation.

Unfortunately for most people that it is too expensive. Even for those who can afford the cost of leaving they’ll be going to a lower standard of living.

Yes you will not find a standard of living like SA anywhere else. Which probably should tell us something. SA is far from a rich country. Prior to the discovery of diamonds SA was a dusty backwater, with no real industry to speak of whatsoever. The wealth of the minority in SA are the result firstly of the one sided accumualtion of the wealth from mining to a tiny English speaking white elite and secondly the BEE like policies the National Party implemented to uplift the fortunes of Afrikaners.

It is time that all South Africans realise going forward will be one on continual sthat (i) SA is a poor country as it stands (ii) without the windfall gains from mining we are likely to grow poorer. Black South Africans live under the illusion that if we just slice the cake more evenly they will become rich. White South Africans live under the illusion that their wealth is the result their hard work and brilliance and if black South African just worked and studied a bit harder they can create their own wealth.

Both sides are sorely mistaken. South Africa is a poor country and without intervention it will grow poorer. The battle for resources are set to intensify. It is highly unlikely that white and other minorities will be able to maintain the highest standard of living in the world.

“Lower standard of living” applies if you emigrate to (western) Europe, USA/Canada, Oz/NZ, etc. You don’t have to.

Try also research on the old eastern Europe (e.g. the Balkan states, Georgia, etc) or South East Asia (Thailand, Vietnam, Malaysia, Philippines) for those who hate cold European winters.

Yes, many of those countries are still poor, when you travel through the backroads and countryside…but they are slowly developing from low down, while SA is slowing shrinking back to an insignificant African country. Think 20 yrs from now & we talk again.

In cities like Tbilisi & Batumi (Georgia) there are construction-cranes all over the show. Development. Thailand & Vietnam’s public trains put ours to shame. The rest of the world is leaving SA behind.

Ask yourself, where will SA’s private healthcare be 20yrs from now? Expect also MAJOR water-supply problems going ahead, due to increasing population & crumbling infrastructure.

Living in fear for your personal safety and uncertainty for what your children will endure is not ‘the highest standard of living in the world’. SA lost that status in the early 80s. I outgrew SA, I couldn’t be promoted and was picked-up and moved to London by a multi-national. Even with spending my Saturday ironing and my ‘4 bedroom house’ I was renting being half the size of the 1st house I bought in Centurion, things were pretty good and only got better. TL/DR SA is not as good as we were taught

I’ve been listening to Magnus for the past 3 or 4 years and have around 2% of my wealth left in South Africa – the rest of it is offshore. An absolute no-brainer independent of whether you are pessimistic/negative about the future of SA.

BTW – I am very pessimistic and believe history will prove the likes of Magnus to be true, as he has already demonstrated.

WRT the comment about lower living standards in developed Western Countries – not true. If your priority in life is eating out 3 times a day, paying people to clean your home and other menial tasks, then perhaps.It also depends on whether you have children or not.

I moved to Oz and my wife and our cumulative income puts us in the top 5% of earners in the country. I’m in commercial property and she is in marketing. We live literally on the beach without burglar bars anywhere. We know all our neighbours. We enjoy public transport which is safe and reliable. Yes there is red tape, eating/drinking out is costly, but on the balance our life our quality of life is SIGNIFICANTLY BETTER in Adelaide than in Cape Town.

Sorry, but South Africa is done. Take yourself and money offshore.

People often say it’s too expensive, I emigrated with only R200 in my pocket and a matric certificate, followed by 2 years of hard work and now I can afford to bring my wife and son over.

Yes it was hard, slept in a friends car but we Saffas are a strong bunch and now I live in a high rise in one of the most beautiful cities in the world.

I’ve 30+ and have met other Saffas who are much older 50+ and done the same thing.

Any body can but alas it’s almost too late, your best bet is to hedge the Rand with as little fee as possible 3 assets (Bitcoin, Gold or Silver, and something from China)

Such a long nonsensical article belongs in a dustbin.

Do explain why… throwaway comments do not serve any purpose. I assume that you do have an angle on this that you can share with the rest of us.

Listen to what Magnus is saying.
One more thing an old Chinsese man said one day “if you bury your head in the sand, your are thinking with your arse.”

Please enlighten us with some substantiation. The wriiter gives known facts. Your statement merely wastes ink.

Why is property being mentioned as if it was handed out for free? EWC is stealing people’s savings and it follows that money saved in whatever other way will be next.

‘“I die, as I have lived, a free spirit, an Anarchist, owing no allegiance to rulers, heavenly or earthly.”

― Voltairine de Cleyr’

Well said Magnus!
My views:
It’s always been my view that the old FSB’’ thought that they were ‘’a law, above the law’’, hence their current ‘’lame duck’’ status and accusations of bribery – it sounds so South African!
I must also agree that, the SARB for which I just had the highest regard over many years, since the days of Tito Mboweni, point blank refused to “see no evil, hear no evil, and speak no evil”. The corruption during the Assault on the Rand in 2001, when three big corporates and one big bank (read Deutsche Bank) totally demolished the USD/ZAR market. Rand Commission that was supposed to investigate this was shut down prematurely!
I also share your views about ‘’Piet Kop-doek’’. I changed my view about him many moons ago when I realised that he had ’’a chip on his shoulder’’ that ‘’smelled of vinegar’’. Luckily RAU got rid of him (whether they fired him or whether he realised that was not the right place for his leftist ideas and he resigned).
The EFF tail is now in full swing, wagging the ANC dog. When the IMF starts giving SA some ‘’lip service’’ about restitution of land without compensation, the financial ‘’powers that be’’, will be under obligation to downgrade and listen…
How far is SA really away from the early Rhodesia situation, when all hell broke loose overnight and anarchy started in full swing?

I personally dont see it as too far away…

Our population is far more violent than the Zimbabweans ever were. We also have a much stronger protest culture.

Lets take step back and look at the bigger picture:
1) EWC is going to happen, you cant make the promise and not deliver, its political suicide, so its WHEN not IF.
2) Coligny was the start, a town can easily be invaded and shut down.
3) PTA north was the second and scary one, community on the rampage can lock a place down for weeks.
4) Not enough cops to deal with more than one large scale event in a province.
5) Hermanus, as above.
6) Politicians are agitating for these things.
7) Once many protests and invasions starts, there is not enough law enforcement to stop it.

Its a recipe for total disaster. Ask yourself one thing, even if it doesnt all go to utter ruin. If you are the minority in such a hostile environment is it where you want to live? Can you do better elsewhere? Probably you can… Atleast the entire system wont be hellbent on destroying you

…..and, the squatter camps are spread all over the big cities…the Tunisia, can be over in one day!

“Our population is far more violent than the Zimbabweans ever were” – that puts it in perspective. We are actually in a low intensity revolution which can (and probably will) change into full blown anarchy anytime.

Deutsche Bank BROKE and it will take Italy’s banks with it, also affecting Commerzbank will also be affected. Portugal, Greece, Spain all broke. They (E.U.as well as the U.S.) have printed money galore! Just remember Mad Bob Mugabe did the same thing and I think it was followed by 40,000% inflation and a $100,000,000,000,000 bill. It’s about to go boom. I have my secret plan, DO YOU HAVE YOURS? This one will be like 2008 on steroids!!!!

Finfit share your secret plan please

Id venture a wager on it being Bitcoin!!! lol…

Thank you for a very informative article.

Although a novice, I cannot but agree with your sentiments.

All the major companies are moving offshore and are doing so ata premium. Just see how Woolworths and many others pay too much for investments in other jurisdictions just to get out.

Businness is quietly leaving ourmshores and nobody is picking it up. Just check, Anglo, Billiton, WBHO, Murray & Roberts, etc, etc,

Very good point. “Smart” money have spoken a long time ago. Nobody is committing fresh capital. Squeezing the cash flow that remains and recycling it into hard currency.

Well Magnus, at least you can tell Croucamp “Told you so” after this EWC idea became ANC policy…

Croucamp is just a sniveling bottom feeder. I wouldn’t posit him as a prime example of our academic prowess. By and large the goal is research, not occupying soapboxes on pressing issues. The pay and job surity is not nearly enough to justify such public debasement.

When people of mere average intelligence at best make an academic career in non-scientific fields such as political science. They tend to overestimate their own intellectual abilities. Kopdoek thinks he is an intellectual.

I agree with the article and enjoy the “cut to the chase” well said Magnus.

South Africa has been a frontier nation since 1652. There were constant skirmishes between the trekkers and the locals on the borders of farming districts. People with the bible in one hand and the rifle in the other hand, moved into the wilderness and lived among warring tribes, and the warring factions within tribes. Deals and promises were made and broken. Cattle, tobacco, alcohol and land were transferred back and forth.

My point is this – why all the excitement now? Nothing has changed! The constant skirmishes are called “service delivery protests” now. The transfer of cattle, tobacco, alcohol and land is called BEE, EE and Land Redistribution now. It is still the very same thing – an attempt to plunder the settler. This is not a new phenomenon at all. The settlers won all the border wars, but they lost the most important one – the last one.

The only difference is that we have much better instruments available to protect our stuff now. If they don’t see our assets, they won’t attempt to steal it. Put it into a “Life Wrapper”, an investment company, a Mauritius Trust, move it to jurisdictions where property rights are respected. Now this is where you enter the next skirmish. When your assets are offshore, you face higher estate duties, costly probate, the constant possibility of bank failures, illiquid investments, communication barriers, etc.

If you you thought it is problematic to be poor, try being wealthy!

Thanks very much…………………where do I go (which insurance company) for the Life Wrapper?

Regards.

I received the following advice – Due to admin efficiencies, Old Mutual International is preferred to Sanlam. After I experienced some minor administrative problems I promised myself never to do business with a company that does not have a local office. If there is an admin problem I need to meet face to face with the person who can assist me. Browsing through websites to find the right contact person and the correct email address can be a nightmare if you are pressed for time.

The OMI life-wrapper is the best option if you don’t plan to use gearing in your investments. They do not allow geared instruments like CFD’s. The life-wrapper is tax-efficient and will not go into probate when the owner dies. You can specify the beneficiaries and save estate duties. The investment is tied up for 5 years though.

All of the best Pacaratac. South Africa will remain the land of milk and honey, as long as your pantry is offshore…..

The one man with common sense who is not blinded by liberalism.

How is liberalism to blame? The ANC and the progressive left stands in direct opposition to liberalism. Property rights are one of the key tenets of liberalism

“Liberalism” in the corporate world, which ousted economist Chris Hart from STD Bank, telling it like it is(?)

Maybe being ‘PC’ is what Bronko refers to..

That is not liberalism. The Economist is running a series on what exactly constitutes liberalism. Liberalism is rooted in the values of the Enlightenment. Liberalism stands for freedom from intervention from government and organised religion for each member of society to live its life as it sees fit provided it does not do harm to another member of society. Liberalism espouses freedom of expression.

Totalitarian regimes like fasicm, communism and apartheid are the direct opposite of liberalism as is the current global trend of political correctness that trumps freedom of expression.

I am tired that liberals gets blamed by social conservatives and leftwing progressives for all ills of the world, whilst liberalism has been the shining light that has delivered humanity from the dark ages.

It is probably a matter of semantics/definition. I am speaking of liberalism in the classical liberal, wider (British) sense whilst I guess you refer to liberalism as the oposite to social conservatism the narrow (American) sense.

You argument is also really poor. I started of by questioning how liberalism is to blame for EWC while respect of property rights is a cornerstone of liberalism and your response then cites the completely, unconnected Chris Hart matter.

Your argument is also irrelevant Michael, my original

While I cannot argue with the stats on the S&P returns vs JSE, it is interesting that the currency devaluation “returns” on forex have been minimal. Over 5, 10 or 20 years, the ZAR has “only” depreciated against the EUR and GBP by about 2-3% per year, which is much lower than the interest rate differential (the theoretical percentage by which the ZAR should have depreciated). Against the USD it has been about 4-5%.

Also, the S&P is surely in bubble territory? Is it not heavily weighted by Facebook and the like, which are surely all houses of cards? Then again, 20% of the JSE is invested in a tech company in China (Tencent via Naspers) so there is another card house if you ask me…

In summary – the whole world economy is a house of cards…who knows which currencies and which asset classes are the best ones. Wisest is to diversify if you can – both in currency and in asset class.

And be sure to read the book of Ecclesiastes in the Bible for some perspective on everything being a chasing after the wind 🙂

As usual spot on Magnus! For all your naysayers; wake up and smell the napalm… Scorched earth (at least in the Union of South African Socialist Republics that is) to follow at a theatre near you. Using EWC as a smoke and mirrors campaign to divert the attention of how the ruling party has abysmally failed her voters and the citizens of this country as a whole, will only lead us all to final destruction. Wake up. If we all do not heed this call above, all of us irrespective of race, political persuasion etc. will be swept overboard without a life jacket. It’s no use shooting the messenger especially if his message is a sincere warning to you and the powers that be that to continue on this course is completely delusional and the height of folly. You cannot make something out of nothing, stealing from Paul to pay back Peter has never worked. An honest child will tell you that. EWC starts with one aspect, but where then does it end? Only with agricultural land? Why not move on to residential property from there? Then who knows, onto businesses and corporations? Then onto pension funds, onto banks and their savings, onto the SARB, onto mines, ad infinitum…

Can anyone clear my confusion with regards to my “offshore portfolio”

I have 50% of my portfolio invested in ETF’s which I buy locally, eg Satrix, Sygnia, these are all the S&P500, MSCI World, UK, Europe etc.. these are obviously bought in Rands, does this constitute investing offshore, or if our Rand collapsed to foreign currencies would my investments be worth almost nothing?

The other 50% I have bougt ETF’s & stocks on the NYSE in a USD based account.

Is what I am doing a good thing with regards to my portfolio?

Although ZAR denominated your local ETF’s tracks the USD value so any ZAR weakness will lead to higher returns for you.

The theoretical risk of your local ETF’s is that it could be expropriated – but this is highly unlikely at this stage. US assets have no risk of expropriation.

A more realistic risk is that asset managers are forced to invest in certain assets. Think Eskom bonds, SA treasuries. So called proscribed assets where employed by the Nats towards the end of apartheid. Think it might have been as high as 50% of retirement funds had to be invested in Governemnt bonds.

This can happen if governemnt cant raise financing internationally anymore.

JUust noticed that STANLIB income fund has significant ESKOM bonds?

How can they do this?

Theoretically an etf is a wrapper that is supposed to physically hold the assets as oppsed to an etn which mimcs the movements.
So your assets still have dollar value even if the rand collapes.

Your investment in the global ETF’s such as Sygnia will really benefit should the Rand collapse. These are a very sensible mechanism for South Africans to invest overseas without using your foreign allowances and worries about estate duties.

You do need to be aware of the heavy estate duties that come into play when investing directly in the US. If you have a SA based assets more than R 3.5 million, I have calculated the US breakeven point (where the US estate taxes on your US based assets match SA estate taxes at 20%) at around USD 240k.

excellent, thanks for all the replies, appreciate the info.

Do you remember the Financial Rand? Offshore means offshore, with no risk of it being trapped in SA at any time in the future.

I have just one question, and it sort of cuts to the heart of “invest offshore”.

How exactly do I move my money offshore?

How do I manage to open an overseas bank account?

How do I transfer funds there?

These may seem like trivialities to the enlightened, but I’m a relative neophyte in financial matters. Advice on this would be greatly appreciated.

K so I can only tell you what i do — I bank with FNB who have foreign currency accounts and I do investments over the Allan Gray platform.

What I do is convert rands to dollars in FNB (online banking) and then desposit it into the fund of my choice via the platform (again online banking)
Allan Gray gives you the deposit details and swfit codes for the new york citibank account and once there they allocate it to the mutual fund i chose which i monitor on my platform profile.

So thats what I do to move money offshore but there are other options.
If you specifically want to have an offshore bank account —
I heard someone from Sasfin once commenting on tv that they can help people open offshore bank accounts with Saxobank, as an example. Maybe query with your bank and start checking with stockbrokers for options.
Standard bank, sanlam, easy equities — all have offshore options they can help you set up.

+1 David! 🙂

Saxobank, is more of a trading platform.

Its very good. I use that for all my offshore equities. Easy enough to open and has ability to use multiple currencies and trade most global exchanges. So the real problem is in choosing what to invest in…

Are you not taking a knock on your R/$ exchange rate by using FNB online platform? 50c at least per $?

I just tried to open a Classic account with Saxobank but got this message:
“Please be aware that due to local legislation we do not accept retail clients from South Africa”

🙁

Property market is looking like the Marie Celeste right now. Deeds Office dead. Who wants to be illiquid when you MUST be liquid right now.SA is already a failed state and is financially and morally bankrupt. The unemployable are rising fast. Plan accordingly

Magnus you certainly do have “testicular fortitude” unlike your critics – some of whom will appear. here shortly and then disappear. You have been consistent and patient.

One is reminded of Clem Sunter and his High & Low Road choices with regard to the future. Well I think we all know which road we are on now despite protestations and heads in the sand. We are indeed accelerating along the low road towards who know what – but it is not pleasant.

People have been afforded adequate warnings over a very extended period but many have not listened or wanted to listen. The opportunities to take remedial action with regard to personal wealth will soon start to become very difficult.

Indeed many asset managers are akin to the estate agent fraternity – truth always gets in the way of vested interests. Local asset managers are just that – local! Wake up people.

Take advantage of offshore allowances, exchange rates and move into cash and assets in your own name not via local institutions. The local boys usually persist with offshore arrangements that suit themselves and their fee structures. Remember that exchange controls still exist and can always be tightened and tampered with.

I recall Clem Sunter predicting, in the 80s, that China would never again be a financial power.

Excellent column Mr Haystek and yet I see in Moneyweb that a parking pay in Die Waterkant in Cape Town sells for R575,000 and developments with per square meter prices of R100,000 are sold out. An ice cream is R30 at least in the V&A Waterfront.

Events at swish functions like the new Norval Foundation Gallery which has an entry fee of R140 and sells out with the five star restaurant packed on the weekends. Private schools are around R5-10000 a month. Every kid has a smartphone which they are using constantly. People still seem to shop, shop, shop and the conundrum is are they are in debt to their eyebrows or are they still here because they cannot live like this anywhere else in the world?

But for the poor in Cape Town with transport infrastructure being burnt down, gangsters running the townships and the taxi industry destroying the economy with violent strikes this is hell.

I too cannot see any light at the end of the tunnel except for the express train heading my way.

I did some searching on property prices in Cape Town. If expropriation is supposed to be suppressing prices it doesn’t seem to be have reached Cape Town yet.

House prices stagnating is actually a good thing for anyone who isn’t buying purely as an investment. It’s shocking how expensive it has become to buy a property, and that’s a global problem.

South Africa should be doing better, but I don’t think comparing it’s stock market performance to markets where central banks are effectively handing out free money is valid. What’s going to happen when that free handout stops? What’s going to happen to the UK if they can’t arrange a deal with the EU? Are we going to have riots and violence like back in the 80s?

It’s unfortunately hard to take Magnus Heystek too seriously. He might be right sometimes, although he doesn’t tell us his true track record on predicting the future. But he also seems to be a pessimist at heart.

Those will be the biggest tears. Capetonians and their darling properties.

Recently:

– Friends have moved back to JHB from Cape Town after “not enjoying Capetonians”
– A developer friend has abandoned major residential developments due to water and property over supply
– I noticed that major R8bn foresure project of offices/retail/residential was shelved.

“South Africa should be doing better, but I don’t think comparing it’s stock market performance to markets where central banks are effectively handing out free money is valid. What’s going to happen when that free handout stops?”

If memory serves 40% of the JSE is owned by hard currency investors so it is hardly insulated from lower global liquidity. Higher real rates in the US will translate to higher real rates in SA over time or we risk a collapse in the currency, that will mop up local liquidity as well.

However the “handout of free money” has stopped. The US discontinued buying bonds in 2014 and have raised interest from 0.25% in December to 2% currently and it is targetting 3.5% by 2020.

The ECB started slowing down its QE program last year and signalled its intention to hike rates beginning of next year.

We have yet to see any impact on teh markets, not saying it will not happen, but just state the correct facts when making an argument.

Yet again an amusing article that contains some valid points BUT yet again the weird attack on SAs asset managers which in my view serves to spoil things.

“When have you ever read or heard any of the large asset managers recommending increased offshore exposure?” Well they haven’t shut up about doing that for the last ten years! Every single large balanced fund has been at the maximum allowed for as long as I can remember – I actually think they have made tactical errors in not reducing offshore allocations at times given long periods of rand strengthening over the last few years.
That has in fact often been the cause of relative short term under-performance!

As for Allan Gray’s offshore limitations on LAs and other vehicles – you know very well that there are offshore limits at manco level too which they simply have to abide by. To point to this as them somehow proof of putting their interests first is bizarre. They have no choice in the matter.

But anyway, keep writing – you are more entertaining than the rest.

Hi Bruno

Here are a few simple steps to investing overseas. Please forgive me if I am being too simple – I am not sure how you little you know, and I know little enough myself, but I know the first steps are so daunting.

1.
Think about what you want to invest in. For example ETFs like S&P500 or FTSE100 or MSCI World or other various. See here for local Sygnia ETFs which you can read up on and make an informed decision for instance https://www.sygnia.co.za/etfs/etf-and-etn-fund-range, see here to read up ALL about local and foreign ETFs on this excellent website https://justonelap.com/etfs/.

2.
If you want to keep your money in South Africa, although invested in foreign assets, open a local account like Easy Equities to make your foreign ETF or share purchases after deciding where you want to put your money. These investment can be added to very easily and cheaply with local Rands (my granddaughter of 20 has an account), and you can also have foreign investments in your Tax Free Savings Account on Easy Equities. These funds will always be cashed out into local Rands, even though they will be at the exchange rate at the time you do so – so in effect your investment will keep pace with the dollar. Some people feel that the SA Govt could clamp down on locals taking/sending Rands out of the country to invest overseas at some time in the future, by increasing Exchange Control regulations, but I think one would have to be very rich for this to affect us in the very near future as at present the limit you can take out is R10 million per calendar year if you apply through your bank to the SA Reserve bank for permission, but if you are young it could affect you one day. I have relatives in Zimbabwe who scratch around trying to find enough foreign exchange every month to pay their SA Discovery medical aid contributions (so they can come here for their medical care as we do – neither the currency nor the care is available there to their citizens.)

3.
If you want to actually remit money out of South Africa to invest in a foreign stock exchange, or you want to have funds sitting in a foreign bank account using the Discretionary Portion (the very easily remittable portion of R1 million annual exchange control allowance) then I know my son used Saxobank which is a Danish bank with offices here in South Africa, that you could email or phone up and then go through the processes to open a Saxobank account i.e. supplying FICA documents etc, which only takes a few working days as far as I know. Once they let you know that the account is open you can approach your bank and apply for the R1 million annual discretionary allowance to be immediately transferred from your local bank account to the account number that Saxobank will give you overseas. They will credit the account overseas in your name, and then you will decide where you want those funds invested. Whenever you sell those shares the cash will go back into the Saxobank account and thus will always stay outside South Africa – and naturally profits have to be declared here for tax purposes and when your estate is wound up. Obviously there is a charge made for doing this work by Saxobank, just like here if you have a stock broking account at Absa bank where it costs me about R150 in total to make an investment in anything, no matter how small. Although the overseas Saxobank fees are less than the local equivalent in Absa fees.

4.
You can also move up to another 10 million every year overseas by making an application through your local bank for permission. Your local bank will apply to the SA Reserve Bank for this permission and you have to obtain and produce a SARS tax clearance certificate for this. When you get this permission your local bank can transfer by SWIFT to your Saxobank bank account overseas and then you decide where you want to invest it.

5.
You could also approach a bank like say Natwest in Guernsey or Isle of Man or Channel Islands to open a bank account for you, if you wish to just hold say Dollars in a Dollar bank account without making any investments, on from there you could make your own investment like I did. I moved money out of SA many years ago that I invested into the Allan Gray Orbis Fund by depositing into their London Citibank, and that investment has done very well indeed for me.

6.
I do know, as mentioned by Bokfrog above, that when you get to a certain amount invested directly in America with money taken out of South Africa, that there comes a point where the tax when you die is much greater payable in America itself (and complicated) than it would be on the equivalent invested through say Easy Equities into those same foreign ETFs. I am not sure exactly of the estate duty position if you take loads of money out of SA and invest it through SAXO into foreign equities, as it is invested through Europe not America, but I have seen quite a few articles on Moneyweb about exactly that.

I do hope this helps someone reading who is a real beginner and needs the confidence to move forward. Believe me, it all seems so difficult in the beginning but actually it is all helped along by the various organisations. For instance if you contact Allan Gray they will advise you which forms to complete and assist you in every way, so you could even make an investment by going to your local bank filling in a simple form paying about R1,000 and getting your R1 million deposited into Allan Gray Citibank in London by next week once your account has been opened locally by Allan Gray with the FICA and forms done etc.

I am in general agreement with the approach that Magnus is taking on these issues. If we don’t as a society and group of concerned citizens take a stand we are going to get crushed! Just think about the unacceptable things we are tolerating which should basically be intolerable in any civilized nation e.g. a disgraceful individual running the country for 9 years, taxis thugs taken over the roads, total disregard for tax monies and payers, blatant destruction of SOEs, racial discrimination under the disguise of transformation, crime so out of control we don’t even bother reporting it, racial hate speech from politicians who even threaten the slaughter of race groups. If you tolerate this without resistance you are going to get obliterated by this regime.

I don’t know hey. Post 1994 has been a boon to these “investors”. Post 1994 has created more millionaire “investors”. Some of these post 1994 wealthy “investors” have been successful in this offshore investing thing, but most have failed, some are finding it even today that it is not as easy as they thought.
“Limits, like fear, is often an illusion.”

It’s absolutely spot on! I’m super baffled that people still think EWC is good for the financial health of the country! Like our own Mr Kriek who has a light bulb moment to make it work! You have to be in lala land to invest in the South African economy. My advice put your money where it is out of reach of the wolves. It’s not science! By the Croucamp is a school yard bully, always was always will be. Foul mouthed and do eager to satisfy his anc handlers. He will be soon forgotten as totally insignificant, never made a difference never will!

Little will come of expropriation without compensation (EWC). The ANC uses it to draw the attention away from the deep damage done by the ANC”s state capture project. Since 17 Dec 2017 all attention shifted from State Capture to EWC.

Before the last election there was big noise that farmers must give 50% of their farms away – nothing came of it.

Lastly, the ANC use EWC to pre-empt the EFF. The public and journalists fall for the ANC’s diversionary tactic every time.

You raise some valid points. My concern is just that false expectations are created through this whole process. Even if the ANC goes ahead with some form of EWC it will fail to meet the expectations of people. TYhe ANC has been playing this game since it got into power. Telling “the people” one thing – normally popolist/socialist and telling “the market” something completely different only to end up doing nothing, I am afraid it is running out of runway.

The anger and frustration of those caught in a neverending cycle of poverty and suffereing is palbable and make for fertile ground for the goons of the EFF. People keep on dismissing the EFF as a 6% party, yet it is driving debate in the country. Also do not forget that the Nazi’s were also a lunatic fringe until economic collapse and hyperfinflation drove a third of Germany to vote for it.

“the market” have also long ago stopped believing the ANC. They will never comne out and say it openly, but actions speak louder than words. All SA CEO’s are always on the Proudly SA bandwagon and they mouth the required PC platitudes but when it comes to deploying capital I cannot recall many SA firms commiting capital to SA.

So I cannot share your “alles sal regkom” view.

Perhaps our hope lies in investing in massive infrastructure in our northern neighbouring countries. Solar in the Namib, desalination and expanding the port at Walvis Bay, rebuilding Zim into a breadbasket and Botswana into an industrial powerhouse.
For when our Groot Trek across the Orange River becomes a reality,and so that the ordinary people may be saved.

Magnus I have been following you for years and love the way you simply cut to the chase.
There are are number of people in SA who are simply not in a position to move or simply do not have sufficient funds to protect themselves. The situation is an oncoming train. If will simply go from bad to worse.
What can be done is to persuade your children to pack up and leave. My dad used to say that a young person can roll up their certificate, put it in a back pack and get moving. At the age of 66 my husband and I have 7 successful kids.between us. His mine and ours……..They are all now living in different parts of the world. They are established and earning solid currency.
They did it on their own steam with plenty of encouragement from us.
Parents must be unselfish and see the bigger picture. Sadly this is a reality

Great article, I have been investing in a regulation 28 fund for almost four years and its has been moving sideways, no grow th. EWC is a reality, runners must get ready.

Maybe Magnus is part of Government propoganda? Pay Magnus to spell doom and gloom and the rich educated non ANC supporters will lap up his columns and decide to emigrate in droves!
Just a theory.

I’m confused and conflicted yes, but I love this country, and if bankrupts me by staying, so be it. At least my conscience is clear that I stuck around to give it a good chance of recovery!
Money isn’t everything!

Boatmaker – I respect your patriotism. Your bias against non-ANC supporters that you wish will emigrate in droves, I do not like and it will come to haunt you and this country.
Talking about your conscience, does it sit well with your conscience that this country has been bankrupt by cader fraud, that crime are unmanageable, that S.A. sit with more than 10 million illegal immigrants whilst having the highest unemployment rate in it’s history, that S.A’s taxation rate (all forms of taxation) are one of the highest in the world, that public services are rated as one of the worst performing countries in the world, etc.

I suggest, you make yourself a boat and set sail in a teardrop for this beloved country are no more and will not rise from the ashes in my or your life time. The old Africa way of survival of the strongest tribe has engulfed and depleted all the beauty, the wealth and the health of this nation previously known as proud South Africans.

Bruno just phone allangray 0860000654. They will guide you nicely. For me at least, AG call centre always avl, reliable. Solid good service. I dont work there. Also read their website re offshore. Crystal clear.

Mr Heystek is spot on as usual.
For those considering ZAR based offshore investments think about the following scenario:
Buy Satrix S&P500 ETFs now (ZARUS: 13.40 and S&P500: 2850). Rand goes to R30 to USD but S&P500 makes zero gain. In ZAR you have incurred a capital gain of 123% but the underlying investment has zero gain. You will pay tax on the currency gain. What happens if the ZAR2USD goes to 100? Your tax liability becomes large and will outstrip your ability to generate real returns. Now think about the inflation and liquidity implications in ZAR of such a drastic currency devaluation. If you have a choice it is probably better to have the investment in foreign currency.

Sure but you only realize a capital gain (or loss) when you sell. At that point your tax owed will be in ZAR and be calculated as a % of your ZAR increase.

In terms of outsripping your ability to generate real returns – returns in what? ZAR or USD? If you are benchmarking in USD then that might be a possibility but then you should be buying USD assets, not ZAR-based ETFs. If you are benchmarking in ZAR then your returns on a ZAR ETF with underlying USD assets will always outweigh your tax liability, surely?

Agree about concerns with the liquidity of ZAR in a currency collapse, depending on the numbers you are talking. Overall better to buy assets directly in a hard currency but an ETF is not the worst compromise considering its accessibility to the average joe.

Asset Managers have verbally been recommending taking as much as possible offshore for some time. Coronation and Allan Gray Fund managers have verbally recommended this to me in the past 3 years or so.

Been doing offshore… local denominated ETFs for the last few years now… Should be ok should hyperinflation hit ?

For South African investors there are a range of relatively straight forward offshore investment options, and any independent advisor worth his salt will be able to advise prospective investors. Brooks Macdonald International is an offshore group, independent, holds its Category One FSCA license in SA and manages over £12.4bn. Actively managed internationally diversified portfolios can be opened from as low as $25k / £25k or E25k at highly competitive and transparent fee levels, & held/ managed in the highly regulated jurisdictions of Jersey or Guernsey. Full online access of portfolios is provided, the portfolio is highly liquid and no additional admin/ penalty / trading / custody fees etc. are applied. We are seeing an increasing flow of new business through many quality independent advisors in SA helping their clients suitably internationalise their wealth. Solutions do exist – and they are not that complicated by and large – if they are complex – treat that as a red flag…

Load All 89 Comments
End of comments.

LATEST CURRENCIES  

ZAR / USD
ZAR / GBP
ZAR / Euro

Podcasts

GO TO SHOP CART

Follow us:

Search Articles:Advanced Search
Click a Company:
server: 172.17.0.2