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There is no financial tsunami on the horizon

Significant challenges remain, but new political leadership can turn the ship.

There is not a financial tsunami heading towards South Africa as contended by Magnus Heystek of Brenthurst Wealth in a recent column.

The column elicited significant reaction from the Moneyweb community as it normally does, but although we may be facing an uncertain future, I don’t think South Africa is losing its balance on the edge of the proverbial precipice.

I have disagreed with Magnus on several occasions before and will probably do so again. He always has strong views about South Africa’s future and his penchant for foreign investments is no secret.

If one looks through the current political noise, it is clear that South Africa has one core problem: we have a pathetic president. It is that simple.

President Jacob Zuma’s actions have caused the country and economy great harm and their ramifications will probably continue for many years to come.

His recent cabinet reshuffle and firing of Pravin Gordhan and Mcebisi Jonas and resultant credit downgrades are cases in point. This has triggered (rightly so) an incredibly negative reaction from various segments of our society and there is an almost tangible negativity in the air.

It is therefore quite understandable that investor and consumer confidence levels are at all-time lows. But does this equate to a doomsday future? I think not.

Don’t get me wrong, I am deeply concerned about South Africa’s short- to medium-term future. We face significant challenges and it is critical that remedial action is taken swiftly. And with this I mean that Zuma must be recalled or at the very least, totally disenfranchised.

Turn the ship around

It seems as if many doomsday forecasters share an inherent lack of belief that the ANC can turn this ship around. I am positive that the party can, and that it could happen relatively quickly. The proviso is that competent political leadership take over from Zuma and his loyalists.

The developments of the past 18 months have revealed that there are ANC leaders who have publically stood up against Zuma. Think Nhlanhla Nene, Gordhan, Jonas, Derek Hanekom and now Cyril Ramaphosa.

But even if Zuma does manage to remain in his position and serve out his term, it will not trigger the onset of a financial tsunami. Our legal system, the Reserve Bank, the increasingly verbal private sector and a few other public institutions are holding their own against Zuma’s strikes on our democracy. As long as these institutions remain uncaptured, the doomsday scenario remains improbable.

There is talk that the ANC may lose the 2019 general election if Zuma hangs on. A few years ago, this would have been an unthinkable possibility, but if this happens it will fundamentally change the future of our country.

Now, within Zuma’s reshuffled cabinet, open dissidence is visible. On Monday public enterprises minister Lynne Brown turned down the proposed R30 million golden handshake to the former Eskom CEO and Gupta-linked Brian Molefe. (There is also an interesting dynamic developing between the Gupta-owned Tegeta and Eskom. National Treasury has blocked the awarding of additional contracts to Tegeta, and it will be extremely interesting to see whether new minister finance minister and Zuma loyalist Malusi Gigaba is going to interfere.)

Read: SA blocks Eskom from paying former CEO farewell package

Economic future

I agree with Magnus that South Africa’s short- to medium-term economic growth prospects are pedestrian at best, and that it could be a good idea to consider a more conservative investment approach.

A total disinvestment from the JSE as Magnus proposes may be overly conservative. The JSE may not shoot the lights out over the next few years, but it has shown more correlation with international markets than with the local economy.

The majority of the JSE blue-chips are also heavily exposed to international markets, which would provide a hedge against currency shocks. And even if the current sideways volatility continues, some sectors may still offer some value.

The reality remains that within the current political climate, capital preservation remains critical. Every investor should at least take stock of investments and associated risks.

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Dear Ryk – I really believe you should step back from the madding crowd & take a look at yr country from far-a-way. I disagreed with a number of MH suggestions (no more so than buying property in wc- my view is to sell ALL property in sa) – yet still had the proverbial thrown at me! If I can take just ONE example. Yr Mr Gigaba is now roaming the world telling anyone who’ll listen that there will be NO change to the country’s finance systems! So why fire PG? JZ has said there will be radical transformation- & you are putting yr faith in these guys? Keep on being reminded of the Jews in Nazi Germany who could have got out before the war started – but didn’t. No doubt using the same argument you are using now.

Robert – – you are a visionary and got out on time.

No need to run those down who could leave but decided to stay

Also no need to run down the country that gave you a start in life

SA can/will(?) come right – sooner than everyone believes IF certain things happen. Whether it will happen is anyone’s guess.

You have made your case – over and over again – and nobody dare disagree.

Enjoy your new life and country.

Amen !!!!

Expats like Robert (usually the ones close to retirement age who have been severely uprooted and unsettled by their decision to emigrate) have an unquenchable need for affirmation that the discomfort that they are experiencing was justified.

Based on his persistent (daily) battering of South Africa at every possible opportunity, I would imagine that his post-move dissonance must be clanging very loudly in his grey-haired clad head, and so he needs to at least try to create a narrative that someone might cotton onto just to have some affirmation that he wasn’t completely wrong in emigrating.

believe me I’m not doing this for the money(!), or to be abused. I am trying to tell people of my experiences of salvaging something from the ashes so that at end they with something to show for all their hard earned money

+Ryk van Niekerk

What a lovely bed time story. I take it you made yourself a nice cup of cocoa afterwards.

I’ll stick to the wisdom of MH, so far it proven right.

@Robert, problem is I went overseas for a couple of years, because everybody said it was the right thing to do. I quickly realized that the grass is not greener. In fact in many ways 1st world countries have even bigger problems than South Africa.

– Everything is insanely expensive.
– 1st world countries are boring.
– You will experience intense home sickness.
– Contrary to popular belief, 1st world countries also have crime. Many people have burglar alarms and dogs to protect their houses. Check out police.uk for up to date street level crime.
– You will not be welcomed with open arms when you arrive, in fact the opposite, you are the “bloody foreigner” that is going to steal their jobs. Some will tell this to your face, others will think it, but not say it.
– 1st world countries also have corrupt governments and ministers. They just hide it better. The ministers expenses scandal in the UK for example.
– Culture shock. You will not be able to easily relate to your new tribe. They have a different sense of humor, etc.

I guess it is probably for the reasons above and some others that you are still trawling South African websites?

Nailed it!

To go succesfully you have go asap. This means no later than 2 years after completing your tertiary education.

At that stage you have a bit of business experience, little money and probably not too many emotional attachments. Not so much to lose.

Problem in SA is the massive violence and sheer backwardness of the local poulation. Education does not help. Witness the carnage in Coligny and reportedly Lichtenburg too today.

Getting away from these people trumps boring and homesickness. Pity but true.

So: if you can get out, well…….get out.

no one is going anywhere. all the easy places (aus, nz, Canada) have put up their “house full” signs. so its about ensuring your investments maintain their value and you can get at them when you need to – indeed ensuring that they are not nationalised. and as I have said many times – emigration is not the faint hearted!

MoneyWeb: how about changing the sorting on the comments to basically anything other than oldest-first?

Gigaba is right, there will be no change. He is only there to fool the rating agencies so the Gupta can get more money. And we can sign the nuclear deal. Once they find out it will be too late.

The flaw with Magnus’ advice is that if a great many follow it (make your RA 75% cash), it will just give us calm monthly contribution investors a great chance to buy SA assets at bargain prices. Then when those cash investors come rushing back because they are barely beating official inflation (never mind real inflation) we will benefit greatly.

Ryk van Niekerk you are wrong. Firstly the ANC has done NOTHING for education. So, if you want to know where a country is going look at the youth! 2nd The money pouring out of this country in the last 4 years is “STAGGERING.” Along with that money goes jobs, taxes, extended family help and more people reliant on the government then ever. Zuma has grown government and that’s NOT how you create jobs! Our tax paying money goes to these ineffectual people. They have stifled business with this broken BEE/BBEEE/BBBEEEE (whatever.) Jus look at yesterday’s article about Pioneer foods. We see it coming. Maybe glasses are needed Ryk van Niekerk

Education is in a sorry state, no doubt about it, but IN SPITE of this there’s a BIG cohort of smart and educated kids emerging.

It doesn’t take many smart people to run things well, so long as they
stay out of government.

Thank you Ryk. Always good to see the other side of the coin! Well written and not overly optimistic, but maybe more realistic than our friend Matius’ view,

When the seawall failed at the north-east coast of Japan, the tsunami engulfed towns and created havoc inland. Hyper-inflation can be likened to a tsunami as it destroys the economy and decimate society.
The independence of the Reserve Bank is the seawall that protects us from the financial tsunami. Politicians all over the world want to use the Treasury to buy votes. Deficit spending and high debt levels create the tension, and a financial crisis then releases the shock-waves, leading to a tsunami.

While the ANC creates high financial tension with socialist policies, the financial system is still stable……for now. We do have a strong and stable financial system. The populist ANC stupidity can destroy this stability and unleash the earthquake any time of course. The financial crisis will happen if land is appropriated without market-related compensation.

We also have relative independence at the Reserve Bank although this “seawall” is under constant attack from the ANC. If the Reserve Bank and Treasury is captured by the forces of destruction, we loose all protection from a financial tsunami.

We tend to forget that England was bailed out by the IMF in 1976 and that the USA defaulted on it’s debt in 1935, 1971 and is currently in the process of default by devaluation. The banking system in the USA, England, Eurozone and Japan imploded, and needed a bailout, not long ago and is still under severe strain in the Eurozone. Debt levels in these countries are higher than ever, and the record-low interest rates attest to the severity of the lingering financial crisis in first-world countries. They have already shown that their Reserve Banks are not independent. Their seawalls are broken….

The financial tsunami is real. It has now taken the form of a widespread national epidemy and is suffocating our economy at an accelerating pace. The depreciating rand is one way to detect and to measure it. Even after Zuma’s term come to an end, the Zuma-influence will not disappear – hallo Nkosazana Dlamini-Zuma. Do not take the advice from Magnus Heystek lightly.

Magnus stated quite clearly that his was NOT advice but an opinion – and this writer does too. The problem with opinions is that they’re like ar$eholes – everyone has one. The FACTS however speak for themselves. Revisit the facts and make up your own mind instead of being sucked in by others’ opinions.

I disagree that Zuma is the only problem and when removed all will be well. Zuma is a product of the average South African, and when removed will be replaced by another person that represents the average South African. Don’t be ignorant on how the average South African look like. Democracy always ensures the average citizen elects the leader. If the ANC lose power it will be because of the EFF that took 13% from the ANC and the only way the ANC will rectify this is by adopting EFF policies. For this reason the increasing talk of white monopoly capital, land grabs etc.They will happily destroy the economy to hold onto power. Its been proven in Africa time and time again. Don’t be ignorant, I am with Magnus. Your safest asset is in a foreign country.

I disagree, a while ago we had Mandela at the helm, now we have Zuma, I don’t think the average South African has changed this much, this quickly.

When Mandela took over, the entire government, this includes the police, army and judicial system was still white. Empty promises and numbers ensured political power to the ANC. There was no need to be radical and it would have been risky. Mandela was radical when strategy required him to be. He founded the armed wing of the ANC ( radical), he changed strategy given the circumstances. Times have changed. The army and police are now black, and the ANC uncertain to its political power. As to the average South African, yes I think on average SA is less intelligent than in 1994, partly due to government paying them in having more children. Remember Mugabe was also a “Mandela” in the west before the threat of losing political power. He got several honory Doctorates from several universities just like Mandela.

I totally agree.This is the bottom line. And the average South African is uneducated and poor and will support and vote for any party supporting free land and Nationalized Banks and companies. EFF.

Whenever anyone uses this argument (the ignorance of the masses), the response should be, speak for yourself! If you think other people don’t look around them, don’t hear what smart people are saying, don’t wonder whether maybe the other side has a point… it might just be you.

In any case, full-blown kleptocracy is the product of non-existent civil society, not the product of averages. And the breadth and depth of our civil society is far, far ahead of any other in Africa.

Just because Zuma’s behaviour is indistinguishable from that of a kleptomaniac, doesn’t mean we are bound to descend into the darkness our neighbours have had to endure.

But I do speak for myself, Beeshaas is not an organisation :-).I am sure the average (majority) voters are very content with Zuma. He was democratically elected via voting for the ANC (inside the ANC as the top leader, also through national election as the leader of the ANC, even a 2nd term). He also passed a motion of no confidence where the politicians representing the majority said they were happy with Zuma. This was after all his scandals were exposed in the media. That is democracy, the will of the majority and therefore the thoughts of the average citizen. Look at the average IQ according to countries and understand how this can happen in SA. But to think only Zuma is corrupt is naïve. Maybe you will realize this once he is gone.

Ryk,for once I seem to agree with you!

My reply to the Magnes’s article reply confirms same, but I also know that it might go a lot worse before it will start going better again.

The independance of the Reserve Bank, together with the first World financial system that was built up (mostly with ”white capital”) in South Africa over years, might soften the blow and help us to whether the storm!

Lets see ryk. Magnus has been right fir years already….and the daydreamers like yourself have been continously wrong. Whose advice should we follow? I took magnus’s advice in 2012…and am thrilled with my returns offshore. On the other hand…i continously read nonsense articles like the one above making piss poor excuses why we should keep our money in a losing investment. Use all periods of rand strength to move money offshore…or be prepared to lose it.

Your “investment” looks good – for now – but guess what if the worst case scenario takes place and proprietary rights are affected and new government attaches your investment as well as your house and other properties.

Your offshore investment remain at the mercy of the latest government policy – – – not a good position to be in!!

Best investment I suggested long ago – – – gold coins bought many years ago – and many 1ct top white diamonds – couriered to a safe place

Ryk – good article – balanced – although many disagree with you, the fact remain – things may just get better in SA if a few things happen. Seems unlikely, but possible.

Spare a thought for those ‘non-FAIS-Advisors’ who ‘only express an opinion’ who would be totally out of touch and without an opinion if off shore investments are no longer the way to go!!

The Zuptas are slow poison, and it is working it’s effects relentlessly on the SA economy.
It all comes down to risk; investing in an economy run by the Zuptas that is less than 1% of the world economy, or spreading your eggs into the 99% around the world.
It’s a no-brainer, really.
Live in SA by all means if you want to, but have your money overseas.

I also believe that Ryk is living in LaLa Land, the country can not exist in the same format as pre apartheid without some serious consequences. I would think that Nationalisation and Land Expropriation are when the tsumami eventually hits the coastline.

Ryk, you’re a smart editor, and yes we all have our different views. For me to invest on hope/should/if/maybe is not convincing enough.

I think the bad guys outweigh the good ones by a lot, and their culture of politics (power, votes, job security, whites is the problem) is a deep seated cancer and a rather successful strategy to retain the support of the masses.

Rather safe than sorry I feel. Tomorrow I start the pain to go to sars for tax clearance

I disagree with your comment that we have one core problem being our president. We have a massive core problem being that the ruling party is rotten to the core. The few people within the ANC that stand up for justice and the country get lots of media attention, leading us to think that there is hope of the party finding its moral compass again. But the rot is much bigger than we think. We’re like frogs slowly being boiled, not realising that the water is getting hotter and hotter. We’ve all been saying for many years now that it will get better. It hasn’t yet. When do we open our eyes to the truth facing us?

Some see the truth – some not yet

Question remain: what do you do when you see it?

What an enjoyable debate. Normally when people take opposing sides it means that there is argument to be made both ways. Don’t forget another aspect of the big picture, so far ignored in the debate as far as I can tell?

The population of all of Europe (especially eastern)is aging and headed for an escalating decrease (unless major immigration is allowed). With aging comes a decrease in consumption. If one looks at the population projections for the USA it is still growing though at a decreasing rate. China’s population more or less stabilized (even with 2 child policy) though still room for GDP growth.

If you examine the same for Africa, this is where most of the worlds population and GDP growth opportunities exist. Predictions are that world population will stabilize at around 10-11 billion (7.3 billion today).

Make of it what you will, but do not leave this out of the mix when formulating ones opinion.

Yes economic growth depends on population and productivity growth. Successful investments however, depends on how companies can contribute to productivity improvements and general well-being of a country. Such companies , ie Microsoft, will have global access.Microsoft could have been located in a country with no market size or growth potential. It does not matter. As long as the country provides an environment for the company to thrive (low taxes, limited regulation).This is why small Islands/countries can attract massive capital/companies. Now to invest in a company under constant threat of nationalization is not wise, especially when there are other safer options.

I’m not sure what you’re saying.

1. The world is over-populated with human beings.
2. Everyone wants human rights, but many do not want the human responsibilities that go with the rights.
3. Environmental issues such as climate change / global warming are causing drought / famine in many places.
4. Some have argued that the global warming over the last 1000 years is no worse that the previous 1000 years. Nonsense. It is only in the last 300 years or so that we have had heavy industry pouring out pollution – air – land – sea. For instance the amount of plastic swimming in the oceans will very soon weigh more than the fish. While over time this plastic will “biodegrade” it ends up as particulate matter in fish, which humans then ingest.
5. The human race must somehow identify and appoint a “committee” of individuals who will decide on all matters relating to rights and responsibilities. Impossible? Probably, but it could be a last chance, otherwise the next rulers could be cockroaches and MSR bacteria.

There always seem to be two camps:

1. South Africa is not bad at the moment.
2. South Africa is not bad at the moment, but it could get worse so you should get out before it does.

Depends which colour you are!

Yes, pessimism is mostly old and white in SA, and spends a lot of its time in front of spreadsheets.

Better than destroying Coligny.

Commentators are correct in mentioning the negatives they see locally, but wrong in their assumption that it is any better offshore.
Banks were nationalized in first-world countries as part of the self-inflicted financial crisis. Property rights are violated in the USA by means of devaluation of the currency. The only way first-world countries can ever repay their debts is by the process of “reflation” whereby inflation is used to work off debt levels. Reflation only works if the cost of living rises faster than asset prices. That is a form of theft or “appropriation without compensation”

Does that sound familiar? Well locally the politicians employ the crude method while in first-world countries they use the sophisticated way of nationalizing your assets without you realizing it.

Banks that were nationalized in 1st world countries , were in trouble. The aim was to secure investments of citizens, provide stability. In SA its the opposite.

Stealth nationalization? US and UK banks in the Great Recession were ‘nationalized’ in order to inject capital into them and prevent them from failing and causing a (bigger) catastrophe. In the US the government has by now sold most of the shares they owned in those banks at a pretty tidy profit. Not sure about the UK positions.

So here’s a sure-fire way to have R1m in your pocket five years from now. Take R1bn and invest it on the JSE and SA assets …

You know, I think that sort of fear actually tends to bring about its own consequence, except obviously the numbers are smaller, because being fearful isn’t generally a good way to get rich enough to have money to invest in the first place.

actually, if you’re paranoid it would be converting R1m into R1bn through hyper-inflation, but hey!

Not long to go now. The debt in the SEO’s and how they are abused to corrupt money has pushed us to the edge of a cliff. The ANC/Gupta government does not care.

Time or a bit late to educate all the future government pensioners that there will be nothing left for them.

Sad that after winning freedom they turn and sell their own people out.

I do wish a little bit that I was able to do “apocalypse thinking”, because the corollary is that it’s all heaven and angels afterwards…

We all hope you are correct Mr Ryk.

But………………………………………. !

“And the Band Played On”…

No matter your opinion, hedge your bets anyway – much better to have a plan B than no plan at all!

No new pres will salvage this country situation, been doomed since the signing at Vereeniging (both times Brits and ANZ).

By creating the “poor”, government create a society who totally depended on them, as now that nearly half the population almost on welfare. But they still need the 10%, than only they will have total control hence (radical white economic transformation), to start off slowly – collapse of education, BEE, land , ownership and end at the complete takeover of the JSE.

Unfortunately today all want to be “chief” with power, and not “Solomon” with wisdom. It is still evident that the biggest thread the ANC, EFF, SACP and unionist politics and agendas is the white minority, the so-called 10% and the total destruction of wealth of this 10% will be the last step to total control and “power”.

With MH, my opinion they will not stop till they got it all, take my money out, even if cross the border of the Vaal to the “Oranje economy”, could be safer.

Time the Western Cape introduced plans and actions to investigate ceding from the rest of SA. Sort of a Wexit.

It will be diffuicult in the short term but long term nirvana awaits for all who are prepared to junk the race card and pull finger ( well after removing 2 thumbs and head from bottom)

Then this rubbish anc guvmunt can take a running jump at itself.

Crime is one of the big problems we are facing.Many small business are closing in rural and city areas with the result job loses.When crime is reported to the police their response is do you want a case number for your insurance no investigation is launched.I live in a rural area and the decay has already set in.

If you have wixit you better make sure you build a high wall around it, because the better the western cape becomes, the more people will flood here.

wasn’t the American civil war about the south ceding from the rest of the states?

Hey Ryk, heard about the wealth tax investigation?

That is the one of the financial tsunamis we are concerned about. The number and % may start low but will increase.

Your happy valley scenario lacks integrity imho.

Your article is just like my name here- SUMMERDREAM !

Some simple logic is required. A country cannot succeed when completely ignorant, mostly corrupt and incompetent people are undermining all the good that our (few) enthusiastic and creative people are doing. Education, which is only way out, is just another failed government dept. Democracy is a sham in Africa, its simply a red herring to sucker the idealistic in the West to keep their money flowing to Africa. Democracy cannot work with ignorant voters who are the vast majority that keep voting the same way regardless of the destruction of our country. Voodoo and democracy are not compatible. Without true democracy we degenerate into the political abyss of dictatorship, oligarchy and more corruption. One or two temporarily successful African countries out of 54 countries in Africa that are not disasters are not good odds for our country. In any event we are already well on our way to the bottom of the barrel. No guessing required, just take off the rose coloured glasses. As a 5th generation South African it gives me no pleasure to be so frankly realistic. I never speak about my negative views when in the company of young people who are so full of joie de vie and positive for the future. The situation is tragic and sickening!

End of comments.

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