SIKI MGABADELI: If you listened to our last conversation about GDP growth, listening to how investment has been slowing down, household consumption expenditure has been down, I’m sure you do feel a little bit poorer. So that’s what we are going to talk about now. South Africa’s middle class being crushed by rising inflation, declining asset values but I think that rising inflation is hitting particularly the poor probably more than the rest of us.
So let’s talk a little bit about that with Magnus Heystek, who is investment strategist with Brenthurst Wealth Management. Magnus, thanks for your time this evening. Are you feeling poorer? I know I am.
MAGNUS HEYSTEK: Of course we are all feeling poorer. When we shop, when we put in petrol, when we use our credit cards we are getting far less than we used to get. So everybody is under pressure except the one or two percenters who have so much money they don’t feel it. But all of us are being squeezed. Properties are not rising, the stock market is going nowhere, salaries and pensions are not rising. So yes, unfortunately we are being squeezed. The middle class is under a tremendous amount of pressure.
SIKI MGABADELI: So even if you’ve been doing all the right things that we keep talking about in this programme, saving, making sure that you are saving in the right products and so on, living within your means, buying property and holding on to it, you are still not doing well.
MAGNUS HEYSTEK: Well, if you look at the performances of property, for instance, over the last seven years in real terms you are still down 19% from the peak in 2007/8. So your property is not making you wealthy.
In the last two, maybe three years the JSE itself is not beating inflation – definitely not over two years; over three years a little bit ahead. But also in that we are running out of steam.
So the pension funds or RAs, everything under pressure. And yet your supermarket bill is just going through the roof. So yes, we are spending less, we have to spend smarter, we have to cut down on expenses, we are in a bit of a perfect storm. No point in denying it.
SIKI MGABADELI: So if one is invested, for example, for retirement in a retirement annuity and so on, what advice would you give them?
MAGNUS HEYSTEK: Well, you’ve got to look at your asset allocation. That’s the most important thing and we don’t speak about it enough. Where are your assets allocated? The average man in the street is not sure what we are talking about.
But you have to try and get some offshore exposure one way or the other. With the declining currency you need something that can protect you against further declines.
So you sit down with your advisor and ask where you can get a bit more offshore exposure in your existing portfolios – whether it’s your pension fund, RA or provident fund. You can move things around a little bit and a lot of people are oblivious to that fact.
SIKI MGABADELI: Alright, we’ll leave it there on that depressing note. Thanks to Magnus Heystek.