Magnus Heystek’s advice to anyone choosing to stay in South Africa
Brenthurst Wealth Management co-founder and director Magnus Heystek says that South Africa is a phenomenal country in many respects, but those staying should make the right choices and protect their wealth.
Speaking in an interview with BizNews, Heystek said the financial strain on South Africa’s middle class has been building for years.
He added that many people are only now starting to confront uncomfortable realities about declining wealth and shrinking opportunities.
Heystek said the core problem is South Africa’s long-term economic stagnation, particularly the steady decline in GDP per capita.
“For the last 15 years, South Africa’s GDP per capita has been declining,” he said.
“People don’t think it’s an issue, but it’s a massive number over time. If per capita income shrinks year after year, someone in that group is getting poorer all the time.”
According to Heystek, the middle class has borne the brunt of this trend. He noted that since 2010 or 2011, the middle class in South Africa has steadily become poorer.
“That’s not an opinion—those are facts, and there’s no disputing the facts,” he said. He pointed to the cumulative impact of taxes and rising costs on salaried earners.
“After income tax, dividend tax, VAT, capital gains tax, and then estate duty on death, there’s not much personal wealth being created by the middle class,” Heystek said.
“If you earn R40,000 or R50,000 a month, or even more, after living expenses and taxes, there’s very little left.” At the same time, traditional wealth-building assets have disappointed.
For many years, the JSE didn’t give great returns, property prices outside of Cape Town have been a disaster, and the rand has declined.
“If you price your assets in dollars today and then travel to London or the US, your purchasing power has been decimated,” he said.
Heystek said the squeeze is visible everywhere. Middle-class people are struggling to afford medical aid, so they downgrade. They drive cars for longer.
He added that motor vehicle sales have dropped from nearly a million a year to about 400,000 because they drive cars for longer. That’s a reflection of the tremendous squeeze on middle-class wealth.
Despite a recent improvement in sentiment, Heystek warned against confusing market calm with economic recovery.
“There is a higher degree of optimism, and the government of national unity has calmed the markets,” he said.
“But the economy itself is still flatlining. Manufacturing is shrinking, and the trade surplus improved because imports collapsed, not because things got better.”
Not about pessimism, but realism
He stressed that recent market gains were driven by global factors rather than domestic reform.
“We’ve had a tremendous commodity boom, the dollar dropped sharply, commodities went through the roof, and gold shares exploded,” Heystek said.
“That had nothing to do with ANC policy. It was pure luck.” This disconnect is why Heystek remains cautious.
“Despite the stronger rand and higher JSE, foreign investors are buying South African bonds, not equities. Even large fund managers say they see better opportunities offshore.”
For individuals, this reality has major implications for retirement planning. Heystek said many South Africans were misled about retirement annuities.
“Advisers focus on the upfront tax saving, but they don’t tell you that you lose control of your money for life,” he said.
“You only get access to a third after 55, and the rest is taxed as income later. That’s tax deferral, not tax saving.”
He stressed that relying solely on regulated retirement products is dangerous. “You need a large discretionary pot of money under your control,” Heystek said.
“That’s money you can move between asset classes and jurisdictions when you need to. That flexibility has made massive differences to people’s outcomes.”
Heystek said the past year showed the power of staying invested globally. “Last year was a melt-up market like I haven’t seen in 30 years,” he said.
“Gold shares were up 180%, South African equities about 50%, Japan 44%, and some offshore funds delivered 40% in dollar terms. You could only benefit from that if you had discretionary, offshore exposure.”
Looking ahead, Heystek said South Africa remains a country of extremes. “It’s a phenomenal country in many respects, but also a precarious one,” he said.
For anyone who chooses to remain in South Africa, he advised having a diversified portfolio, with a large portion invested abroad.
“Most of my clients don’t want to emigrate, especially at an older age. But they have a very large exposure to offshore assets, and they’re comfortable with that,” Heystek said.
He added that offshore diversification is not about pessimism, but realism. “People are saying that their life is here in South Africa, and they’ll die here,” Heystek said.
“But I’m going to make sure my children and grandchildren have options. That means investing globally and protecting your purchasing power.”
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