Financial research group, Powerstocks has released a set of graphs showing a mass exodus of international investors from the JSE.
“Since the September 2013 foreign-flows peak – achieved two months before SA fell into a business cycle recession – foreigners have dumped an unprecedented net R286 billion in SA equities and government bonds,” said Dwaine van Vuuren, CEO of Powerstocks.
“JSE shares accounted for 74% of the outflows which brings the total rolling annual (12-month) outflows to R163 billion,” he said.
Van Vuuren specifically noted that while emerging markets have experienced outflows within the last few years, these have been isolated to China. In fact, emerging markets as a group have experienced inflows for every quarter since the end of the financial crises in 2009.
According to van Vuuren, the majority of the money lost by South Africa could have been prevented as they were primarily caused by factors well within the country’s control.
He cited the following eight reasons why international outflows had increased so drastically, based on factors cited by international ratings agencies.
- SA’s working age population is growing faster than its economy, and unemployment is at 13-year highs and growing.
- The SA economy is going nowhere, and its growth rate is far below its African and EM averages.
- Government finances are perilous – its debt is at record levels and growing, State owned enterprises (SOE’s) are bleeding us dry and corruption/wasteful expenditure is widespread and unchecked.
- Lack of clear policies across various sectors has led to a plunge in confidence and a widespread private sector investment strike.
- Government, business and labour are focussing on narrow self-interests instead of working together in unison for the best of the country as a whole.
- Most interventions by the government in the economy are focused on regulation and red tape, as opposed to growth enhancement and confidence building.
- Protracted political tensions generate policy uncertainty and impede structural reforms.
- The economy has failed to benefit from the collapsing rand (the rand is no longer a traditional shock-absorber).
The graphs below outline outflows over the past 12 months