Late 2017, at the height of political tensions in the country, economist Dawie Roodt advised South Africans to take their money out of the country amid looming downgrades which would send the economy into another recession.
While much has changed since then (including the appointment of Cyril Ramaphosa as president), Roodt still believes that many South Africans should be taking their money out of the country.
Speaking to BusinessTech, he noted that the circumstances are different for each individual South African – but broadly speaking, he advises his clients to be overweight abroad.
“There are many reasons for this viewpoint,” Roodt said. “The first major point is that the South African economy is not doing well.
“The second major issue is that of politics and uncertainty. For example, we have the issue of confiscation – although government calls it by the fancy name of ‘expropriation’ – which is the sort of thing that worries investors.
“Very importantly as well (from an asset management viewpoint), there are just more opportunities and a bigger variety outside South Africa – it’s as simple as that.”
While Roodt emphasised that the factors will differ for individual investors, he provided a number of example scenarios of how and when to look at investing out of country.
“For example, if someone came to me and said that she has R1 million and is 90-years-old, my advice would be to put it into a money market and leave it in South Africa,” he said.
“If someone comes to me and they are a young guy that has inherited the same R1 million from his grandmother, my advice would be to take everything out.
“Even if the same guy inherited R100 million, I would advise him to take everything out.”
Not getting better
Roodt also confirmed that he did not expect the picture to change in South Africa over the medium-term.
“I think the difficult times are still ahead of South Africa,” he said.
“As an economist who does analysis on things likes fiscal accounts and the South African economy, and I can tell you that there will be very difficult decisions that will have to be made over the next couple of years.”
He added that he was unsure as to whether the country’s political leaders have the will to make these changes – citing President Ramaphosa’s recent announcement that SAA won’t be shut down as an example.
“For the medium-term at least I don’t foresee me advising clients to bring money back to South Africa,” he said.
Should everyone take their money out?
Despite this negative environment, Roodt said that it really does depend on what you want to do with money in South Africa.
“It’s important to remember that South Africa is a high-risk environment and that also implies that there is a potential for high profits and high returns to be made,” he said,
“I have many clients who are business-owners and my advice to them is to leave the business in South Africa.
“Don’t liquidate and go and compete internationally, keep it here and make your money here. You may even want to invest in South Africa if you are capable of identifying risks and managing those risks,” he said.
“But if you have any spare cash – take it out – that’s my advice.”