A rapidly growing number of investors across South Africa are looking at international opportunities., according to deVere Acuma, part of the world’s largest independent financial advisory organisations.
“While we deal with them (clients) on all manner of issues from retirement and pension planning to foreign exchange, there’s been a striking trend over the last year,” said Gavin Smith, head of Africa at deVere Acuma.
“A rapidly growing number of our clients have been increasingly telling our advisers over the past 12 months that they are becoming ever more concerned about the political and economic challenges facing South Africa and the incredible uncertainty that this creates,” Smith said.
“Specifically, they tell us that they believe the primary risks for their wealth include that the South African economy is expected to remain weak for the next few years at least, the plummeting and volatile rand, the controversial land expropriation issue, the possibility of another downgrade by ratings agencies, and the increasing likelihood of at least another two tax increases next year.”
In light of these factors, Smith said that investors were understandably looking at international options, such as efficient overseas property investments, to help build and safeguard their wealth.
“In general, the investors flagging up these concerns are not only the uber-rich, but they are also hardworking, middle-class families looking for better protection, better returns and more flexibility,” he said.
In an interview with BusinessTech, 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.
He noted that while the circumstances are different for each individual – 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.”
Smith noted that in times of growing volatility, the need for diversification of assets by asset class, geography and legal jurisdiction is paramount.
“The two main factors needed to achieve good long-term returns are the same for South African-based investors as they are for anyone else,” he said.
“First, a diversified asset mix that limits volatility. That’s to say, the risk that your portfolio falls suddenly, just before you need the money.
“Second is patience, or having ‘time in the market,” he said.
“This allows the build-up of compound returns while minimising leakage of cash to stock brokers, and avoids the risk of trying to time the market which too often results in buying high and selling low by following herd instinct.
“Fortunately, there are many well-established, bona fide financial solutions to help investors mitigate the current and growing headwinds which are likely to remain for several years to come.”