South Africans need to invest with their heads and take 80% or more of investable funds offshore to preserve their wealth, says partner at Austen Morris Associates Ian Edwards.
This is in the wake of the “calamitous mini-budget” presented by finance minister Tito Mboweni on Wednesday (30 October).
“If there was doubt before the medium-term budget that South Africa is heading the wrong way, it is now surely and brutally removed. We are therefore advising people to invest as much of their money as they can elsewhere in the world.
“We do not see a single reason why people should keep any discretionary investable funds in the country,” Edwards said.
He added that people should keep their house and their pension as their only assets here if they live in SA. But the rest should be invested in hard currency assets that will protect their buying power which has already been deeply eroded.
Edwards cited the early signs of a growing economic crisis in South Africa as per Mboweni’s budget speech.
“Rising debt, a massive and growing public sector wage bill, the strong possibility of higher taxes and the inability of government to address the real problems point to a high likelihood of poor returns from local assets classes for a long time to come.
“The mini-budget solved nothing and showed up the poverty of ideas to address our most pressing issues,” he said.
Edwards said that he is advising clients, particularly those with long term investment goals, to put money into global equities and to consider US equities, despite current worries that valuations are on the high side.
“Investing in large and recognised managed global equity funds, or regulated ETfs, provides diversification benefits for South African investors,” he said.
“These can be accessed by the everyday investor in South Africa or through an offshore provider.”