Discover why South African investments remain safe despite economic challenges, as Steven Amey from Ashburton Investments shares insights on local opportunities and market trends. File photo.
In the current economic climate, many locals may be wondering if their investments are safe in South Africa. Such concerns are understandable, given negative news reports about the South African economy, the rising cost of living for consumers, and large volumes of investment flowing out of the country.
One of South Africa’s top asset managers, which has been performing well locally and offshore, is however optimistic about long-term opportunities in South Africa. Asked if South Africa was still a safe place for regular South Africans to invest for their retirement, Steven Amey, head of intermediated distribution at Ashburton Investments, says the answer is “yes, it can be”.
“There are challenges, but we see a lot of investment opportunity in South Africa,” says Amey. The sentiment may be surprising considering Ashburton’s recent announcement of a partnership with global investment powerhouse Morgan Stanley Investment Management to strengthen its global capabilities. The company, which is the Asset Manager of the First Rand Group, also recently made headlines for its strong performance on local equities through its purely South African equity fund. Only 62 local funds out of about 1 852 domestic unit trusts or Collective Investment Schemes (CIS) are 100% invested in local stocks.
There is reason to be positive about investing in South Africa right now
“Investment sentiment is positive in SA at the moment. A global survey from Credit Suisse Group AG and the London Business School recently revealed that South Africa was the global leader in equity returns over 117 years, from the year 1900 to 2016, due to its commodity-rich nature. And while past performance is not always a predictor of future performance, we have many reasons to feel positive about investing in South Africa into the future,” says Amey.
Amey lists several additional pieces of recent good news for the South African investment universe. “Firstly, local interest rates were reduced in September and November, echoing similar cuts by the US Federal Reserve. Secondly, South Africa has had more than six months without load shedding and the local renewable energy industry is showing good growth, all of which is good news for producers who boost our economic development.
Thirdly, we are seeing positive moves towards more privatisation in South Africa, especially with struggling state-owned entities like ESKOM and Transnet. In the local mining sector, we’ve also seen more than R170 billion worth of new deals, mergers, and acquisitions. Consumer confidence also reached a five-year high, as the economy continues to recover from the COVID pandemic. And last but not least, it is very positive to see that 140 local CEOs recently committed to support the government’s economic reform targets.”
The recent introduction of the two-pot retirement system, which allows South Africans to access the savings portion of their pension funds to provide relief from financial distress, was also good news for local pension fundholders, as it gives some financial flexibility to individual investors.
Achieving alpha with SA-only equities
Proving that South Africa was a good investment destination, Amey highlights that the Ashburton Equity Fund, which has had a “healthy exposure to smaller and mid-cap stocks” over the past three years, managed to deliver 95bps per annum of positive alpha over the benchmark FTSE JSE Capped SWIX. The Fund is invested in companies such as Grindrod, AlexForbes, Massmart, Raubex , and WBHO.
“In general, we are very positive about the long-term investment prospects of our local equities. We have also made the decision to pivot our strategy, with our equity fund now being 100% invested in SA equity in 2024,” says Amey.
Get good independent financial advice
Amey cautions investors to always seek advice from qualified financial advisers. “Be careful not to use braai conversations or your immediate circle of friends to make investment decisions. What is happening right now may be different from what has happened in the past or what will happen in the future, so getting good advice from a financial adviser with a good track record, and a strong understanding of the market is highly recommended, especially when dealing with one’s hard-earned money.
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