Category Investments

Waiting for the whistle

27 July 2006 Angelo Coppola

South Africa should be careful of scoring an own goal - the road isn't less travelled and it has an opportunity to provide a funky African experience.

Jeremy Gardiner a director at Investec Asset Management, speaking at the fpi convention in Gauteng today says that South Africa has come a long way, but we have a long way to go.

From an overly pessimistic country with everything wrong, to a country that was overly optimistic. Pessimism and talk of emigrating again is creating a full circle. The nastiness in letters to the press concerning the FIFA World Cup is unnecessary.

Some of the issues that are making South Africans think about things differently include high profile crime, the government succession fight, corruption, rand weakness, and perhaps even the weather.

We have to get the World Cup right - we are not going to have a German world cup. The vuvuzela is the country's secret weapon, although everyone will be watching if we as a country don't get it right.

Internationally geopolitics is the greatest threat witness Iran, Iraq, Afghanistan, North Korea and the Middle East. The dollar remains under pressure, but there is no collapse in sight. A US and global housing collapse may be a problem, while bird flu seems to be another problem.

Oil also remains a problem with some people predicting $100 to $150. Gardiner says that it will be in the $60 range.

The Americans are using their houses as ATMs and debt levels are huge estimated at 120%, while China growth is at 11.3% year on year, although their wages are ridiculously low.

Internationally inflation has been kept low by India and China as they kept consumer prices down. The problem now is that these two 'air-conditioning' countries need to be fed, and this impacts on oil and resources prices.

Locally inflation rates are low at 4.8%, when one considers that these were double digit inflation rates, less than a decade ago.

Gardiner maintains that Africa is South Africa's competitive advantage. The locals know how to operate in the rest of Africa. The locals need to get into the continent before the foreigners do.

A warning though is that the big deals in SA in the last 12 months are creating more foreign interest: Barclays - Absa, Vodaphone - Vodacom, ABF Illovo.

Emerging markets are not unattractive, and SA less so. The foreigners are here because of the expected large infrastructure spend and the increased value that the black middle class is bringing to the table. They are here for a five year term.

He says that there will be a gradual decline in the rand, down to between 6.80 and 7.30, although the current account deficit could change all of that. So why then do people get stressed when it comes to offshore investing and diversification? He maintains that it's a principle and not a level diversification is a principle - don't wait for a number.

Turning to gold, he says that gold investing is not for the feint hearted its either death or glory.

On tourism SA is still attracting tourists, although the criminals should stop attacking the tourists its not good business practice. This area creates more GDP than mining.

In terms of housing and the economic wellbeing of the population, SA is in a sorry state. 50% of the population lives on less than $3 per day, and one has to consider the high percentage of that figure that goes to transport, due to historical imperatives.

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