Gavin Smith, Head of Africa at deVere Acuma
The ANC’s manifesto should serve as a “wake-up call” for investors to consider creating, building and safeguarding wealth internationally. This is the clear warning from Gavin Smith, Head of Africa at deVere Acuma, part of one of the world’s largest financial advisory organisations.
His observations come after President Cyril Ramaphosa presented the ANC’s manifesto to a packed Moses Mabhida Stadium in KwaZulu-Natal at the weekend. Ramaphosa highlighted a number of key economic issues – of which growing the economy was a leading focus.
“The President set out some laudable plans to try and turn the economy around. However, many investors will, understandably, assess that they haven’t got the time to wait until the reforms are implemented and have a real effect. As such the manifesto served as a wake-up call for them. Against the country's economic backdrop, sensibly, they will be wanting to ensure that their families’ futures are protected sooner rather than later,” Smith says.
“Fortunately, there are a plethora of options available, including the bona fide, established financial planning solutions that will help provide important opportunities to create, build and safeguard wealth internationally.”
Of the manifesto, one of the disturbing aspects was the announcement of the intention to change the mandate of the South African Reserve Bank (SARB), which echoes the ANC’s 2017 elective conference resolution to nationalise the bank.
Smith comments that “the manifesto stated that the SARB needed to become more flexible, and play a role in reducing unemployment, poverty and inequality. State-owned-and-run entities in South Africa have a rather poor record at this point and harming the credibility of the Reserve Bank would be detrimental to investor confidence.”
In addition, President Ramaphosa also said that he is considering the notion of prescribed assets, which will see the government legislating that money managers will be forced to invest a portion of their funds in state-mandated areas or companies, particularly SOEs.
“Neither of these scenarios paints a positive picture for South African-based investors and has the very real potential to cause distress for investors, banks, for pension and retirement funds and for insurers,” says Smith.
He adds that another area of concern continues to be the proposed land expropriation without compensation plan, which has caused a great deal of hesitance for investors in recent years and to which President Ramaphosa reiterated his party’s commitment at the launch.
“As long as land expropriation without compensation is on the table without final policy and safeguards, investor confidence will continue to be shaken,” says Smith.
He adds that it is also significant to note that Jacob Zuma, the architect of state capture himself, was involved in the launch and enthusiastically received by the audience, which highlights the reality of a party divided, and one whose stance against corruption is insufficient, as opposed to what its leadership might suggest.
“Until there has been progress and/or revision in terms of these economic issues, savvy investors are likely to remain proactive in building and protecting wealth for themselves and their families by investing in and maintaining an international portfolio,” Smith concludes.
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