Stay abreast of COVID-19 information and developments here
Provided by the South African National Department of Health
On My Mind
– SA: getting the ball rolling
Former CEO of Sanlam Private Wealth
May 17, 2018
First off, some facts and figures. According to the latest Knight Frank Wealth Report (2018), there were 10 350 individuals in South Africa worth more than US$5 million last year (an increase of 13% from 2016), and 500 who had net assets of more than US$50 million (up 14%) – although much of this growth in wealth can be attributed to the strengthening of our currency. The report forecasts a 20% increase in both these wealth categories over the next five years.
While the numbers at the top of the wealth pile are increasing, the ranks of those at the bottom also continue to swell. According to a World Bank report released in March this year, during the period from 2008 to 2015, half of our country’s citizens could be described as ‘chronically poor’, and only a quarter of us can now be labelled as ‘middle class’ and above. In fact, with a Gini coefficient (a statistical measure of wealth distribution in a country, ranging from 0 to 1) of 0.63 in 2015, South Africa has the tragic distinction of being the most unequal country in the world.
Those at the bottom rungs of the wealth ladder are becoming increasingly disillusioned and impatient with the slow pace of economic reform and empowerment – as evidenced in widespread social unrest. This includes attempted land grabs in such diverse areas as Midrand and Hermanus, trucks being torched in violent protests on the N3 highway at Mooi River, and the siege of Mahikeng, during which residents revolted against an allegedly corrupt North West premier as well as the lack of service delivery in the area.
There’s no denying that the ‘Cyril effect’ has been a renewed sense of optimism and hope, bringing with it a wealth of new opportunities for economic growth. President Cyril Ramaphosa has set a target of raising more than R1.2 trillion in new investments over the next five years. He and his ‘sales team’ have been well received by the international investor community – for starters, he’s already obtained the buy-in of British Prime Minister Theresa May, who has committed more than R850 million.
However, our core challenge as a nation – indeed, our primary responsibility – remains to translate these opportunities without further delay into job creation that improves the lives of the poorest of our poor. The level of inequality in our country is ultimately just not sustainable. If we don’t take effective and urgent steps to eradicate poverty by kick-starting our economy, as we’ve long argued, we’re not likely to see an abatement of the growing discontent and despondency among our citizens.
There’s a lesson we can learn from Argentina in this regard. In a recent article on politicsweb, political commentator RW Johnson pointed out that, similar to what we’re now seeing in South Africa, the end of the rule of Cristina de Kirchner in that country in 2015 also sparked euphoria and the hope that foreign investment would pour in. This didn’t happen, however, partly as ‘investors had been badly bitten and were not twice but many times shy,’ as Johnson put it.
The point is that South Africa is not out of the woods by a long shot, and we’re going to have to pull out all the stops to make our country an investment-friendly destination for both local and international investors if we want to avoid taking the same path as Argentina – to the front door of the International Monetary Fund with hat in hand. And we need to show we mean business and attract some meaningful investments in order for our president to demonstrate to the more radical elements of society and the trade unions that there is, in fact, an alternative to protest and other disruption. Whether we want to know it or not, our president’s current land reform drive is in all likelihood an attempt to prevent unrest and ensure this process at least occurs in an orderly fashion and without further chaos.
Ramaphosa is certainly intent on getting people talking. Last month he announced that a major conference – involving both local and international investors – would be held later this year to kick-start his investment strategy. But to ensure that any wealth generated does in fact do what it’s supposed to – address our country’s enormous inequality problems – ordinary South Africans at all levels of society also need to start generating plans and engaging in constructive debate around them. In this regard, two creative proposals have been put forward over the past month – ideas that in my view warrant closer attention and further debate.
The first is the revival by former Business Day and Financial Mail editor Peter Bruce of a proposal originally conceived in the office of former Standard Bank Group chairman Conrad Strauss around 20 years ago. The idea, accredited to Francis Antonie, then a senior economist at the bank, is essentially that each company listed on the JSE issues new shares equivalent to 1% of its market capitalisation, with the funds raised being pooled into a ‘wealth fund’ to be managed by the private sector and used for projects aimed at alleviating poverty and inequality.
In an opinion piece on BusinessLIVE, Bruce did the math: the value of all the shares on the JSE combined is currently around R15 trillion, 1% of which is R150 billion. Imagine the impact this amount of money could have in starting to address South Africa’s most pressing needs, for example, better education, as well as uplifting the poor and economically marginalised in our society.
I agree with Bruce that corporates won’t necessarily be unwilling to participate in such a plan – especially if they have the assurance that the fund as well as the projects tackled will be effectively managed by the private sector and the money won’t disappear into someone’s pockets. It’ll also be cheaper than most companies’ current BEE deals, many of which haven’t had the desired impact on those they were designed to empower.
The second proposal is one by Frans Cronje, CEO of the Institute of Race Relations. His team has estimated that to purchase a 1 000ha farm for an upcoming farmer, stock it with 200 cows, a bakkie, tractor, trailer and implements, and provide the farmer with some working capital, would cost in the region of R20 million – enabling said farmer to start his enterprise debt-free.
But R20 million appears to be a rather ambitious investment for just one farmer. Where does Cronje suggest the money should come from for such a project? In a recent article written for News24, he argues for the re-prioritising of expenditure in other areas. For instance, if the government’s R10 billion bailout of SAA (and the airline’s request for a further R5 billion) had been spent on land reform, 750 new black commercial farmers could have been established. And if the government cuts its wage bill by only 10%, a further 3 000 farmers could be financed every year, to name but one more example.
I believe this is a sensible proposal, one that doesn’t negate the ‘willing buyer, willing seller’ principle (since there is no buyer) and ensures that property rights remain protected. I’d go further to suggest that instead of – or in addition to – these upcoming farmers being offered assistance by the Department of Agriculture, Forestry and Fisheries, and other state entities, already successful commercial white farmers in the same region could take the new farmers under their wing and provide mentoring and general support. Again, I’m confident many would willingly help – as is already evident in certain agricultural sector programmes.
These are but two excellent ideas put forward by concerned citizens in an attempt to get the ball rolling and give our economy the boost it needs to bring meaningful change to the lives of the poorest South Africans. The question is, where to from here? Unless proposals such as these are taken seriously and debated nationally, they’re likely to fall by the wayside and ultimately be forgotten.
In my view, our new president needs to create a forum with representation from all spheres of society, where out-of-the-box ideas can be tabled, brainstormed and panel-beaten for actual implementation. It’s crucial for the national conversation to continue – and for the voices of the various interest groups to be heard as we forge a new path towards prosperity for all our citizens.
This is my last On My Mind column as CEO of Sanlam Private Wealth. I’ve thoroughly enjoyed communicating with our clients over the past 13 years and am grateful for your continued support over the period.
Sanlam Private Wealth manages a comprehensive range of multi-asset (balanced) and equity portfolios across different risk categories.
Our team of world-class professionals can design a personalised offshore investment strategy to help diversify your portfolio.
Our customised Shariah portfolios combine our investment expertise with the wisdom of an independent Shariah board comprising senior Ulama.
We collaborate with third-party providers to offer collective investments, private equity, hedge funds and structured products.
South AfricaSouth Africa Home Sanlam Investments Sanlam Private Wealth Glacier by Sanlam Sanlam BlueStar
Rest of AfricaSanlam Namibia Sanlam Mozambique Sanlam Tanzania Sanlam Uganda Sanlam Swaziland Sanlam Kenya Sanlam Zambia Sanlam Private Wealth Mauritius
GlobalGlobal Investment Solutions
Sanlam Private Wealth (Pty) Ltd, registration number 2000/023234/07, is a licensed Financial Services Provider (FSP 37473), a registered Credit Provider (NCRCP1867) and a member of the Johannesburg Stock Exchange (‘SPW’).
All reasonable steps have been taken to ensure that the information on this website is accurate. The information does not constitute financial advice as contemplated in terms of FAIS. Professional financial advice should always be sought before making an investment decision.
Participation in Sanlam Private Wealth Portfolios is a medium to long-term investment. The value of portfolios is subject to fluctuation and past performance is not a guide to future performance. Calculations are based on a lump sum investment with gross income reinvested on the ex-dividend date. The net of fee calculation assumes a 1.15% annual management charge and total trading costs of 1% (both inclusive of VAT) on the actual portfolio turnover. Actual investment performance will differ based on the fees applicable, the actual investment date and the date of reinvestment of income. A schedule of fees and maximum commissions is available upon request.
COLLECTIVE INVESTMENT SCHEMES
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium to long-term investments. Past performance is not a guide to future performance, and the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available on request from the manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved manager in collective investment schemes in securities (‘Manager’).
Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in a portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of a portfolio and an investor will differ depending on the initial fees applicable, the actual investment date, date of reinvestment of income and dividend withholding tax. Forward pricing is used.
The performance of portfolios depend on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-dividend date. Portfolios may invest in other unit trusts which levy their own fees and may result is a higher fee structure for Sanlam Private Wealth’s portfolios.
All portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No. 45 of 2002. Funds may from time to time invest in foreign countries and may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information. The manager may close any portfolio to new investors in order to ensure efficient management according to applicable mandates.
The management of portfolios may be outsourced to financial services providers authorised in terms of FAIS.
TREATING CUSTOMERS FAIRLY (TCF)
As a business, Sanlam Private Wealth is committed to the principles of TCF, practicing a specific business philosophy that is based on client-centricity and treating customers fairly. Clients can be confident that TCF is central to what Sanlam Private Wealth does and can be reassured that Sanlam Private Wealth has a holistic wealth management product offering that is tailored to clients’ needs, and service that is of a professional standard.