Capital flight, plunging Rand = More SA owned assets abroad than flowing in

A small terribly important statistic is revealed in the Bloomberg article below. For the first time ever, the value of South African-owned assets outside of the country exceeded the annual inflow of funds into it. This kind of statistic sets the alarm bells ringing. As a developing country with massive challenges, South Africa needs all the capital it can get. But when the data proves its own citizens prefer to send their money out of the country rather than invest locally, and foreigners prefer other geographies, we have entered a vicious downward spiral. Something is seriously wrong. Serious reflection is required. Rhetoric and a succession of economic own goals by Soviet-style leadership are having a destructive impact far beyond what is appreciated by the political leadership. Capital is cowardly. It only flows where it is safe and has the potential to grow. Neither of which, right now, is on South Africa’s economic agenda. – Alec Hogg   

By Rene Vollgraaff

(Bloomberg) — The value of South African assets abroad outstripped foreign investment into the country for the first time on record — thanks to the rand’s slump.

South Africa's banknotes, which features an image of former president Nelson Mandela on the front in Pretoria November 6, 2012. REUTERS/Siphiwe Sibeko
South Africa’s banknotes, which features an image of former president Nelson Mandela on the front in Pretoria November 6, 2012. REUTERS/Siphiwe Sibeko

The difference between South African foreign assets and liabilities swung to a surplus of 113 billion rand ($7.2 billion) at the end of September from a deficit of 131 billion rand at the end of June, the central bank said in a statement on its website on Dec. 31. That’s the first positive reading since the Pretoria-based bank began recording the data at the end of 1956.

Read also: SARB Governor Kganyago: We won’t defend the Rand, it’s pointless

“The volatility and decline in domestic and global equity markets as well as the significant decline in the end-of-period exchange rate of the rand resulted in a respective modest decline in foreign liabilities and a substantial increase in South Africa’s foreign assets,” the Reserve Bank said.

The rand plunged 25 percent against the dollar last year, the worst performance after Brazil’s real among major currencies tracked by Bloomberg. The South African currency has been under pressure because of a slump in commodity prices, lackluster economic growth and rising interest rates in the U.S. It fell to a record low of 16.0543 against the dollar in December after President Jacob Zuma unexpectedly fired his finance minister.

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  • Earl Wyatt

    To say govt needs to do this or govt needs to do that, is to attribute some kind of credence to the notion that they are trying but somehow just lacking in advice. Time to stop the beating around the bush and acknowledge that firstly in their eyes government needs to do one thing and one thing only and that is stay in power. Not by means of doing the right thing and actually governing and serving to create the environment necessary to enlarge the economic “pie”. Oh no, remember this “government” is nothing but a Communist Terror organization masquerading as a government. Why do you think they refer to each other as Cadres and Comrades and sing songs about killing their own citizens?

    And what do Communist Terrorists do? Well they murder, destroy, oppress, suppress and disseminate propaganda to create strife to their own benefit. They also employ a multi-pronged form of offensive that includes coercion and intimidation. A revolution is almost always followed by a “Reign of Terror” and as a revolutionary organization they are too busy conducting their Reign of Terror to even begin to think about learning to actually govern. What this government “needs” to do is but one thing: Go.

  • rivoniaboy

    The real reason that the Rand is collapsing is the fact that South Africa is rapidly becoming another failed black African state.

  • The Spark

    Got to agree.

    It isn’t possible for the ANC to get Zuma out of government now. He has surrounded himself by yes-men MPs who will never vote him out.

    He conned the ANC into making him president. The conned the voters into keeping him president.

    Hang on tight you poor fools, it’s going to be a fast ride heading downward very quickly.

    Remember Zimbabwe?

  • nHlanhla

    they’re not insane – just trained and steeped in a failed economic system.
    They WILL, despite everything, prove the ‘WEST’ s bad and they WILL cosy up to the failed russian commies and the largely capitalistic chinese – The run on the chinese at the moment is to try to discourage the BRICs bank which is supposed to come to SA’s rescue.
    The Rothschilds banking control of the world must be protected. yea right!!

  • Mark Turing

    The politicians need to wake up!!

  • Rob Picton

    Yes, isn’t this the biggest scam. Take Zim for example. While Mugabe was standing on a stage crowing about his economic success and how terrible the West is, the UK and Europe were feeding his people. Its was happening at the same time! Makes me wonder who the real fools are…..

  • PJ

    Indeed, and SA used to be a destination of choice in Africa, now there are many African countries ahead of SA in the queue for investment dollars

  • Rob Picton

    Even when a loaf of bread costs R50 there will be no room for introspection. The ANC leaders will play the blame game casting ‘whites’ or ‘an international western conspiracy’ as the cause of the economic problems. You work hard, pay tax in contribution to (by tax payer percentages) the words biggest social state, only to be branded as an imperialist who is taking what is theirs. Stuff that…

  • The U.K. Sends £25 Billion in foreign aid to Africa and other developing countries every year, that at today’s exchange rate would equate to R575 Billion. Just start a charity to save fly covered starving African children and you will be sure of getting your share of the free money on offer and that is just the UK, add all the countries in Europe and the Canadian and US contributions and you will realise how small that R244 Billion really is in the greater scheme of things.

  • John Dove

    “The Bank’s figures show South African investors held R5.276-trillion in offshore assets at end-September, which was up 4.6% on the previous quarter on a 9% decline in the effective exchange rate of the rand.”

    Now it makes sense to me….

  • Lawrence Dahl

    Excellent comment, Aaron, and sadly all too true.

  • Rooinek

    Ok.

    Can I have some chicken feed then? Don’t need much. Not even R1 billion. Just R50 million.

    Thanks.

  • Aaron Anderson

    The politicians really need to take a step back and objectively analyse what their rhetoric and the broader regulatory framework must look like to an outsider. If you put yourself in the shoes of an investor (foreign or local) there is nothing remotely attractive about putting your money to work here vs. literally anywhere else where your property rights are guaranteed, governments actually seem to appreciate your activity and you are not perpetually being branded as some kind of racist colonialist capitalist boogey-man. But beyond even that, things are getting so bad that many funds cannot remain invested in this country purely due to their own basic statutory regulations and protections. If that is not a wake up call, nothing will suffice. I have discerned a sentiment among the poor that this is all just wealthy white people worrying about their money – things will change rapidly, however, when they develop the insight that will ensue when they have to pay R50 for a loaf of bread.

  • The Passing Show

    Oooh be careful in what you say.
    Capital is not cowardly at all. Never.
    Capital is like water. it follows the channels l that lead it to home. And to the safest haven
    if you think that SA is starved of capital then you are wrong.
    100% wrong.
    The capital of respectable investors requires not much more than a reasonable 30% or 40% return. Ask the Oppenheimer dynasty or the Wiese dynasty or the Rupert dynasty or the Motsepe dynasty (not so sure about the Motsepes)
    Wait until the Russians and Chinese arrive en masse.
    They will give you as much capital as you want.
    But because they have to pay off numerous slack and deficient idiot Zuma clansmen they will require returns of 100’s of % p.a.
    Just do some due diligence on the Guptas.
    And they at least eat with knives and forks.
    And of course phuque the peasants

  • Brian McFallon

    It’s only us that think in Rands.
    It’s 15 billion dollars.

  • R244 Billion is chicken feed in the global investment market.

  • John Dove

    That says there was a swing of R244bn in three months. ZAR only depreciated by 9.7% in that timeframe. Before Nenegate. Is R244bn even possible ?

  • Thomas Edison

    With criminally insane leaders leaders there is only one option – move as much as you can offshore.