Magda Uncut: Zille should go, ESG meaningless, SA’s irrelevance and more
In a riveting interview, Sygnia Limited CEO Magda Wierzycka discusses her controversial views on ESG investing, emphasising the need for genuine impact investing. She highlights the importance of tackling global issues like food security, renewable energy, and healthcare innovation, particularly through ventures emerging from Oxford University. She discusses SA's new government of national unity and calls for DA chair Helen Zille to leave politics. Wierzycka also critiques the AI hype, calling for realistic expectations and innovations in chip technology. The conversation delves into challenges faced by South African innovators due to funding reluctance and explores promising investment themes, including cancer and obesity drugs. Hosted by Nielsen Network CEO Bronwyn Nielsen, this interview offers deep insights into responsible and impactful investment strategies.
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Highlights from the interview
In an enlightening interview, Sygnia Limited CEO Magda Wierzycka speaks with Nielsen Network CEO Bronwyn Nielsen, discussing her perspectives on ESG investing and the critical issues facing the global investment landscape. Reflecting on a controversial statement made at a 2021 investment conference, Wierzycka reaffirms her view that ESG investing has become a mere buzzword. She argues that the governance aspect is already a standard for asset managers and that the focus should shift to genuine impact investing, which addresses major global challenges like food security, renewable energy, and climate change.
Wierzycka elaborates on her venture capital firm, Braavos Investment Partners, which is dedicated to impact investing. She emphasizes investing in companies with innovative solutions to significant issues. For instance, she mentions Wildbio, a company enhancing crop yields by 20-30%, potentially improving global food security. She also highlights a health tech company developing a rapid diagnostic tool for emergency rooms, and another firm working on recycling aviation fuel to reduce carbon emissions.
Nielsen probes Wierzycka on her environmental stance, to which Wierzycka passionately responds that she cares deeply about climate change, citing recent events in Cape Town as evidence of its impact. She criticizes the global response, particularly pointing out Joe Biden's absence from COP28, and stresses the need for responsible investment in technologies that mitigate climate change.
The discussion shifts to healthcare, where Wierzycka recounts the development of the Oxford-AstraZeneca COVID-19 vaccine. She explains that the vaccine was based on innovation from Oxford University and was provided at cost during the pandemic, making it the most widely used vaccine globally. She underscores the importance of affordable healthcare and expresses disappointment over the lack of funding for South African innovation, noting that promising local research often relocates to the US due to better funding opportunities.
Addressing AI, Wierzycka provides a balanced view, recognizing its potential for efficiency and job enhancement but cautioning against the current hype. She discusses the limitations imposed by current chip technology and stresses that genuine AI advancements are still far off.
Concluding the interview, Wierzycka identifies three key investment themes: AI, cancer treatment, and obesity drugs. She is particularly optimistic about the market potential for obesity drugs, citing the success of products like Ozempic. Despite challenges, Wierzycka remains hopeful about leveraging international venture capital to support South African innovation, provided systemic issues like corruption and energy instability are addressed.
This interview offers profound insights into responsible and impactful investment strategies, highlighting the necessity of moving beyond buzzwords to tackle real-world problems through innovation and strategic funding.
Edited transcript of the interview ___STEADY_PAYWALL___
Bronwyn Nielsen (00:01.19)
Magda, to say that this is the highlight of my week is an understatement. We've got so much to discuss, and I want to delve into your investment themes. But before we go there, we are halfway into 2024. I can't believe it's mid-July. Could you give us an overview of what the last six months have entailed for you?
Magda Wierzycka (00:31.362)
Thanks, Bronwyn, very kind of you. I currently split my time between South Africa and the UK. In South Africa, I run Sygnia, and I'm very excited about its new positioning and strategy. In the UK, just before the pandemic, I set up a venture capital fund. This has given me a much more global perspective on events than just sitting in South Africa and interpreting the various political issues that impact the market.
I've been exposed to very interesting forums. For instance, every quarter, I go to the United States to attend the Yale Business Forum. CEOs of some of the biggest companies and politicians discuss what business can expect from regulation. This forum is a great learning experience about US business, the economy, and unfolding events.
In September, there will be a lot of discussion around Trump versus Biden. Another interesting forum I've been involved in is Saudi Arabia's Davos in the Desert. I spoke there last September and October, and I'll do it again this year. This gives me exposure to global thinking, global leaders, and events in the Middle East. So, from a personal perspective, having spent time in the UK has given me a much wider perspective on global happenings.
Bronwyn Nielsen (02:40.966)
In preparation for this interview, I watched several of your interviews on both global and local platforms. In a May 2023 interview with Liane Manus on SABC, you mentioned South Africa's loss of relevance on the global stage. Where do we stand now, and how does the political landscape factor in?
Magda Wierzycka (03:14.67)
On the global stage, we have become irrelevant in terms of investment discussions. Back in 2023, load shedding severely affected global sentiment towards South Africa. As an emerging market, we were off the table in discussions. Earlier this year, I was in Miami at a Saudi Arabia-organized conference with many investment managers. There was a panel of top CEOs and CIOs of US asset management companies. One participant discussed BRICS, listing Brazil, Russia, India, and China, but forgot South Africa. He thought the "S" in BRICS was a plural. When it came to me, I pointed out that the "S" stands for South Africa, illustrating our lack of recognition in investment discussions.
Bronwyn Nielsen (05:09.444)
You also said, "We don't punch above our weight; we just punch ourselves." What are your thoughts on the political spectrum and the government of national unity?
Magda Wierzycka (05:28.706)
It's one thing to claim political neutrality, but that's not how we are perceived internationally. We align with BRICS and do not criticize Russia. We support Palestine and the Gaza Strip. This perceived alignment affects international investors' perceptions of South Africa. Some large US financial institutions have decided not to invest in South Africa based on our political stance. Despite the US dependence on South Africa, our growth relies on exports, imports, and foreign investment. We can't afford to alienate large foreign investors.
With the government of national unity, I hope to see a divergence between ANC ideology and what South Africa stands for as a country. This makes me more optimistic than before.
Bronwyn Nielsen (09:44.932)
Magda, you're more optimistic about the political landscape given the recent election and government of national unity. Were you expecting this positive outcome?
Magda Wierzycka (10:14.03)
Of course not. No one in South Africa was. The emergence of the MK Party raises questions about their funding. I don't believe they emerged solely by mobilizing ANC infrastructure. No one expected the ANC to come in as low as they did. Everyone anticipated around 46% and some form of coalition government, hoping for a coalition with the DA. The DA's performance was disappointing and not unexpected. Despite their contributions to South Africa's economy and governance, the perception that they are a white party has hindered their progress. When the DA sent a predominantly white delegation to negotiate with the ANC, it reminded me of the 1990s negotiations between the National Party and the ANC.
Helen Zille's leadership has also been a hindrance. She needs to recognize that the DA's future success lies in visible transformation. Her grip on the party is holding it back. Despite the corruption and incompetence in the ANC, she is the one holding the DA back.
Bronwyn Nielsen (13:46.438)
Your message is clear. Let's move off politics and into the investment game. Talk to me about Sygnia's new strategy. You co-founded Sygnia in 2006 and have built a significant financial services organization. With your global view, where is Sygnia heading?
Magda Wierzycka (14:21.934)
We are punching above our weight. As an entrepreneurial company, we have the flexibility to implement strategies quickly. We don't have multiple committees for approvals. Our apolitical stance has allowed us to voice controversial opinions without being beholden to any government or political party.
Sygnia's strategy focuses on the consolidation in the retirement fund industry. Most retirement funds are now falling into umbrella funds. We launched a small umbrella fund around six or seven years ago and are building on that strategy. We compete against giants like Sanlam, Alexander Forbes, and Momentum for retirement fund business. Our strategy includes interesting features appealing to individuals.
We also focus on the retail market and individual savers. Our Lisp administration platform for individual investors has the largest number of investors without advisors. This entrepreneurial, transparent, low-cost brand appeals directly to the market. Since 2015, when we had no retail presence, we have managed to change that significantly.
Bronwyn Nielsen (17:12.336)
Sygnia is dominant in terms of exchange-traded funds. Talk to me about that philosophy, particularly regarding investment fees.
Magda Wierzycka (17:33.742)
We compete with Satrix, and both of us control about 35% of the ETF market in South Africa. In 2015, we acquired DBX trackers, a Deutsche Bank ETF tracking business with 100% foreign ETFs. This acquisition positioned us in the ETF market, promoting low-cost, passive investing. I'm a strong believer in this approach. Our index-tracking funds, especially those targeting pension funds, have shown top performance over the long term. This performance is stripped of all fees and is transparent to investors.
Internationally, this trend has been around for 20 years, and we are finally seeing its realization in the South African market. It's a very pleasing trend for Sygnia.
Bronwyn Nielsen (19:43.046):
I want to take you back to 2021 to an investment conference where you made a controversial statement about ESG investing, where you said it's meaningless.
Magda Wierzycka (19:56.204):
Yes, meaningless. I will repeat it. I think ESG investing is a buzzword. Many large asset managers, including BlackRock, have withdrawn from marketing ESG. The G, governance, is standard for any asset manager; no one says they invest in companies with poor governance. So we are left with the E and the S. We believed in impact investing rather than just ESG, and that's why I set up a venture capital firm in the UK focused on impact.
Bronwyn Nielsen (20:45.99):
This is Braavos Investment Partners?
Magda Wierzycka (20:51.694):
Yes, Braavos Investment Partners. We focus on impact investing, targeting companies that can address major issues like food security and renewable energy. For example, a company called WildBio developed a method to enhance crop yields by 20 to 30%, addressing food security. In HealthTech, we invested in a company that can diagnose multiple conditions in 15 minutes in emergency settings at a fraction of current costs. Another company is working on recycling aviation fuel, a significant polluter.
Bronwyn Nielsen (21:27.812):
What are your thoughts on the environment? Are you saying it's not a real theme we should consider in our investments?
Magda Wierzycka (21:51.566):
We do care about the environment and have focused funds on climate and renewable energy. For example, we invest in companies emerging from Oxford University with novel approaches to addressing environmental challenges. Impact investing is about making a real difference, not just using the ESG buzzword.
Bronwyn Nielsen (23:37.36):
To clarify, you do care about climate change?
Magda Wierzycka (23:51.694):
Enormously. Just look at what's happening in Cape Town with 15,000 displaced people. Climate change is real. At COP28, Joe Biden didn't attend, and the focus on renewables was softened. We must use our resources, including financial, to invest in our children's future.
Bronwyn Nielsen (25:11.276):
Let's talk about healthcare. The Oxford AstraZeneca COVID vaccine was a significant investment for you. Can you elaborate on applying Oxford's innovations to South African universities?
Magda Wierzycka (25:47.79):
The AstraZeneca vaccine development was based on Oxford innovation. The IP was owned by Vassitec, and during the pandemic, they couldn't profit from it, making it the lowest-cost and most widely used vaccine. In healthcare, we aim to deliver affordable care broadly. We've tried to set up a fund to support South African innovation, but local pension funds are reluctant to invest, leading to a brain drain as our best minds move to the US for funding.
Bronwyn Nielsen (30:49.314):
Do you plan to continue pursuing education funding?
Magda Wierzycka (30:56.718):
I haven't given up, but I've paused. I'm now in London, with access to other venture capital funds. However, South Africa's issues, like corruption and load shedding, need addressing before we can attract more risky investments in innovation.
Bronwyn Nielsen (32:34.895):
Talking about innovation and new investment ideas, AI is a hot topic. What are your views on AI and any other themes we should watch?
Magda Wierzycka (33:25.934):
AI, particularly generative AI, is a version of complex algorithms that can run large language models. However, it's not sentient. AI can enhance efficiency and supplement certain jobs but is far from general AI. The development of AI is limited by current chip technology. We need new chip innovations to progress further. The hype is overblown, and businesses claiming to use AI often exaggerate.
Bronwyn Nielsen (36:51.586):
Any other themes we should focus on?
Magda Wierzycka (37:05.406):
Three themes: AI and its hype, companies working on cancer drugs, and obesity drugs. In AI, Nvidia dominates until new chip technology emerges. For cancer, any company working on treatments has a vast market as diagnoses increase. Lastly, obesity drugs like Ozempic have an enormous market, with companies like Novo Nordisk and Eli Lilly leading the way.
Bronwyn Nielsen (40:10.606):
Any thoughts on stocks like ASML in the chip manufacturing space?
Magda Wierzycka (38:27.814):
Not particularly. Nvidia's market dominance is clear, and without new chip technology, there aren't significant competitors. Other stocks are not as exciting to me.
Bronwyn Nielsen (41:05.018):
Magda, thank you for your time. The BizNews community will gain significant insights from our conversation. Thank you, Magda Wierzycka, co-founder, and CEO of Sygnia and Braavos Investment Advisors.
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