BNC#8 truth over hype: Magnus Heystek on investing, independence, and winning in a tough economy

Magnus Heystek built his career on questioning narratives and pursuing truth - first in journalism, then in financial advice. From navigating market volatility to championing global investing, his journey reflects resilience and independence. In a challenging South African economy, his message is clear: think critically, stay global, and never compromise on honest, objective advice..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox every morning on weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..Watch here.Listen here.Edited transcript of the key note speech.Good morning, everybody. What a great introduction. What a great friend. What a loyal friend. Thank you so much, Alec. I wish you had continued for another 20 minutes and then I would have been happy. Last year, Alec put me as the first speaker because one of the political speakers pulled out at the last minute. 00:30So I had carte blanche to say what I wanted. I had no idea what all the other esteemed speakers had said. So now on the last day, I was listening to all the various speakers, Rob Hersov, Dawie Roodt, and everybody. And I kept on changing my talk because they were talking about it. And even Helen Zille was touching on a couple of things. This morning my wife said, "What are you talking about?" I said, "I'm still not sure." But I want to dedicate this talk to two people. 00:58I want to dedicate it firstly to Neil de Beer, who came into my life about a year ago at this seminar. And I have never met a man who sucked you into his existence, into this vortex of energy and thought and discussion like Neil de Beer. We had a couple of lunches, had some coffee. We communicated after his Sunday morning shows, which was absolutely riveting radio and podcasting. 01:26And it's such a pity that he's gone. So there's a great loss to the business community. 01:33The second dedication is to someone we all know, Clem Sunter, an absolute gem of a person. I got to know Clem about 30 years ago. Clem was, apart from being an American, I think he was the director of JCI, which was the developer of the golf course estate in Johannesburg called Dainfern, where I bought. And we had a golf day there for Johnnic, and they invited us. And as the club captain at the time, I got to... 02:02play with the chairman or director or the big man. And it was Clem Sunter himself. And I met this tall, avuncular, friendly, engaging personality—terrible golfer. Terrible golfer. But he could laugh like nobody else when he mishit the ball. On the 13th, there was a holdup. And there was a "closest to the pin" competition, and you know how that slows down the golf. And Clem started... 02:32playing with his air guitar in front of us. And he put on a show for this four-ball. And we said, "Clem, what's your story? I mean, can you play guitar?" And he laughed and he said, "Not well known. I was in a rock band at university. And my claim to fame is we were the opening act for a band called the Rolling Stones." So now I think that's a claim to fame. And of course, afterwards, Clem became... 03:02extremely famous, not only in South Africa, but all around the world for his high road, low road scenarios. I don't think there's anybody in this audience who has not listened to him or listened to his podcasts. He's spoken to many of our clients and I mean, he's had a profound influence on my thinking, your thinking, the government's thinking and how we apply that high road, low road scenario in our personal lives. Because firstly, as a country, we've been moving... 03:32going back in time. He uses the low road, high road analogy, although he only popularised it in the early 80s, 90s and applied it to South Africa. South Africa, if you think about it, since inception, 1910, has been careering between the low road and the high road, more towards the low road in most cases. So if you start with the unification of South Africa, if you start with another point in time, maybe 1948, we definitely veered towards the left hand. 04:02And for a very long time, we were definitely going down the drain. But as someone once said, his name was Professor de Kiewiet. He was a Dutch-South African economist. He summarised South Africa as a country that prospers through political mismanagement or political disasters and economic windfalls. And that summarises South Africa. And even today, that's applicable to our course in life. 04:31So from the political disaster of 1948 leading up to 1960, when we left the Commonwealth, 61, we became a republic. We also, as a country, became very, very lucky. Why? Because the Free State goldfields were discovered, which was the largest gold discovery on Earth. And that generated so much wealth, so much industrial activity, roads, railways, ports. As a result of that... 04:59lucky find of the gold mines in the Free State, predominantly the Free State stretching up to Krugersdorp, Klerksdorp and those places. So, against the political disaster that we were operating as a country, we also had the economic windfalls of gold and that kept us and made us a very, very wealthy country. The Rand at one point, as someone pointed out last night, the Rand at one point was one-to-one; in fact, two-to-one to the Dollar. You got two Dollars... 05:28for one Rand. When I joined journalism with Alec, 70-whatever, make it 80, the Rand was—you got $1.40 for a Rand. Now that's, since then the Rand has been in a decline. So moving forward, where was the high road in our society? The high road was, I would say, with the release of Mr Mandela, the first general election, and from about 95, apart from the fact that we were winning, we won the World Cup... 05:58we gradually started improving our finances as a country. We slowly upgraded. 2008, I might remind you, ladies and gentlemen, all three of the ratings agencies appointed or gave us a triple investment rating. S&P, Moody's, Fitch, we were three notches above an investment grade rating. 06:27I would say the high road from about 2002 to 2008 is the closest—that period was about the closest that we came to being on the high road. The economy was growing at four to five per cent from 2002 to 2008, largely as a result of China's introduction to the World Trade Organization. And they were buying everything we could dig out of the ground. We became prosperous. The debt to GDP came down to 25 per cent... 06:54economy growing at six, the currency at five and a half, if I might remind you, five and a half to the Dollar. The problems started brewing, the political disaster started brewing in 2007 when Zuma was appointed, or 2008—correct me if I'm wrong on the dates—but since then we have the nine years of the lost years until 2017 when he departed the political scene. That's when we definitely veered towards the... 07:21low road again as a country; we lost our investment grade rating. And I think in June/December 2017, when he fired— Nhlanhla Nene pointed out, the "weekend special"— Van Rooyen, as Finance Minister, that's the closest, or just about the closest we came to really getting stuck onto the low road, where government just takes over the finances. And we were punished severely by the capital markets. I mean, the Rand dropped 6% on one day. And I think they got the message; 07:50the Rothschilds of the world gave the cabinet the message: you better get rid of this guy because we're going to pull out capital very quickly. And since then, we've been bumbling along. Now, Clem Sunter would call that the middle road or the muddy road that eventually. So we've been gradually plodding on; as a country, we've been plodding along with the economy not growing 1% once again. Yesterday we had the... 08:19announcement two days ago that our economy grew at 1.1 per cent. Most economists year after year say, "This year we're going to go to one and a half or two per cent," and we've been failing busily for 12 or 13 years. So our growth rate is stuck in a rut and we come back to why, and other speakers have been discussing why we are stuck in the rut. And with the current political leaders, my view is we will not get out... 08:46of that rut. I mean, earlier this year, I saw a report from Investec, which I respect highly. They were forecasting a 3% growth rate in four years. I said it is not possible, not with the current management in place. So we've got the downgrade. The other aspect where we've been fighting this is our debt situation. 2007, 2008, it was 25% of GDP. It's been going up year after year after year, especially under Pravin Gordhan. 09:16They just started spending money and they were spending money on the wrong stuff, not infrastructure. It was all salaries, wages, perks, etc., plus the theft that was taking place. And again, this year, we had the minister saying, "Well, this year we're going to get control of the debt." Well, Daily Maverick published a piece two weeks ago where it clearly stated that for the last 12 years, every year at the budget time, the minister, whoever he might have been... 09:43said, "This year we're going to control the debt and it will come down." All those beautiful charts, which you saw again this year, showing that the debt projections are going to come down. I can put it on the table now: it's not going to happen. And they'll find all kinds of excuses why it won't happen. So very shortly, our economy is stuck in the doldrums. If you look at the gold mining industry or the mining industry as an example, 1980, it made up 20% of our GDP, 20%. 10:13It's down to six now. It employed about 800,000 people in 1980. It now employs 250,000 and is declining very quickly. But the more important part, and there was a very good article in Business Day by a young man called Ashley Mbasu. He's the chairman of the Junior Mining Council. I've never heard of the guy, but I thought it was a perfectly written article. He was warning, he was talking about the reasons why capital is fleeing South Africa. And that's what you need to take note of. 10:43The expenditure on exploration in South Africa has dwindled as a percentage of world exploration down to 0.6%. So there's no money being invested in South Africa looking for gold mines. So there's no point in the politicians getting up and saying we've got all those diamonds and gold and manganese in the ground because that's exactly where it's going to stay. And the article made a very clear point that the... 11:10capital investment in mining is a very, very long game. If you don't know what's going to be happening 15 years down the line in terms of taxes, terms of incentives, in terms of infrastructure, they will not commit capital. And that was the message of the article. And hopefully someone in government reads it. So we might have all the treasures in the ground, but it's going to stay there because the ports, the railways, and all the other things will ensure that it stays there. So when I read these very optimistic forecasts for the... 11:40JSE and for the economy I say, "Wag n betjie," just go dig a little bit deeper. And people would say—someone tweeted the other day, now I couldn't respond on Twitter because someone, believe it or not, hacked my Twitter account a year ago and I've been unable to get it back again. So if there's any young techie here who wants to earn a lot of money, you get my Twitter account back, I'll pay you fifty thousand Rand, even more, but I've given up. 12:07I tried, I wrote, I begged, I pleaded, I sent messages to Elon: "Give my account back." But anyway, the Twitter or the tweet was, "Now that the Rand is doing so well, something about Maggie is bringing back all his money." And the answer is no, not a cent. Not a cent is coming back. And I'll tell you why, I'll tell you why. And we need to go back to another date in time, 2015, 1st of April. 12:33On my birthday, the government announced that you can now take 10 million Rand out of the country. That was a turning point in many respects for South Africans and South African investors. And I alluded to it last time and I said, we don't realise what a profound impact that has had on our lives in terms of personal freedom, liberty, etc. Now we could decide: where do I want my wealth? And for most people, the 10 million per couple plus the 22 million per year... 13:02and you spread it out over two or three years, represented quite a large amount of money, if not all of the money. So that was a freedom that opened up. I don't think the asset management industry in South Africa at the time really realised what happened—that this change, this freedom that the ANC government, one of the few good things they've done, was about to hit the asset management industry. And there were campaigns about "local is lekker"... 13:31and "don't worry about offshore, it's dangerous" and "all these scams" and "the anacond" and all that kind of rubbish. I went to so many seminars, but people are smarter. People make up their own minds. They actually say, "This is a phenomenal opportunity," which I advocated very strongly because, like Alec, I have attended global investment seminars for many, many years, realising South Africans are very, very, very, very small fish in a big pond. 13:57I said, "This is fantastic. We can now invest in technology—you can't buy technology here. You can invest everywhere in the world." And at that time, we had major political risk in South Africa, so you do this. The Magnificent Seven was already starting to run. So there was enormous wealth being created and South Africa was not party to that. So 2015 things changed. And fast forward... 14:24and while Mike Schuster was still alive—he was a consulting economist—he calculated at that time, and I think the number is much bigger, about 1.6 trillion Rand had left the country legally, which is now in foreign denomination elsewhere in the world. Now, because of that—and it's still today—I don't get invited to the golf days and the lunches and the seminars of the local asset managers, because I'm just not on the list. That's not the message that they wanted to hear. 14:54The point I make, and I stress it every time I get into an audience: my company, me, my advisors—we don't work for anybody but our clients. So we don't get paid by anybody, we don't get paid commissions. Our clients pay us a fee, a professional fee, and they must, in my opinion, get honest and objective investment advice. I can only sketch scenarios. I can't sell something. So the research... 15:22back then by guys like Mike Schuster was that your prospects of growth are much better offshore. And that has largely been the case until Alec introduced his five-year challenge with me and Piet Viljoen, where I'm now bloody losing. But that's beside the point. And I might just add, in Euro terms or Dollar terms, the portfolio has doubled in four years, mainly driven by—people always ask me, "What are you investing in?" I'll tell you. My portfolio consists of Randmore... 15:51Sean Peche, phenomenal fund manager. I've got 15% gold in there. I've got a European equity fund. And I also have a fund that none of you have money in—you know, it might be one or two, but that's going to change. It's the Orbis Japan Equity Fund. Japan has been a phenomenal place to invest over 10 years. You do not ever hear people discuss Japan on South African media as a cultural thing, a language thing. Only now... 16:21But before I go to that point, that fund has over 10 years given our clients 16% in Dollar terms; last year gave 40%. Nobody talks about Japan. May I ask who's got money invested in Japan? Very few. You probably listened to me last year. I mean, Mark Jurgens, very good, a colleague of mine has moved down to Hermanus now. He's a good financial advisor. Guys, if you need someone in Hermanus to speak to, Mark, nobody else. None of these big names... 16:51But beside the point, Sygnia has now opened the door for the first time. They've created a Japanese instrument that gives exposure to Japan. So that's just how you can build your global portfolio. So as far as I'm concerned, it still remains offshore with your long-term capital. There are short-term opportunities. Now coming back to the JSE, it's had a phenomenal year. No question, no question. But as they say in life, as in love... 17:20as in money, luck counts. Last year, December, or the year before, in December 24, as Trump was appointed, what happened? The gold price took off. David Melvill is smiling from head to head, there's the cheek to cheek. The gold price started rising and the global reserve banks started buying gold at an enormous pace, at an enormous pace. 17:49Gold boom, our market was driven by essentially five or six shares. If the gold price reverses, I have no view on that. Peter Major had some comments about that. That party is over. They'll be back to local fundamentals. And if you scratch deeper, they're not fantastic. Allan Gray was honest enough to say, our market has got ahead of itself. Morningstar, I listened to a podcast by Morningstar about a month ago. And in terms of their global asset allocation, they also... 18:18did not put South Africa first. They say South Korea has better opportunities, Argentina, and places like Brazil. So the local fund managers would like us to believe that everything's fine. I don't believe in that. Our clients have become global. And I would like to end off on—one minute. Our clients today are global. And the investment world has changed dramatically. And we spoke very briefly with my colleague Mark 25 years ago... 18:45financial advice was a one-dimensional type of activity. I sell you a product. I take a lot of commission upfront, and I don't talk to you for five years. Today, if you do not have multi-skills in your practice—and in our practice, for instance, we now give advice on tax, South African tax, global tax. We give advice on estate planning, asset allocation, currency allocation, wills, winding up of estates, offshore trusts, which we've now done... 19:14We have a Mauritian Trust Company. We have to deal with scientists. We have to deal with the probate. If you don't have all of those skills in your practice, you are dead in the water, because you're not only just giving advice. You are building a life for someone. And I used the analogy with my wife last night. I said, we are trying to keep our clients on the high road of finances. A lot of the work we do as advisors, sometimes is just to say no; they come up with... 19:42crazy ideas, the share matches and the leader matches and the Bitcoins. And we just say, "Stay away from it." So we steer our clients onto the high road. And you cannot do that if you don't have multi-skills in your portfolio. So on that note, I would like to say once again, it's been a phenomenal conference. I have been stimulated endlessly and a tribute to Alec. I mean, Alec, I think, is the only guy in South Africa who can pull this together. And every year it just gets better.

BNC#8 truth over hype: Magnus Heystek on investing, independence, and winning in a tough economy

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