Alec Hogg on what investors, local and foreign, think of the GNU
In a fund-raising talk for Rotary in Hermanus last week, BizNews editor Alec Hogg addressed how local and international investors have reacted to the results of Election'24 and the Government of National Unity. Cutting through the noise, he eschewed popular narratives in favour of hard data that explains a perception this has been the nation's most positive change since 1994.
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Edited transcript of the interview ___STEADY_PAYWALL___
00:00:12:00 – 00:00:51:07
Alec Hogg:
2024 If you look at the possibilities of where we would go. And then I'm going to take you through and justify the statement others made to you and how the international community has interpreted this. There's a social media post going around at the moment about the Zimbabwean Olympic team. There were seven members said athletes who are representing Zimbabwe at the Olympic Games that are accompanied by 67 officials, including the vice president and his wife, reflected on the own.
00:00:51:08 – 00:01:27:06
Alec Hogg:
A private jet. We have an article today by a longtime columnist of ours called Cathy Buckle, who lives in the. And Cathy tells us that next month, in the middle of August, Zimbabwe will be hosting SADC, Southern African Development Countries, South Africa and Zambia and Namibia. And this is a summit that happens once a year. But it's such a big deal in Zimbabwe where half the people, by the way, are hungry, where we're not for international aid.
00:01:27:08 – 00:01:55:22
Alec Hogg:
They would go hungry, they would starve. Zimbabwe has built a $200 million, eight-lane highway from Harare to a place called Mount Hampden, where it's just built a brand new parliament. I say this to you because that is one possibility. Forget everything else that's going on in Zambia, 78 youngsters to be put into jail and there's on for 90 days and no one knows.
00:01:55:24 – 00:02:24:01
Alec Hogg:
There are a lot. We did forget anything else. Just just think of those very obvious issues. Let's end it. There is an election in Venezuela. By all accounts, Nicolas Maduro is going to get behind it. Not surprisingly, because Venezuela's GDP, in other words, its economy has shrunk by 75% in the last ten years. Imagine that your economy is down by three quarters.
00:02:24:03 – 00:02:35:17
Alec Hogg:
1 in 4 people in Venezuela had left the country. They'd be left the country to find a better life somewhere else. Anyway. Both their refugees.
00:02:35:19 – 00:03:01:21
Alec Hogg:
Are sitting about. Politicians in this country believe that Venezuela and Zimbabwe are the paragons of virtue. They had the systems that they would love. So we came to the election in 382, 84, which you look back and you say, well, it's like a windy country. 83% of us who 85% voted for the day. we're in the UK.
00:03:01:23 – 00:03:25:24
Alec Hogg:
Things are going well. Yeah. All is good. But we are part of a country that really came very close to the break. If was. Yeah. You had the constitutional US and the non constitutionalists. So those guys that want to take us Zimbabwe bends where the direction. Those are the non constitutions. They want to tear up the constitution because 1994 according to them was a start.
00:03:26:01 – 00:03:54:13
Alec Hogg:
This is a real real issue. I'm making this up. And the international community knew it as well. International community looked at South Africa as an investment destination. That's it. As you might have heard, Rob Hersov saying continuously and is well connected. Yeah. And internationally South Africa's Uninvestable. So the international community was not interested because of the risks of what could have happened.
00:03:54:15 – 00:04:30:19
Alec Hogg:
But the risk of South Africa going the route of Venezuela or even closer to Zimbabwe, those are really, really real issues. So off we go to the polls, forgetting one other very, very important thing. In 1994, when democracy was negotiated in South Africa, those who did the negotiations did something incredibly smart, which we now have to repeat in the 2024 election, then realized, my goodness, had they not done so, we might have been going in another direction entirely.
00:04:30:21 – 00:05:01:23
Alec Hogg:
They brought in something called proportional representation. Now, if you look at the British system, which is the system we had, so the, different constituents around the country, you put up, your political parties would put up the area represented, and people would vote for those representatives. And as a consequence of that, that would be an end. But it also meant if you had to get 50.1% of the vote, you had all power.
00:05:02:00 – 00:05:28:01
Alec Hogg:
the 49.9% of the fact were ignored. That's what we had in the olden days. That's what Britain had. Britain's got a real problem at the moment because they've got a party. You might not like him, but Nigel Farage, you've got 14% of the vote, but he's got 4 or 5 seats in Parliament. So 14% of the population have got virtually no representation.
00:05:28:03 – 00:06:05:21
Alec Hogg:
So what would have happened if we had the old system in South Africa? Well, there's a guy. I'll give you a seat. And he said, no, it's not because he's not very well known. Who does? His name is Adrian. Adrian Frith. He's a data analyst. And what he did was he took South Africa, broke down the different constituencies where the voting was in the provincial ballot.
00:06:05:23 – 00:06:43:17
Alec Hogg:
Remember, we had two ballots, the national ballot and a provincial ballot. So he took down the provincial ballot and said, let's break that down into constituencies, as you have in the Westminster system. And what would the result have been? Although the ANC only got 39.3% of the vote on the provincial ballot nationally, so adding up all the provinces in a 200-seat parliament because there were 200 seats, members of parliament from that provincial ballot, they would have ended up with 117 seats.
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00:06:43:19 – 00:07:09:04
Alec Hogg:
The DA with 48, MK with 30, the IFP with five, and nobody else would have had enough. That's the way it would have worked out. So had we had the Westminster system, there'd be no gate in Parliament. Some people had to be that people that they would have been no. Yes. In Parliament. Many people would have been happy with that, but there would have been an ambassador majority for the ANC.
00:07:09:06 – 00:07:12:22
Alec Hogg:
That's all Jesus can make it.
00:07:12:24 – 00:07:38:11
Alec Hogg:
So we've got to stop and we've got to ask, have you got to thank those guys leading up to 1994 for making this country one of the models, not perfect, it's still all kinds of arguments about the electoral system, but at least we have a system with those malcontents who put on their red berets and vote for the fifth.
00:07:38:12 – 00:08:09:23
Alec Hogg:
Even though everywhere in the country they are in the minority, they at least have significant representation in Parliament. Because, as we all remember, in the run-up to 1994, it was like a pressure cooker when people didn't have an opportunity to express themselves. So proportional representation left us, instead of having the ANC with nearly 60% of the seats in Parliament as they would have under Westminster.
00:08:10:00 – 00:08:43:17
Alec Hogg:
Would I need 40%? So I'm going to take you through these numbers because this is where hopefully there's some kind of divine intervention that happened here. Now. Yeah, we have 400 seats in South Africa's parliament. Yeah. ANC went from 230 to 159. The DA from 84 to 87. MK Jacob Zuma. What's their constitution? I remember once, reporting on a speech that he made where he said, if you could just make me the budget czar of South Africa for one week. I'll fix this place. That he was to be Julius Caesar. Well, Julius Caesar got 58 seats out of 400. The EFF went from 44 down to 39, and then met IFP at 79. New entrant, Freedom Front Plus, went from 10 to 6. And then a bunch of other little parties.
00:09:10:13 – 00:09:35:07
Alec Hogg:
So now what? It just takes you through a little bit of the arithmetic. Our most popular columnist R.W. Johnson, said before the election, the most obvious deal as a political scientist is the ANC and the EFF. Why? Because the ANC and the EFF would get you just out of a, well, around two hours. In fact, it would get you to 198.
00:09:35:09 – 00:09:53:22
Alec Hogg:
And then you could add in the PA with nine seats, and then you got your 50% and you can get all the numbers plus. Why is that so? Because as that ruling party or the biggest party, you want to make a deal with the party that you have to give away, at least to you know, it's a smaller number.
00:09:53:24 – 00:10:19:18
Alec Hogg:
That was the theory. If for a long time said that he felt that the ANC would do a deal with the EFF after the election, and then Jacob Zuma would have to just through everything. He'd upset the applecart. And I think he may have been sent here to rescue the country. Whether Zuma had not intervened, we would have had a very, very different outcome.
00:10:19:20 – 00:10:47:16
Alec Hogg:
So there's an interesting point for you. And Zuma interviewed with supporters of the Kremlin. And this is not a case. We have lots of evidence of it. But the most obvious evidence is when you have a look at the t-shirts and t-shirts as big in South Africa, give a guy a t-shirt. You know, it's not well in certain parts of the country, and wear t-shirts with ink, which on the one side has got it and the other side has got Putin.
00:10:47:18 – 00:11:06:18
Alec Hogg:
So there were to even this guy and of course, there would be no disclosures about the hundreds of billions of rands that had to be given to MK to help achieve the kind of electoral outcomes that it had. Okay. So the most obvious thing was ANC. Is it one, not the eight seats to bring in? You could have brought in Bodger to be.
00:11:06:18 – 00:11:21:07
Alec Hogg:
So it is three seats and then you go and chart the second possibility would have been the ANC in Nkandla. That's 217 seats. Remember, you're going to get 201 to run this country.
00:11:21:09 – 00:11:50:24
Alec Hogg:
217 or 198. You've got MK in there. You've got the EFF in there. I mean, you put them all together. Of course, it would be even a bigger majority that you've got us moving towards the it's well the Zimbabwe option. And I venture to believe that many of us would have been making plans because that is not an option that any rational person would like to go with.
00:11:51:01 – 00:12:38:02
Alec Hogg:
But it didn't happen. What happened was the ANC and the DA together would have had 246 seats collectively about 201. But politically, that wasn't going to fly because, as you could imagine, the members in the ANC, that is a lot of the media as well that is fueling this, which says that the DA is the white party that wants to take you back to the apartheid, and Helen Zille is this bad person, etc., without caring to go and do any of the research into the reality of the fact that the DA is the successor to Helen Suzman, who spent years in Parliament fighting for exactly the kind of dispensation we have today.
00:12:38:04 – 00:13:07:12
Alec Hogg:
But of course, narrative trumps facts in politics at the time. But as a financial journalist, he's now realized that if you don't have the politics right, if you can't have a country, you do anything you can. You could write as much as you like about the investment appeal of companies and economies. But if you don't have the politics right, it all means nothing.
00:13:07:14 – 00:13:31:06
Alec Hogg:
Politics, narrative, economics, facts, just bear that in mind as you go forward. So yeah, we have a situation which is the obvious one. The ANC decided to give it back. Yeah, ANC would have had a lot of problems into it. So what did they do? Listen to this, divine intervention. They picked up all the other parties in a government of national unity.
00:13:31:08 – 00:14:14:09
Alec Hogg:
And you added them all together, you get to a figure of 287. That's ANC, the IFP, PA, Freedom Front, Good, UDM, ACDP, Al Jamah, 287. The Democratic Alliance has 87 members of Parliament. So even with all these rats and mice, everybody you could bring together with the ANC, you haven't got that one-seat majority. It's like the Springboks beating the French by one point in the quarterfinal, and then by another one point in the semifinal, and then beating the Kiwis by one point in the World Cup final.
00:14:14:09 – 00:14:18:19
Alec Hogg:
It's a one-seat.
00:14:18:21 – 00:14:40:14
Alec Hogg:
But it's also quite good in a way because it keeps both parties honest. It keeps the DA honest because who knows, maybe they'll go along and get some little party to move from being progressives to, but from the MK grouping to join the ANC, give them a ministry or whatever. There's all kinds of strange things that happen in politics.
00:14:40:16 – 00:15:05:21
Alec Hogg:
But what I'm saying to you now is work out the chances of that happening. And it's got to be odds that even the most generous bookie in the world, if given to you, would say it's impossible. So those are the consequences of our election. We have a government of national unity. It's got just enough votes to keep the DA honest, to keep the ANC honest.
00:15:05:23 – 00:15:32:04
Alec Hogg:
You brought in the little parties as well, with lots to prove. We've seen what Kate McKenzie has been doing as the Minister of Sport. Whatever you might think of him, I'm interviewing him myself, by the way, on his book, which is recommended reading. You've got to read that thing. It's called "The Choice." Understand the got. Easy adage is he's putting out a lot of effort, as are the DA ministers.
00:15:32:04 – 00:15:56:01
Alec Hogg:
Who are it? Their different portfolios. Delek persons on a mission. We can see the same thing with Gerhard Schreiber here in the Western Cape already in Home Office. And you will see a lot of that. We've got an energetic President. Cyril was tired. I hated the election. Look at him now. He's bouncing around as though he's got a new lease of life.
00:15:56:03 – 00:16:32:04
Alec Hogg:
All of that might be a honeymoon phase, but international investors that believe it's a honeymoon, international investors are booked to this and said, this is for real. We have got a country that is moving in the right direction. That's a big statement. How do you justify that? Well, we start off with the most obvious part of it, which is the companies on the stock market who benefit most from economic growth in a country because the economy is not growing.
00:16:32:06 – 00:17:05:22
Alec Hogg:
Banking shares languish. If the economy does grow, banking shares benefit because they're the ones who put the oil into the engine of the locomotive. The banks' index on the Johannesburg Stock Exchange since the day after the election until today is about 21.5%. That's big. If you put a hundred thousand rand into it, you're now at 21,000, but a far bigger indication comes from bonds.
00:17:05:24 – 00:17:32:24
Alec Hogg:
When I was a young reporter, I had a boss, Penelope Gracie, back in those days. Yeah. To want to gun she was was a usual in be a woman boss. Certainly in such a senior position within the newspaper industry. And Penelope used to really give me a hard time. She would rewrite my copy continuously, for which I'm forever grateful.
00:17:33:01 – 00:17:59:24
Alec Hogg:
But the other thing that I thought you were grateful for was she put me into a job of covering the money and capital markets. Now you talk about something all paying and something that any reporter wouldn't have wanted. Reporters that would have covered sport list and foremost job reporters. And then mining peat crying. That's exciting and sexy. Maybe not really politics, but certainly if you're a financial analyst, it'll be companies.
00:17:59:24 – 00:18:36:02
Alec Hogg:
And you get the free meals by going to the AGMs and to the press conferences, certain come out to cover what is money in capital markets, excepting that the money in capital markets where I started at Enron weren't my trade is all about the pricing of an economy. So if you have the government in our country which overspent by about 18% a year, we're not terribly excited by the fact that we are showing a primary budget surplus.
00:18:36:02 – 00:18:45:08
Alec Hogg:
What that means is that it's like you in a household saying, I've balanced the books, but I haven't paid the bond.
00:18:45:10 – 00:19:09:18
Alec Hogg:
Because we not that security but that interest that we owe on South Africa's this that it every year we have to borrow more money to pay for the bond, pay for the interest, to service that interest. So we're at a at a point where debt is so important to this country, and the cost of debt is critical for every developing country.
00:19:09:18 – 00:19:34:18
Alec Hogg:
It's like that as a developing country, you know, bring in money from elsewhere. You don't have your own resources to grow your economy. You have to ask people from other parts of the world to dip your money, to invest, supposedly in infrastructure projects and infrastructure projects, like a company investing in a new garden equipment. It makes money. You then repay and you go forward.
00:19:34:18 – 00:19:56:13
Alec Hogg:
So you build bridges and roads and everything that comes to creating infrastructure, which then makes your country war repeating, which you can generate income from. Said in South Africa, we've been using that money for it was begging me to using it for public servants as we we know, we know we don't. We're Nike shoes and we know where we were going.
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00:19:56:15 – 00:20:21:22
Alec Hogg:
And I'll, I'll finish off on on a little bit of upbeat stuff on that too. But that money you borrow as a developing country, it costs you a price. Cost. You introspect, think it was as a person is be bankrupt three times and you go to the bank and you ask them to borrow money or to lend you money to start another business, they'll give it to you, but they're going to give it to you at a very high interest rate because you're appropriated to us.
00:20:21:24 – 00:20:45:03
Alec Hogg:
Countries are exactly the same. Argentina has defaulted on its bit half a dozen times. So if the Argentinians were the best one in the world and the best narrative in the will go to the global bank and some ask borrow money. Those who get gift give it their cash. All the idea of a very high interest rate. It's the same with South Africa's pricing of its debt.
00:20:45:03 – 00:21:14:01
Alec Hogg:
It's critical because it tells you what the international community thinks. A 20-year loan to the South African state on the 5th of June—this was when we had the results—there were all kinds of concerns that we were going to have a non-constitutionalist government in the sky together with the ANC. We were paying 13.39% on our debt for new debt that we had. Today, we are paying 11.5%, a 188 basis point improvement. So what is that telling you? That's saying that the international community is looking at South Africa and saying your risk has now been upgraded by nearly two percentage points. That's a 20% improvement. That's big.
00:21:14:01 – 00:21:56:02
Alec Hogg:
I can talk for hours about the optimistic outlook that I have for our country, with our new dispensation, with our competitive politics, with the fact that you are no longer ruled by divine right, the fact that power corrupts, and absolute power, as we've seen in the last 30 years, corrupts absolutely. And you could kind of see it. But yeah, talk is cheap. Many bars in the West have seen a very good quality improvement, suddenly from being really poor quality before.
00:21:56:04 – 00:22:17:01
Alec Hogg:
Back with high stakes, as an investment advisor, he and I were in our early days in journalism. We both worked for a company called Best Score, long gone now. Best Score used to own Beeld and The Citizen. My way into journalism was with The Citizen. We were on the fourth floor. The transfer order was on the third floor. Magnus's office was directly below mine, and he was a horse racing reporter. I was with Financial Times, but we know each other since 1980. Since all that time, he didn't stay with horse racing for very long. I was the one who went into horse racing, yet he went into finance very quickly.
00:22:17:03 – 00:22:42:16
Alec Hogg:
He's incredibly independent. And about 15 years ago, he said this country is moving in the wrong direction. We spoke about it yesterday. In fact, he's coming to our conference on the 12th of September. I know, Mike, you've booked and quite a few other people have booked for it, and we're bringing seven people together. King, the chairman of Isca, and some really top business people in France—just a one-off on the 12th of September. Our big one, of course, is in March.
00:22:42:18 – 00:23:04:05
Alec Hogg:
But Magnus will be there. I asked him what he was going to talk about at the conference. You've been so negative for 15 years. He said, well, you read a book by Peter Lynch called Beat the Market many years ago. And Peter Lynch said there's only one thing you really, really need to focus on: is this asset you're buying going down or is it going up? Magnus said 13 years ago, look at South Africa. And he said we were going down.
00:23:04:07 – 00:24:10:08
Alec Hogg:
He's not saying we're going to rebound, but certainly, the trajectory is now in the opposite direction. So there you have it from the super bear, who is now starting to burn property. He's just bought another property in the area. Okay, so everybody else has been buying property, and it doesn't matter where in the world. You broke with that good place to buy, and we know the consequences of that. But when you've got the super buyer who makes that call and says, okay, things have changed, that tends to support the view that I've been articulating this morning to you, that something big happened on the 29th of May, 2024. It was a very close-run thing. There was a lot of laundry that happened, but those who could have had a political row, that's for them to sort themselves out.
00:24:10:10 – 00:25:10:10
Alec Hogg:
What we have now is a government of national unity, which may or may not hold, but the signs are excellent. There is an international community that is watching and presenting a lot of pressure on the players. If you tried to script what happened on the 29th of May, you would have been accused of living in dreamland. But if you tried to script what happened in 1994 in this country, you too would be living in dreamland, particularly when you consider Boipatong.
00:25:10:10 – 00:25:49:17
Alec Hogg:
Many of us have forgotten that the invasion of Boipatong… remember the brutal violence that occurred when they didn't like what was going on, and they started shooting people indiscriminately from the back of trucks until a couple of them were executed. But they were putting it down to Albie. And then you're joining these guys driving cars into the World Trade Center. Do you remember that? Do you remember Victor Khoronwa Dukashupi scalping each other in Soweto? I do, because I had my team of—I was then the input editor at the SABC. My team of cameramen were going into the township. We lost Kelvin Sipho at the SABC. We lost…
00:25:49:17 – 00:26:15:04
Alec Hogg:
We had to cover the desecration of graves. There were a group of people in 1993 who chased them and killed Kelvin Buck. Dudley was really badly injured as well. That was the reality we were facing in 1993. And yet we had an election, and yet we had a country that went deep into 2024. Those of us who've been around long enough to see what happened in '94 might be saying, hang on, maybe we've had another bolt from above, another act of divine intervention.
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