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EDINBURGH — Financial commentator, advisor and personal finance book author Magnus Heystek has painted a grim view of the South African investment terrain. He has been encouraging his clients to focus on markets elsewhere, as he has done with his own money. Heystek believes this is not a good time to invest in the South African stock market. He has been debating the merits of investing with Alec Hogg, BizNews founder and respected stock market watcher. Hogg reckons now is looking like a good time to pick up some bargains. The list of the 10 worst performers on the JSE makes for depressing reading (for more on the merits of either side of the debate, read Heystek’s letter to Hogg). But, if you are optimistic that President Cyril Ramaphosa and his team are going to clean up the mess left behind by former president Jacob Zuma and his circle of corrupt, inept lackeys, don’t despair. This could be a good time to start developing the foundations of a solid stock portfolio. – Jackie Cameron
By Renee Bonorchis
(Bloomberg) – It’s not even the end of the first quarter and already there’s a plethora of once-significant South African companies that have either collapsed or had their share prices hit the wall.
The likes of sugar producer Tongaat Hulett Ltd., tech provider EOH Holdings Ltd., Blue Label Telecoms Ltd. and Aspen Pharmacare Holdings Ltd. have lost billions in value, sending tremors through a South African market that was still reeling from the shock of retailer Steinhoff International Holdings Ltd.’s more than 90% plunge since December 2017. The latest in the sorry line-up was construction company Group Five Ltd., which went into administration on Tuesday after running out of funding.
While property and construction have suffered some of the worst declines this year, the malaise isn’t limited to those industries. From technology to telecommunications, retailers, consumer goods, agriculture, education and financial services, South African companies are battling with crippling unemployment levels, plummeting business confidence, instances of corporate malfeasance and a lifeless economy that expanded just 0.8% last year.
And it’s not just about economic indicators. The property firms? There’s deep uncertainty about land rights in South Africa as President Cyril Ramaphosa moves toward changing the law to clarify when the state can expropriate land without compensation. For construction companies? Years of mismanagement, corruption and under-spending on state infrastructure have left builders without enough things to build. In the background, of course, there are consumers who are shopping less and straining under increased taxes.
South Africa’s economy is forecast to expand 1.7% this year, according to the central bank and National Treasury, but that figure was produced before higher-than-estimated tariff increases were announced for cash-strapped power utility Eskom Holdings SOC Ltd.
One ray of hope is the soaring palladium price. That’s caused the shares of companies such as Impala Platinum Holdings Ltd., Lonmin Plc and Anglo American Platinum Ltd. to outperform most stocks on the 165-member FTSE/JSE Africa All Share Index this year. It’s just a shame that the mining industry in South Africa, once the world’s biggest gold producer, makes up less than 10% of the country’s gross domestic product these days.
While the mining counters have helped the Johannesburg bourse climb more than 5% this year, that’s less than the gains by exchanges from New York to London, Tokyo and Hong Kong. There’s an adage in Afrikaans, one of South Africa’s languages, that says “local is lekker,” meaning home is great, but so far this year, local isn’t very lekker at all.