Magnus Heystek: How did SA get here, what needs to be done – and how it affects investment decisions

Weekly, Magnus Heystek joins Alec Hogg as the BizNews Power Hour market commentator. Always full of insight, Heystek comments on the recent civil unrest in South Africa – and how it may affect your investments. Listen in on the in-depth conversation, with the Brenthurst founder speaking about the benefits of investing your money overseas. The former award-winning financial journalist notes that he sees Brenthurst clients as global citizens. “You cannot keep all your money in one country,” remarks Heystek. – Jarryd Neves

Magnus Heystek on investing in South Africa:

Everybody is now focusing on where we are as a country right now? How did we get here? – which is a whole debate by itself. And, how are we going to get out of it and what needs to be done? Now, one cannot just simply dismiss that South Africa will never become a failed state. That would be quite foolish and short sighted. If you’re saying, “my scenario planning involves the following A, B or C,” How does it affect the investment decision making? What can you do with the assets that you have or the assets that you will earn in the future? It’s a wide-ranging debate, looking at the various ways to plan for a very uncertain future.

On investing your money overseas:

We’ve been trying to convey that message to our clients – whom we consider to be global citizens – for a long time. As a small company we, 10 years ago, set up our own Global Balanced Fund to give our clients exposure into the global markets – at a very low cost. That fund is now up to R1.5 billion and doing extremely well – beating the bigger brand names because of the cost structures. Our clients have been very comfortable with our approach. It’s not being panicked, not being selling or alarmist. We’re just simply saying that you’re a global citizen and you cannot keep all your money in one country. It was not about politics in the early days.

What intrigued me about what was happening elsewhere was Wall Street, Silicon Valley, the phenomenal innovation taking place in the United States, Israel and in Switzerland. I was very attracted to those investments because I saw what was happening, personally. Based purely on statistical outperformance, we should invest offshore. Of course, we were attacked and it attracted a lot of unfair criticism. They got it totally wrong – said it was emotion and that I’m unpatriotic. It was not – it was getting good returns for my clients. Our clients – and I have got a number of messages recently – say thank you for externalising such a large portion of our portfolio. We now see what you mean and that story has not changed. It’s a pity that so many large companies with massive, vested interests were basically spinning a different story all day long. Their clients are paying the price today.

On the ANC wanting to create more social grants:

I share those sentiments. That’s exactly what government cannot do – to double down on what they’ve already been doing – which is cause to, by and large, the massive unemployment, unhappiness and anger. It was all just a compendium of of problems which caused this uprising, in my view, and because of social media today, a message like that gets transmitted instantaneously across multiple platforms and there’s an uprising.

On the threat of companies disinvesting from South Africa:

The letter that struck me as very ominous was the letter by Toyota South Africa. If you know a little bit about the Japanese culture, they are not confrontational and threatening. They don’t want to embarrass people – all those cultural traits of Japanese. But for them to write a letter like that and it gets published to the Durban municipality saying, “guys, we are very close to pulling out of South Africa.” That to me is a very dire warning that, if it’s not handled correctly…I mean, can you imagine Toyota pulling out of South Africa – they are a major investor. That would be the signal to other companies. They might just reconsider the operations in South Africa and that will lead to a cascade of foreign investments pulling out of the country. We have to consider these issues and the way government deals with it, going forward, is incredibly important.

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