Magnus Heystek: The JSE’s slow demise as Ramaphoria turns to Dysphoria

Magnus Heystek reflects on South Africa’s economic trajectory from its mining boom era to the current challenges faced by the Johannesburg Stock Exchange (JSE). He draws parallels with the historical dominance of the Oppenheimer family in the South African economy, highlighting the decline of major players like De Beers and Anglo-American. He points out the impact of political shifts, economic mismanagement, and a lack of infrastructure maintenance on the JSE’s underperformance. He emphasises the disappointment of “Ramaphoria” and the subsequent flight of capital, both domestic and foreign, due to unfulfilled promises and an unfavourable investment climate. Heystek contends that the JSE’s diminishing relevance on the global stage reflects a broader trend of capital outflows and warns of a potential irreversible decline unless significant policy changes occur.

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By Magnus Heystek

How Ramaphoria has been a dud for foreign investors

I spent a few delightful days over the Xmas period reading the engrossing biography of Harry Oppenheimer* and the creation of the De Beers-Anglo-American global mining conglomerate, a story that spans almost the whole of the 20th century.

As I said in an email to the author Michael Cardo, shadow minister of economics affairs for the Democratic Alliance, I enjoyed it as if I was reading the latest John Grisham or Lee Childs crime thriller. I simply couldn’t put it down and I feel as if I need to read it again, there was just so much information contained in this book.

I suggest that anyone interested in reading about the role of the Oppenheimer family in South Africa and its economy get a copy of this well-researched book.

What tickled me somewhat was that much of the action took place in Brenthurst, Little Brenthurst, and the Brenthurst Library—the residences of the various members of the Oppenheimer family at the sprawling estate in Parktown, very close to the MI highway near Killarney. Tickled pink because I managed 20 years ago to register the name “Brenthurst” for my fledgling investment company as somehow the family neglected to do so.

Read more: Magnus Heystek on the JSE, the ANC, and 2023 – 2024 investment & disinvestment trends

I did receive a huffing and puffing lawyers’ letter from the family, but I politely sent them a copy of my registration at the patent office, whereafter it all went quiet.

But I digress.

The book covers a vast period from the setting up of De Beers by Cecil John Rhodes, the birth of Kimberley and thereafter the finding of gold on the Witwatersrand, and then, after the 2nd World War, the discovery of gold in the Free State.

What added to the enjoyment of the book was that it covered the massive surge in growth of the Anglo empire into the UK, USA, and other parts of the world during the 70s and 80s, a period which coincided with my entry into the world of financial journalism. I was there and wrote many articles—as any financial journalist would have done, such was the dominance of Anglo’s on the SA economy.

At one stage the market capitalization of the companies controlled by the Oppenheimers and Anton Rupert exceeded more than 60” of the market capitalization of the entire Johannesburg Stock Exchange (JSE).

Gold and diamonds naturally played a massive part in the growth and expansion of the SA economy, particularly after the 2nd World War and later, when the world moved off the fixed price of gold in 1971, $32 per ounce,at which it was fixed since 1931.

This led to a massive surge in the gold price which reached $800 an ounce in 1980 and SA produced 1 000 tonnes of gold. You could imagine the wealth effect of such a precious metals bonanza. Johannesburg was the mining capital of the world. At one stage there were 32 mining houses and about 60 gold mining companies and numerous mining exploration companies listed on the JSE.

Anglo-American Corporation became the flywheel to most parts of the SA economy during that time.

It was boom-time in central Johburg. The Carlton Centre was being built, and so too the Tollman Towers, Johannesburg Sun Hotel, and the old JSE head office in Diagonal Street.

It was heady days being a financial journalist. As finance editor of first Die Transvaler (1980 to1986) and thereafter The Star (1986 to 1994) I was a front-row spectator to all of this. Almost every day there was news of a new listing, take-over, or some other piece of headline-grabbing business event happening in the city of gold.

But sadly, 30 years later, this is no more.  De Beers and Anglo are long gone, the Oppenheimers have long time ago moved most of their assets abroad and today even 44 Main Street, the former imperious head office of Anglo American has since been donated to an NGO. The central business district, where most of this played out, is gone, no more. Buildings are empty and most of the listed companies on the JSE have decamped to Rosebank, Sandton, and more recently Waterfall.

Unlike major global cities where not much changes over hundreds of years, such as Amsterdam, for instance, where you see well-maintained office buildings built in the 15th century still in daily use. This is Africa, we don’t maintain, we just move on and build something new somewhere else. Or not.

Investing in the JSE over most of this time, roughly from the 1930s to 1990, was very profitable. Gold was on a multi-decade bull market while the massive industrial growth in the SA economy lured foreign capital, despite the stigma of apartheid, into SA, and onto the JSE.

This was one of the reasons why the JSE, together with Wall Street and the Australian stock markets, were the best-performing markets as outlined in the book “Triumph of the Optimists” by Dimson, Staunton, and Marsh, published in 2002.

All this started changing in the late 1980’s when capital sanctions were imposed on SA, and thereafter the uncertainty created by the end of apartheid and the regime change. But there was enough momentum in the economy for the cracks not to be showing. The roads were still OK, the railways running, and any warning of a coming disaster was shouted down by politicians and many sections of the media.

But SA got lucky again. In 2001 China was admitted to the  World Trade Organisation (WTO) which unleashed a massive boom in commodities as from 2002 to 2008, which again was very beneficial for investors in the JSE. Furthermore, the hosting of the Soccer World Cup in SA in 2010 added to the economic impetus driving SA forward with a massive boom in the construction industry.

As economic historian CW de Kiewiet once remarked: “SA’s progresses through economic windfalls and political disasters.” The political disaster was yet to come. The political disaster was the ANC and its mismanagement of the economy since particularly since 2011.

With the commodities boom in the rear-view mirror, the ANC nevertheless opened the spending taps, mostly on salaries, wages, and perks. Spending on maintenance and infrastructure dropped off. At first, the physical decline wasn’t visible. Roads and railways still operated, but slowly and surely the infrastructure started faltering. Roads, railway lines, power stations, bridges and ports. All the boring 19th-century stuff that still makes a modern economy work, ironically enough.

At the same time, the looting under the former pres. Zuma’s watch started and which has never stopped, in my view. The perpetrators have just become smarter and more cynical.

Law and order became strange concepts. Our crime rate started intruding into almost every household, every street corner, and even business premises.

Ramaphoria was a brief interlude, which lasted for a brief few months, but soon turned into a flight of capital, both local and foreign when it became clear that CR’s promises were just empty promises. Instead of the swamp being drained, the swamp just became bigger.

The outflow of capital from SA’s markets, both equity and bonds, since 2018 has now turned into a torrent. The latest figures now stand at a combined net outflow of R1,3 trillion.

And it shows. The average return of the JSE over the past 10 to 15 years has been dismal relative to world markets with much of the growth coming from dual-listed foreign stocks. Strip out the dual-listed stocks and the average returns for shares exposed to SA Inc. have been extremely poor.

Read more: Magnus Heystek: South Africa’s wealth exodus – The unseen impact of offshore investments

What makes this underperformance even worse is when the returns are expressed in USD terms.

It shows how a nation of investors is slowly but surely becoming poor in global terms. Providing investment returns in local currency terms is misleading when the currency has been declining at around 6-7% per annum against the USD in particular.

Ask anyone fortunate enough to recently attend the Rugby World Cup in France about their experience. After describing the utterly riveting rugby and the glorious triumph of the Springboks, they would start talking about the price of beer, wine, and a good meal. Absolutely horrendous.

But that is a function of a slowly weakening currency.

Imported goods—mainly priced in dollars– are increasingly becoming unaffordable to local consumers, and it is showing. Motorcar sales are a prime example. I remember some 10 years ago when the local motor industry was very confident that it could sell a million vehicles every year. That dream has died due to a lack of affordability. Last year less than 500 000 cars were sold to South Africans and the trend has been one way—down.

Whether we like it or not, commodities such as oil, grain, computers, cell phones, and medical equipment are all priced mostly in USD and to a certain extent in Euros. Local currency returns are meaningless—just ask most countries in Africa—when the currency is declining year after year against the global benchmark of wealth, the USD.


The below chart shows the USD-returns from January 2018—when Cyril Ramaphosa took over the reins of the ANC and shortly thereafter, the country.  After a brief rally in the markets and currency, it has all since then been downhill. While the JSE moved sideways over this period, global markets roared ahead, creating stupendous amounts for global investors. Even the sharp downturn in markets as from November 2021 to June 2022, did not prevent the Nasdaq, S&P500, and MSCI World from vastly outperforming the local market.

In fact, foreign investors who bought into the Ramaphoria story have yet to show a profit. In short: local investors have missed one of the largest bull run in global equities in many decades! Nasdaq has returned 260% since Jan 2018, the S&P500 was up 91% while MSCI World Index +66% in USD terms.

There are many reasons for this under-performance. Law and order, the late Dr Simon Marais from Allan Gray would have said, is probably top of the list. Then follows threats to property rights, loadshedding, collapse of infra-structure as well as general hostility towards the business sector and taxpayers by the ruling ANC. In all, a toxic environment for companies listed on the JSE, especially those companies exposed to these hostile conditions.

Johan Rupert, chairman of Remgro and Richemont, was recently quoted as saying global investors are not comfortable investing in a country where the ruling party still addresses each other as “comrade.”

Magda Wierzycka, CEO of Sygnia Asset Management, added to this by saying, almost on the same day, that the JSE has become “irrelevant in global investment circles. It doesn’t offer anything the world needs now.

And it shows;

The global investment returns in 2023 show the extent of the irrelevance. Without the tailwind of commodities—which temporarily assisted from 2020 to 2022—the returns of the JSE in USD terms were hugely negative, down 11,5%in USD terms.

Compare this with the Nasdaq, driven by the Magnificent 7, which was up 44%, Japan up 30%, and most European markets up between 15 and 25%.

The media generally has been loath to report on this demise of the JSE. Over many years I tried to highlight this trend but was met, not with a deadly silence, but with a general condemnation of being “negative” and “Dr Doom” when it comes to investing in the JSE. Some of the comments on social media were much more vicious.

As late as last year November Rapport’s financial columnist Nico van Gjisen wrote a bizarre article, claiming that advisors who recommend offshore investors to their clients were “parasites”. I couldn’t get my head around these comments. Would he rather that his readers earn returns of around 5% per annum over 10 years—such as the Old Mutual Investors’ fund— instead of 15% which was produced by a good global equity fund such as the MI-Plan Global Macro fund? They are both local funds run from SA, but the difference in returns has been staggering.


But under the headline “JSE busy dying” (October 15, 2023) Netwerk24 published a more realistic account of what is going down with SA’s major stock exchange. It has become harder and harder to ignore the elephant in the room.

It referred to the following undeniably facts:

*Over the last 30 years the number of companies listed on the JSE has declined from 600 to 294.

* Poor relative returns are now filtering through into weaker-than-normal returns for pension and retirement funds.

* Foreigners have been fleeing the local bond market since 2018 as well, with ownership declining van more than 42% of local bond market issuances to less than 25% today. Meanwhile, the risk profile of local bonds is soaring along with the increase in SA’s foreign debt and budget deficits that need to be funded. The risk is now more and more concentrated on the local markets and players. This means that interest rates will not decline as much as world markets when the downward cycle of interest rates starts.  Many former ANC-connected have been raising their concerns about the current economic trajectory.

Read More: Glynnis Breytenbach: How Scorpions 2.0 can go after the ANC’s big looters…

Prof. William Gumede from the Wits School of Governance recently warned that SA is heading for an Argentina-style currency collapse.

So too does Pali Lehohla, former statistician general of South Africa. In a recent piece on Daily Maverick he says the following:

“During the era of the current president, Cyril Ramaphosa, everything that went wrong during the Zuma years has got worse. Corruption at all levels is growing, we have relentless load shedding, criminals and crime syndicates are on the loose, and politicians and civil servants at all levels are using their positions to amass wealth for themselves and their families.

“These are all symbols that we are well and truly in the Gwara-Gwara era … things are getting worse and, if nothing is done to arrest this slide, South Africa could reach a point of no return,” said Lehohla. 

These comments encapsulate the view from abroad, in my view.

The reasons why so much capital is flowing out of SA—heading for the hills—are twofold. First, there are better investment options available in the world and has been for a long time.

Second, South Africa is not a place that makes capital flows attractive. BEE requirements by itself scare off foreign capital, as we have seen with Elon Musk sidestepping his home country by not establishing his Starlink network here because he would have to give away 30% of the company to ANC-connected cronies.

The sad part of this unfolding slow-moving death spiral of the JSE is that lesser-informed investors, relying on the advice from a well-incentivised local advice industry (not to recommend offshore investments) have seen the values of their investments lag their global counterparts by a substantial margin. Certain parts of the media also seemed to swallow the “local is lekker”-story punted by local fund managers, no doubt supported by some heavy advertising to keep them in line.  SA could get lucky again, and the commodities could soar again. But, judging from events playing out in China, this looks unlikely.

Valuations, no doubt are very attractive at current levels. But it would take a major reversal in ANC policies to entice global investors back into our markets. And until then, the message is clear: “local is not lekker”.

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Magnus Heystek is investment strategist at Brenthurst Wealth.

*Harry Oppenheimer: Gold, diamonds and dynasty. Author Michael Cardo. Jonathan Ball Publishers.