Magnus Heystek: Thank the ANC for your offshore nest-egg
Key topics
ANC’s mismanagement led to economic decline and emigration trends
Wealthy South Africans are relocating to the Western Cape in large numbers
Offshore investment allowances helped protect wealth and ease emigration urges
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 at 5:30am 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.
By Magnus Heystek
It doesn’t happen very often that the ANC receives praise from columnists such as me.
Indeed, much of what I have been writing and commentating on over the past 10 years or so has been harshly critical of the ruling party (and now only the dominant part in the Government of National Unity).
And it’s been easy to pick apart the ANC and its policies for more than a decade. In fact, it’s been an avalanche of catastrophic decisions and implementations which has left the economy and society gutted, destroyed, neglected and all-round in a much poorer and sadder state.
Poorer as in the gross domestic product per capita (the ultimate yardstick of whether a country is growing/prospering or declining) is now the same as in 2007.
Let that sink in: GDP per capita has not grown in 17 years.
And it shows. It shows unemployment at record levels, the country with the worst economic recovery rate since Covid as well as the country now branded by the International Monetary Fund (IMF) to be the most difficult to set up and run a business.
And did I mention that our ports, harbours, and railway lines are now considered to be the worst in the world.
At the same time, our major cities such as Johannesburg, Durban and Bloemfontein are slowly collapsing into a potholed, rat-invested sewerage dump. Even the ever denialist Cyril Ramaphosa was forced to admit that Joburg is a mere shadow of its former self, demanding that urgent steps need to be taken.
But again, as is his wont, he did not shine the torch where it needed to be shone: corruption, mismanagement, and theft within the inner machinations of the ANC-controlled city.
In all: the ANC’s mismanagement of the economy is now globally recognized and no spinning from the government will change that.
Demographic trends: south and out!
During this time there have been two major demographic trends, both which are still ongoing: one is the trend amongst wealthier South Africans moving to the only DA-controlled province in SA — the Western Cape — and the other is that more younger people and families are upping and leaving our shores for better pastures elsewhere.
I write this after spending a week attending the Biznews Investment Conference in glorious Hermanus, the town with eye-watering property prices, and overall a fantastic place to live.
But it is a bubble: no town in SA can be so clean, so orderly and so … almost European, considering the hordes or Dutch, German, Scandinavian and British tourists my wife and I saw wherever we went.
But it’s not only Hermanus. The golden triangle as far as property is concerned, is Stellenbosch, Franschhoek and Paarl, which is equally booming with new developments, and likewise soaring property prices, both commercial and residential.
I was fortunate to get involved in the Val de Vie-property market in the Paarl more than 10 years ago and have seen property values double in less than 5 years. There seems to be no end to the property boom in this town at the foothills of the Afrikaner language monument, and strangely enough, the town where the Great Trek started more than 180 years ago.
Now it is called the Great Trek South.
During my presentation at the Biznews conference I asked for a show of hands to indicate how many people in the 300-strong audience had made the move from the North to the South. Almost 25-30% raised their hands.
Then I conducted a second survey: I asked the audience how many have offshore investments. Almost 100% put up their hands.
Now this is not the answer our local asset managers want to see, but it reflects the massive demand for offshore assets over the last ten years.
Despite the local asset managers beating the “local is lekker” and “JSE is cheap” drum, investors have been moving their money offshore in great numbers. I don’t know how much money has left SA via the SIA and AIT (approved international transfer), but the late Mike Schüssler suggested it was more than R1,3 trillion.
That also partially explains the sideways movement of assets under management for most large SA asset managers. Coronation, for instance, has seen the rand value of its AUM over the past 10 years virtually unchanged at around R620bn. But in dollar terms this AUM has declined by 38%!
I would suggest that this trend is prevalent at all the large local asset managers. Unless they could offer offshore assets to their clients, that money has gone to global giants such as Vanguard, BlackRock, Franklin Templeton and the Fundsmiths of the world.
That’s also why all the major financial players have somehow tied up with JP Morgan, Goldman Sachs, Threadneedle and others.
Who do we thank?
And that’s when it occurred to me: Who can we thank for this offshore allowance? None other than the ANC, who 10 years ago in the 2015 Budget, slipped in unannounced the increase in the Single Discretionary Allowance (SDA) to R1m and R10m investment allowance into life. Totally unannounced and with no prior discussion with banks and asset managers.
This ability to move money offshore has, in my view, prevented many South Africans from emigrating. I know of local investors who have used the offshore allowance to send out 100% of their liquid assets, remaining in SA with perhaps their family home, a car or two and some furniture.
In doing so they have (a) reduced the urgency to emigrate and (b) they have protected the global purchasing power of their investments.
It’s very difficult for older people, with established roots in their communities, to up and leave. Far better to send your money out (which is now legal) and remain in sunny SA, or better still, move to the Western Cape, which many people have done and are doing.
Several people came up to me afterwards to admit that the fact that they have most, or all, of their assets offshore means the urgency to emigrate has reduced somewhat.
Making use of the R1m investment allowance annually has also been a smart move, with global funds and indices handsomely beating the JSE over each period since, measured from 1 April of each year.
In some years outperformance has been as much as 40% over the nine periods measured in my calculations.
The only period where local has outperformed offshore markets, has been over the last year, mainly due to the sharp downward correction in global markets and the strengthening of the rand from R19,40 to R18,20 currently.
I would go further to suggest that the SDA has now become the foremost discretionary investment for most people with disposable income to invest: not RAs, local money market or anything else. Get your money offshore easily and without hassles and beyond the reach of the ANC!
*Magnus Heystek is a director and investment strategist at Brenthurst Wealth. Follow him at @MagnusHeystek on X.