Forecasting the currency to weaken another 20% in the coming year, it’s fascinating watching those outside SA come out of the woodwork to ask for advice on investing in property, wine or art.
This kind of knee-jerk reaction to perceived “value” reinforces the view of SA as a dichotomy of dollar- or euro-anchored local assets and those that are rand-anchored. Property prices can diverge wildly between “foreigner” and local neighbourhoods, brand name icon art in shiny galleries and struggling artists producing grittier, interesting current social commentary; brand name wines and those in supermarkets.
While I haven’t bought a house yet in SA (despite the encouragement of many people in Pretoria – clearly they are thinking about how I can help fund the account deficit!) the desire is helpfully fuelled by glossy copies of South African House and Garden, where it is usefully always summer while it is grey and drizzly here in the UK.
In the art world I have a particular interest in younger artists like Senzo Shabangu (represented by the David Krut gallery) providing social commentary through print work, as well as topical pieces like the photographic work of Ilan Godfrey and his hauntingly moving picture of the array of crosses at the koppie in Marikana. Wine investment is difficult given the desire by so many South Africans to drink amazing wines far too young and so I collect mainly to drink.
But here the very real dichotomy of haves and have-nots comes to the surface and is going to affect each person participating in South African assets. The transactional nature of this foreigner value hunt stands at odds with the ability to give more back in SA more easily with such a weak currency and the shifts in policy we may well see. Foreigner land ownership, land reform, the Expropriations Bill, down the-line VAT hikes, luxury-items VAT rates, greater inheritance tax – are all going to be issues for not only locals but also foreigners.
South African politicians and policy makers often like to make the case that
foreign investors “owe” SA some sort ofcharity – “free money” or a get-out-of-jail-free card for SA’s problems. Such a view is dangerous when investors have so much choice globally – but the view is applicable when you get stuck in to onshore assets – particularly property.
Foreign value hunters, just in the same way as a company coming into SA, need to be cognisant of the political lie of the land, expectations and where policy is going. In this regard, that same advice I give companies is applicable – show that you get it, that you are a guest, and that you want to give something back locally and things will go more smoothly. SA has given me so much joy in the 10 years I’ve had the privilege to travel to your country (on top of the endless frustration at the slow pace of transformation and structural reform to boost jobs growth). Yes, the sun, the vistas, the amazing food, the great wine, the friends I’ve made...
Personally I give back through supporting two charities (not to mention all the free job creation-boosting policy advice I give to government). I’m a trustee of Breadline Africa, which provides infrastructure (containers) and services (training) to boost early childhood educational outcomes. We find and support entrepreneurial local women in townships around the country and provide them with well-structured early childhood development programmes and put well-stocked libraries in township schools.
It has opened my eyes to a wider range of everyday issues in SA through giving my time and skills, not just my money. IkamvaYouth is the other, larger, charity I sponsor. I’ve seen how such simple interventions as after-school homework clubs can boost the educational outcomes and university access for so many in the townships.
So let’s hope a weak currency can also be a force for good – charities that can raise more rand by looking offshore, foreign value hunters giving back in a bigger way, and government using a constrained fiscus, as a downgrade approaches, to tap into the philanthropic instincts and technical acumen of the private and charity sectors at home and abroad to improve service delivery.
April 2016
Foreign value hunters need to know the political lie of the land
Peter Attard Montalto, senior emerging markets economist at Nomura, on finding value in SA
There is a subtle irony in being in Wanted magazine at this time as a foreigner – and
speaks to the weakness of the rand. South African friends often quip that I could buy a house in Constantia for the price of my morning coffee in London and while we are not quite at that stage, the humour reflects the situation and uncertainty in SA and the risk premia driving the currency weaker.
Forecasting the currency to weaken another 20% in the coming year, it’s fascinating watching those outside SA come out of the woodwork to ask for advice on investing in property, wine or art.
This kind of knee-jerk reaction to perceived “value” reinforces the view of SA as a dichotomy of dollar- or euro-anchored local assets and those that are rand-anchored. Property prices can diverge wildly between “foreigner” and local neighbourhoods, brand name icon art in shiny galleries and struggling artists producing grittier, interesting current social commentary; brand name wines and those in supermarkets.
While I haven’t bought a house yet in SA (despite the encouragement of many people in Pretoria – clearly they are thinking about how I can help fund the account deficit!) the desire is helpfully fuelled by glossy copies of South African House and Garden, where it is usefully always summer while it is grey and drizzly here in the UK.
In the art world I have a particular interest in younger artists like Senzo Shabangu (represented by the David Krut gallery) providing social commentary through print work, as well as topical pieces like the photographic work of Ilan Godfrey and his hauntingly moving picture of the array of crosses at the koppie in Marikana. Wine investment is difficult given the desire by so many South Africans to drink amazing wines far too young and so I collect mainly to drink.
But here the very real dichotomy of haves and have-nots comes to the surface and is going to affect each person participating in South African assets. The transactional nature of this foreigner value hunt stands at odds with the ability to give more back in SA more easily with such a weak currency and the shifts in policy we may well see. Foreigner land ownership, land reform, the Expropriations Bill, down the-line VAT hikes, luxury-items VAT rates, greater inheritance tax – are all going to be issues for not only locals but also foreigners.
South African politicians and policy makers often like to make the case that
foreign investors “owe” SA some sort ofcharity – “free money” or a get-out-of-jail-free card for SA’s problems. Such a view is dangerous when investors have so much choice globally – but the view is applicable when you get stuck in to onshore assets – particularly property.
Foreign value hunters, just in the same way as a company coming into SA, need to be cognisant of the political lie of the land, expectations and where policy is going. In this regard, that same advice I give companies is applicable – show that you get it, that you are a guest, and that you want to give something back locally and things will go more smoothly. SA has given me so much joy in the 10 years I’ve had the privilege to travel to your country (on top of the endless frustration at the slow pace of transformation and structural reform to boost jobs growth). Yes, the sun, the vistas, the amazing food, the great wine, the friends I’ve made...
Personally I give back through supporting two charities (not to mention all the free job creation-boosting policy advice I give to government). I’m a trustee of Breadline Africa, which provides infrastructure (containers) and services (training) to boost early childhood educational outcomes. We find and support entrepreneurial local women in townships around the country and provide them with well-structured early childhood development programmes and put well-stocked libraries in township schools.
It has opened my eyes to a wider range of everyday issues in SA through giving my time and skills, not just my money. IkamvaYouth is the other, larger, charity I sponsor. I’ve seen how such simple interventions as after-school homework clubs can boost the educational outcomes and university access for so many in the townships.
So let’s hope a weak currency can also be a force for good – charities that can raise more rand by looking offshore, foreign value hunters giving back in a bigger way, and government using a constrained fiscus, as a downgrade approaches, to tap into the philanthropic instincts and technical acumen of the private and charity sectors at home and abroad to improve service delivery.
Attard Montalto writes here in his personal capacity