Where is the real growth?
“South Africa is in shock as first quarter GDP shrinks by 3.2%.” That was the news headlines last week. Not a great start to 2019! We had all hoped for an upturn in the economy this year given the dismal performance of the JSE last year as the JSE saw its worst performance since 1931 last year.
Consumer confidence is the one thing economists will agree that drives economic growth. Unfortunately, the South African consumer confidence is down. I think it is no wonder given the constant bombardment of bad news such from corporate scandals (Steenhof last year and Tongaat Hulett last week) to Government fraud. And then on a personal front they are experiencing a decrease in their buying power as well as more and more friends and family immigrating. Consumer confidence is down!
Once the darling of emerging economies, this is no longer the case for South Africa. Many emerging markets saw growth pick up in 2018 after low commodity prices and low economic demand previously. Unfortunately South Africa did not benefit from this growth but rather saw a stagnation in growth and a decline in foreign investment. As an emerging economy we need to attract foreign investment to stimulate growth and unless we can become attractive to foreigners, we may not see much significant growth in the foreseeable future.
So where does the average South African investor go to get real growth? Where would one get real long term growth? Fortunately South Africa is an open economy and we can invest anywhere in the world. The JSE is no longer the investment universe but the world is. We can move money in or out of South Africa with relative ease, thanks to our world class anti-money laundering laws (FICA, POCA and POCDATARA), which makes us attractive to foreign investment companies. These laws have opened the doors for us to invest offshore because of the transparency required from investors. This is great news for South African investors.
For so long we have been a closed economy and many of us still think this way. Somehow it seems easier and safer to invest locally than offshore. But if we only invest locally, we restrict ourselves to only 1% of the investment universe, missing out on the other 99%. So how easy is it to access the other 99% i.e. invest offshore? Fortunately it is easy and investors can either invest directly, using their offshore allowance or through asset swap.
Therefore, investing offshore is a very real and viable option, providing you the opportunity to leverage the global market, ultimately diversifying your wealth portfolio.
Sigrid Madonko
Certified Financial Planner ®
Professional Director at Quintus Wealth
info@quintuswealth.co.za