31 March 2021 | www.moneymarketing.co.za
@MMMagza
@MoneyMarketingSA
First for the professional personal financial adviser
WHAT’S INSIDE
YOUR MARCH ISSUE ‘STORIES DRIVE FINANCIAL BEHAVIOUR’ Getting clarity about the stories your clients believe about money can be challenging
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Offshore SUPPLEMENT MoneyMarketing’s guide to investing offshore in volatile times
Page 17 THE IMPACT OF COVID-19 VACCINES ON YOUR CLIENTS’ LONG-TERM INSURANCE Many people are sceptical about receiving the COVID-19 vaccine
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Is SA’s economy on life support – or has it been thrown a lifeline? BY MOHAMMED NALLA CFA, Founder: Magic Markets and Moe-Knows.com
B
udgets are usually unpleasant things. Their sole purpose is to reconcile unlimited needs and wants with limited resources. I have always been amazed at the fanfare and focus that the national budget tends to receive in South Africa relative to other countries, although given the parlous state of the sovereign’s finances in the country, it is probably imperative that every citizen be fully engaged when it comes to considering and mapping SA’s fiscal future. That said, the deluge of media coverage around budget time often fills the discourse with more noise. It is often important to step back from the noise in order to ‘see the wood for the trees’. This piece is not about the budget - much ink has been spilt on the ‘data’. Instead, I’ll focus on what it means for longer-term investment potential in SA, as well as key considerations of investors considering both onshore and offshore assets. I have been following, analysing, and dissecting the budget for most of Mohammed my career, starting Nalla
Annualised Performance Laurium Flexible Prescient Fund: 1 February 2013 to 31 Jauary 2021
during the tenure of Trevor Manuel. For the last several years, my expectations around the budget have been generally dismal. Consequently, the bar was set low. For context, Minister Tito Mboweni’s 2021 budget managed to exceed what I believe were reasonably modest expectations. The gauntlet has been set down. Much rides on the Minister’s ability to rein in the unruly public sector wage bill, and this will very much be the ‘make or break’ moment. Minister Mboweni may balk at the thought, but dare I say that if he succeeds, he may be remembered in the same vein as Thatcher who managed to reign in the labour movement in the UK during the 1980s to steady the UK’s fiscal ship. This is an odd analogy to make for a man who served as the Minister of Labour in the Mandela era, but the reality is stark. The choice that stares us in the face is one of fiscal stability and increased capacity for service delivery vs fiscal and economic ruin. Should he succeed, the narrative will shift from one of continuing to tread water, to one of constructive rebuilding of an economy that literally stares over
the precipice. There is a deep need to reignite growth in the South African economy. After negative per capita GDP growth for the last seven years, it is high time. ‘Operation Vulindlela’ is the name of an initiative driven by the Presidency and National Treasury to push ahead on structural reform aimed at getting the inter-ministerial cogs moving. It needs to migrate from being just a buzz word (of which many people still aren’t aware), to the sharp end of the sword in driving the initiatives outlined in the both the State of the Nation Address and Budget. Investment (both by the public and private sectors) remains anaemic. At a collective 18% of GDP, it is a long way off the 30% + levels seen in Asia, which spurred the growth of the Asian tigers and continues to spur the growth of the economic behemoth that is China. In fact, SA’s premise of higher growth during the Medium-Term Expenditure Framework relies heavily on gross fixed capital formation; and perhaps as a signal of intent, corporate income tax is set to be decreased from 2022 onward. Despite this, when comparing SA to other emerging markets or even developed market peers, the growth rates expected over the medium term are uninspiring. After a post-pandemic bump of 3.3% expected this year (off a low base), growth is expected to average a measly sub 2% over the following two years. This compares unfavourably to the average of over 5.5% in the BRICS countries and even relative to the 3.8% average in the US. Continued on page 3
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We know Investments T +27 11 263 7700 E laurium@lauriumcapital.com www.lauriumcapital.com Laurium is an authorised financial services provider (FSP No 34142). Collective Investment Schemes in securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CIS’s are traded at the ruling price and can engage in scrip lending and borrowing. A schedule of fees, charges and maximum commissions is available on request from the Manager. There is no guarantee in respect of capital or returns in a portfolio. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. Performance has been calculated on the A1 class using net NAV to NAV numbers with income reinvested. Prescient Management Company (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002). For any additional information such as fund prices, fees, brochures, minimum disclosure documents and application forms please go to www.lauriumcapital.com. Graph source: Morningstar
