In August 2020 we suggested that diversifying your investments by increasing the offshore component, was a sensible investment and diversification strategy.

 

We commented “Our finance minister, Tito Mboweni understands what needs to be done and business has expressed its willingness to support this approach. However, we wonder whether the ANC and Trade Unions will have the will to implement the changes needed.”

 

We foresaw South Africa facing several headwinds in restoring the economy from the base of an already weakened state, thanks to ten years of state capture and corruption, to a sustainable future. What has happened since?

 

  • We have now been through a second and third COVID wave, which has further damaged large parts of our economy, particularly the tourism sector which was an engine for growth and job creation.
  • Our investment rating has since been downgraded further by ratings agencies which makes the task of recovering to investment grade, and the cheaper borrowing costs that go with that status, more arduous.
  • The civil unrest and widespread looting of the past weeks has damaged many businesses, as well as the image of South Africa as an investment and tourism destination. It will take time for this confidence and momentum to be restored.

 

The events of the past weeks have overshadowed the positive steps which were being taken, among others, opening up private electricity generation, allowing the private sector to participate in improving the performance of our ports and the progress in pursuing those who looted state funds through corruption.

 

Over the short term, these events have seemingly not had much of an impact on SA markets, but with this investment landscape the country will continue to struggle, and we stand by our view that it would be prudent to retain a sizeable offshore exposure.

 

 

Over the short term, these events have seemingly not had much of an impact on SA

 

While this does not mean that offshore markets will necessarily do better, many of them do not have the same challenges ahead and so offer useful diversification. The currency fluctuation also adds another layer of potential volatility, so a well thought out offshore strategy is vital.

 

If you would like to review your offshore position, please contact us for assistance.