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SA shares don’t represent ‘great long-term value for investors’ – Wierzycka

The lack of creativity and “economic incompetence” displayed by South African policymakers is why South Africans looking to grow their investment portfolio and generate wealth should consider betting in largely in offshore markets, says investment heavyweight Magda Wierzycka.

Wierzycka, founder and executive chairman of JSE-listed Sygnia Limited, was speaking at Moneyweb’s Better Investor conference on Thursday.

Read: Sygnia shares hit a 52-week high on robust results

She advised investors aiming to generate wealth through long-term investments not only to maximize their offshore equity exposure, but also to ensure their portfolios are well-diversified.

“To be perfectly honest, I don’t see how South African equities represent much long-term value for investors as things stand. Unless of course by some miracle the ANC has a magic wand that will solve all the problems we have – which they don’t,” Wierzycka said.

Read: SA can only recover in a post-ANC world

If investors want to invest in South Africa, Wierzycka stressed caution, saying this should be kept to a minimum, citing the country’s low economic growth rate, high unemployment, rising inflation, growing infrastructure challenges and an economically incompetent government as some of the major deterrents. .

“In South Africa – given how high our bond yields are and how likely they are given the fiscal and economic situation – I would split my money between bonds and some South African equities,” she added. .

All is not hopeless

Speaking on a panel with Wierzycka at the conference, Hlelo Giyose, CIO of First Avenue Investment Management, took a more positive outlook regarding the investment environment in South Africa. He said that despite the challenges facing the country, the time to sacrifice South Africa as a viable investment destination has not yet arrived.

Disagreeing with Wierzycka’s sentiments on the strength of the country’s stock market environment, he made the case for South Africa, noting that the local market can still help build a portfolio positioned for generating wealth, despite all that may seem false.

“In large part, this has happened because South Africa has commodities that are driving global growth…

“South Africa has phenomenal management companies that really focus on capital allocation and not capacity building,” Giyose said.

“Contrary to [the] Chinese and Japanese management companies [that] building capacity and supercharging the economy with capital – with manufacturing capacity, with industrial capacity – we are deindustrializing because we are so focused on getting returns per dollar per rand invested. he added.

However, Giyose agreed with Wierzycka that South Africa poses a significant, largely political, risk. Given this, he recognizes the role that offshore investments continue to play in strengthening his portfolio.

“This is especially true given our sluggish economic growth rate.”

The latest gross domestic product (GDP) figure from Statistics South Africa for the first quarter of 2022 is slightly above economists’ expectations at 1.9%, mainly thanks to growth in the manufacturing and trade sectors, the catering and accommodation.

Despite this, most economists – in their annual growth forecasts – expect GDP to remain below 2% for 2022. This will be well below the overall 4.9% growth recorded in 2021, albeit at a level low after Covid-19 fallout in 2020. .

“South Africa is only around 0.8%, maybe less, of global GDP and it’s falling. South Africa’s financial assets are around 2% or less of global financial assets and that too is shrinking as other countries get bigger,” Giyose noted.

“So when you’re an investor looking to grow your investments or your capital or your savings globally, be very aware that there are greater opportunities in the world,” he said. he conceded.

To watch Moneyweb’s Better Investor conference sessions, click here.