Sector could do more to tackle SA’s cruel ovarian lottery
Is the investment industry doing anything to change SA for the better? At the recent CFA South Africa Annual Investment Conference, Delphine Govender of Perpetua Investment Managers tackled this thorny subject, leaving one with the distinct impression that she believes the sector could be doing a lot more.
Govender provocatively emphasised the high degree of inequality in SA, using aerial imagery of the obvious divide between the well-off and those surviving in poverty. Two of her examples were Cape Town’s Hout Bay and its neighbouring squatter camp, and Johannesburg’s Sandton and Alexandra.
“Such inequality in South African society is not sustainable if prosperity and growth is our vision,” she said.
Her key message was that investment should be a means to an end rather than simply an end, especially in a developing economy. Its fundamental purpose should be to contribute to all through an increase in societal wealth and wellbeing. But she reprimanded the investment industry as struggling to meet these aspirations and said it needed to reconnect.
Govender brought up the sentiments of Pacific Investment Management Company founder Bill Gross, who bemoans that money is made from securitising things and shuffling paper rather than building things.
Compare this with decades ago when doctors, airline pilots and similar — people with “real” jobs — were the best paid in society. Philanthropist Gross says today’s society has the unmistakable odour of Mammon — being the greedy pursuit of gain and excessive materialism — and as an industry we have failed miserably in the efficient use of capital.
The investment business should have a broad vision of creating and increasing wealth within well-managed risk parameters, mobilising capital for society-wide job creation and wellbeing. Govender said our industry needed to resolve its constant battle between selfinterest and societal interest.
In my decades as an investment professional, I have too often seen highly “rewarded” people spend an inordinate amount of time worrying and stressing about their personal portfolios and potential bonuses, let alone the wealth of small clients, and certainly not the injustices of grinding poverty.
Govender is also concerned about the lack of development and transformation in the investment sector, and observed a remarkable lack of generosity in knowledge sharing.
How many senior analysts and fund managers are prepared to impart their depth of knowledge and experience to young and aspiring new entrants? I suspect this reluctance is due to misplaced fears and erroneous beliefs — that this is somehow a zero-sum game and if you share, you lose.
The dramatically skewed nature of the industry was also highlighted by Govender. Of 465 sell-side research analysts in SA, only 19% are female. Even more acute is racial underrepresentation. Only 14% of sellside analysts in the country are employment equity-designated. The industry persists as predominantly pale and male.
With reference to Warren Buffett’s “ovarian lottery” statement, Govender emphasised that we must ensure nobody gets left behind. Also in SA, the sector remains remarkably concentrated, with just a few investment houses controlling the bulk of financial assets.
The concept of inclusion is a difficult one, not only in SA, but globally. People gravitate to those who are like them and even subtle biases can lead to exclusion. We do ourselves no favours, as critical thinking comes from diversity. Govender set out several principles for those in this business: be excellent in all your work, no matter how menial; be a leader in your own right; get rid of the cancer of corruption; demonstrate ethical and honest behaviour; invest sustainably; be responsible in capital allocation; take the long view rather than basking in short-term success; be a generous role model; and recognising that you have a head start, improve the odds for others.