ALLAN GRAY: JUST DO IT
There is increasing frustration among SA’s pension fund managers at the country’s failure to relaunch after Ramaphosa took the reins in 2018
It’s clear that SA’s smartest asset managers — the people who manage your pension — are frustrated that the sun has failed to come up on President Cyril Ramaphosa’s “new dawn”. This week, Allan Gray held its annual investment summit, and there was a palpable air of disappointment at the country’s failure to relaunch after Ramaphosa took the reins in 2018.
Duncan Artus, chief investment officer at Allan
Gray, put it best when he was asked how the private sector could do more to engage with the government.
“The real thing that people are looking for is action. Whenever you listen to a political speech, 99% of it is rubbish. It’s just blah, blah, blah and no-one ever does anything … people want to see action — not policies, not investment conferences — they want to see what are you doing, because that’s tangible,” he said.
Artus had earlier alluded to the rising tide of political risk, in SA and globally, that is a byproduct of the cheap money flowing throughout the world. This has fuelled inequality since it has made those with assets richer, and those without poorer, leading politicians to increasingly see redistribution as a remedy.
“In SA, we already have a very redistributive economy. But I think [this trend] gives the government cover [to] say: ‘Oh well, we’re doing it in America, we’re doing it in Europe: let’s introduce a basic income grant, let’s introduce further social grants,’” he said.
So how do investors protect themselves against this? In SA, Artus said, you need to be smarter about how you allocate money. For example, you could buy shares such as clothing discounter Pep, which is likely to record higher sales than its rivals, as a greater number of its customers receive welfare benefits.
Artus wasn’t alone, though, in his disillusion with SA’s government. Stanlib’s Marius Oberholzer said that while there has been some progress — such as SAA being sold to a private consortium — there needs to be far more evidence of economic reform to shift the narrative.
“Ramaphosa asked the business sector to tell a good story a couple of years ago — and he hasn’t delivered. And so, ultimately, CEOs have got to look after their capital,” said Oberholzer.
You can’t really blame them. As Northam Platinum’s Paul Dunne told the FM a few weeks ago, the most critical job of a CEO is to attract capital, and decide how to allocate it. Get this wrong, and you’ve failed.
It would seem many others think as he does, because there has been vanishingly little investment in local industry in recent months — which speaks as much to the crisis of confidence as it does to the short-term uncertainty over Covid.
Still, even as the money managers sketched a bleak picture of SA and its parlous growth, they also spoke of how many local shares are bargains for investors — including the banks and platinum companies.
Malungelo Zilimbola, CEO of Mazi Asset Management, pointed out how, when Covid hit, many people shifted their assets into cash — which means they missed one of the biggest equity recoveries of a lifetime. “Stay invested in equities,” he said. “If you look at the recovery we’ve had since March last year, we’ve had a 40% recovery in our stock market. Those who are not invested, and sitting in money market [funds], have missed out on huge returns. For a retirement fund, that is really atrocious.”
Delphine Govender, the founder of Perpetua Investment Managers, also stressed how many discounted stocks there are on the JSE. And she argued that asset managers and big business ought to take action themselves, rather than wait for a sluggish government to create a conducive environment.
“We’ve been waiting for this action, and we’ve become stuck,” she said.
Govender pointed to an op-ed in The New York Times on July 28, titled “South Africa is falling apart”, which spoke of the deeper economic and social fissures in this society. Not least of which, she said, is the fact that just 3,500 people in SA own more than 32million others do.
“We are at a crossroads: an economic, social, political, environmental and technological crossroads.” From here, she said, SA could either create an inclusive economy which enables small business and entrepreneurs — or it could go the other way, fuelling more anger and inequality.
At this point, both options are still possible. But if there is any constituency able to lean on policymakers to shift in the right direction it is the asset managers, who together manage R6.3-trillion in the country’s pensions and savings.
‘Whenever you listen to a political speech, it’s just blah, blah, blah and no-one ever does anything’