Capitalising on hard times

Discovery, the SA insurer starting its own bank, will continue to invest in businesses in its main market even as SA’s economy grapples with a recession.

Chief executive Adrian Gore said yesterday: “I am a great believer that opportunities are not in good times. They are in difficult times. We remain convinced these are times to invest and build so that when things come up out of the trough you are in a very strong position.”

The CEO’s comments come after data released on Tuesday showed the economy unexpectedly shrank for the second consecutive quarter in the three months through June.

President Cyril Ramaphosa is trying to restore investor confidence, battered by almost nine years of misrule by Jacob Zuma, amid an escalating global trade war that’s soured sentiment towards emerging markets.

The company may invest R10 billion in SA, Gore said, without giving a time frame.

Discovery invested 7% of its earnings in the year through June in new initiatives at its various units, including the bank it plans to begin by the end of the year and a commercial insurance business.

On Tuesday it reported a 16% increase in adjusted earnings to R5.4 billion.

“I’ve seen what a successful business can do for job creation, to investment,” he said. “We’ve created directly probably 5 000 jobs in the last five years and probably indirectly from that multiples of jobs.

“Opportunities are under-priced in bad times, that’s for sure, and that’s why we are building,” Gore said. “I remain optimistic that the long term is sound and that’s why we’re investing.”

‘Need leadership’

Ramaphosa is also having to contend with an official unemployment rate of 27.2%, near a 15year high, and a currency that has weakened 20% against the dollar this year.

While the president has made progress in a campaign to attract $100 billion in new investment to bolster growth, his plans have been undermined by a decision by the ANC to amend the constitution to make it easier for land to be expropriated without compensation to help transfer more ownership to black farmers two decades after the end of apartheid.

“We need leadership from business and government and civil society to give people hope that these things [are going] to be dealt with properly and we can get through them,” Gore said. “What we do need is leadership with vision, a bit of patience. Give our president time.” –Bloomberg