SA’s new government of national unity (GNU) has made room for optimism in the investor market. That was the message to some of Port Alfred’s top business leaders who attended an investment seminar spearheaded by Edge Financial Group at the MyPond Hotel boardroom on Tuesday. The Edge Financial Group director is Ed Gutsche.
The seminar brought together the group’s clients and other interested parties to listen to investment experts present local and global scenarios that are impacting equity markets. Director of wealth management business 22 Capital, Peter Clainos, who manages one of Edge Financial Group’s equity fund portfolios, said global perceptions of SA were an important driver of local markets. Clainos’s talk focused on the topic: “Why we are excited about SA”. Clainos said the GNU was made up of 11 parties across the political spectrum.
“This is a good thing,” he said. “You’ve got more collaboration; you’ve got accountability and there’s a fostering of trust that’s coming in to the whole government; a message that people need to act and they need to show what they are doing.” He said the African Growth and Opportunity Act (that provides eligible sub-Saharan African countries with duty-free access to the US market) needed to be retained. “It contributes R40-R50bn per annum to the economy—we can’t afford to lose it.”
Clainos said representatives from both sides met this week “and it’s [talks] on the positive end — so we are not looking to lose that status. It’s something positive towards the country,” he said. He said investor optimism was a key element towards pushing to higher levels of growth in the country. “The global perception is that ‘you have a positive government here and, we believe with the new government they will take care of the key components, electricity, rail and ports, and water security. The government realises the potential of those four elements and we are positive that it will address those issues.”
Clainos said since 2016,it was estimated that R850bn had left SA as foreigners “went off-shore”. To emphasise out the positivity around local markets he said: “We are slowly starting to see some of it trickling back into the market and imagine what happens if this starts flowing back.” He explained why SA, as an emerging market, was attractive for investors . “SA is exceptionally undervalued. It is trading at 17 times the earnings and I can’t say the same for overseas value,” he said. Quoting the SA Reserve Bank, he said load-shedding, had cost SA 2% of GDP last year. “But business and households have adapted as South Africans are resilient. “Last year there were 335 days of load-shedding.“ This year there is so far 125 consecutive days of no load-shedding. It’s a big difference,” Clainos said.
“As one example of a retailer listed on the JSE, Shoprite spent R1,3bn on just running diesel generators to keep their stores going,” Clainos said. “And all of that money now [with no loadshedding] goes back in to the economy and circulates. So there is going to be a difference or improvement on the bottom line numbers on their set of financials. Referring to the beleaguered Transnet railway operation, he said that the government had stepped in, in a bid to curb losses. “Last year, government set up a national logistics crisis committee and appointed a new board to Transnet, led by Michelle Phillips. And an inaugural board was appointed to the Transnet ports authority last year and slowly we saw some results in February.
“We saw coal exports were up 20% this year over last year. In February Transnet recorded its highest volume of iron ore export. There is light at the end of the tunnel,” he said. “The potential is massive when this railway system gets sorted out. The lights must stay on, we must have an active railway system, ports must be functioning and there must be water security.
Clainos reminded investors to remain positive and optimistic in the present market and the GNU stood out like a beacon of hope in terms of growing the economy. “It bodes well. We’ve already seen some positions in government where actions have been taken. “The key point is that SA is a prime market because it’s so cheap in terms of its valuation of its assets and that alone is an attraction. “If you’ve got government stability, it’s now going to attract international investors back to SA.
“People have got to believe in SA and I think what you are seeing is that people that are here are looking for positive outcomes. “I don’t think everything’s been
positive internationally and there is more uncertainty. “If you look at the world right now, SA looks more rosy and positive than some of the rest of the world looks — something we haven’t said in a long time. “We can see there is a change in people’s sentiment and attitude and that is positive,” Clainos said.
Gutsche said his company believed that economic conditions were definitely swinging more in SA’s favour. “We believe with potential for inflation to drop and with far better energy supply and better political climate that there is huge scope over the next couple of years not only for the SA economy to do well, but also shares companies that are listed on the market.
“Edge has brought a lot more exposure to SA Inc, as we believe that the other
decisions that we are continuously putting in to place, are all starting to have a positive effect on our clients’ returns and that is why over year- to- date as well as two years, our equity fund is currently outperforming the sector average,” he said.
• This article was first published in Talk of the Town, August 1, 2024. The newspaper serving the communities of Ndlambe and the Sunshine Coast, with a weekly wrap of Makhanda news, is available at stores from early on Thursdays.
