Human psychology is a strange phenomenon and the world of investments is not immune. In fact the opposite is true, many financial advisory firms are now employing human behavioral finance specialists from the world of academia.
The South African investor is no different to his colleague’s in other parts of the world. Let’s take the exchange rate as a case on point. The graphic below is the ZAR/USD exchange rate for the last two years.
The mountain top peak in December 2015 and January 2016 was the debacle of South Africa having three different Minister’s of Finance over a three day period, or Nenegate as it has become known. There was another minor peak in mid 2016, caused by the Brexit vote shock, but by and large the ZAR currency has been on a strengthening trend since Nenegate.
When did most folk clamour for their tax consultants to get tax clearance certificates, and for their bankers and financial advisors to get money offshore? You guessed it, at or around the first quarter of 2016.
Now, with the ZAR at a relatively healthy 12-58 to the greenback, there is an alomost deathly silence and hardly any rush to get funds offshore.
This current currency scenario must be seen against the backdrop of no signifficant or fundamental change in the South African economy. The rating agencies have “kicked the can down the road”, but the degrade threat has not gone away. Our GDP growth was a dismal 0,5% for 2015, government debt is at an unhealthy 48% of GDP. In simple terms GDP (Gross Domestic Product) is the value of all goods and services produced by a country over any given time, it can be equated to the turnover or revenue number of a company.
GDP is often used to measure the size of a countries economy, and even there South Africa does not stack up well.
South Africa stands at 0,42%, refer top right hand side of the World Bank data chart. When the whole world is available, ready and waiting, why would one want to restrict one’s investment portfolio to the southern tip of Africa?
With the exchange now at a relatively healthy level and a range of blue chip investment opportunities available, investors should now be clamouring for tax clearance certificates and banging on the doors, or texting their trusted financial advsiors, with the rallying call – get me offshore now!