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Your financial portfolio in the midst of the recessionIn the midst of the financial crisis, investment in Africa continues, most of it deriving from trade relationships with other BRIC countries (Brazil, Russia, India and China). What are the opportunities and how best can current investors take advantage of the current situation?
As Standard Bank hosts the Africa Forum, assessing how local and international investors can make their mark in South Africa and across the continent, Opportunity set out to find out where Africa’s future returns are positioned.
Telecommunications and property consistently emerged as two top choices.
“USSD (Unstructured Supplementary Service Data) development is well suited to African market segment; it’s a mass market in which there is significant opportunity,” says Chris Rolfe, chief executive officer of Mobilitrix, a firm that has committed itself to investing in the infrastructure required to serve the continent’s broad mobile client market.
“We will continue to invest. It is such a low-cost environment and with a simple format,” he adds.
It has been said that real estate never fails, and word from some in the industry is that opportunity still abounds. “The demand for property is growing, not only with savvy overseas investors but also many local investors who are once again starting to accumulate portfolios of South African property,” according to Lew Geffen.
There are “high-end properties for much less than you pay in Sydney, New York, Malibu,” he explained to Realestateweb.co.za, adding that “the rand may have strengthened and overseas property prices may have fallen, but South African real estate is still the best option for upmarket investors”.
As reported by Realestateweb.co.za, research also shows that for the R1.3 million average cost of a tiny studio flat in central London – a favourite city for South African-based investors – one could acquire an ultramodern loft apartment in central Cape Town, or a three-bedroom apartment right on the beachfront in trendy Sea Point.
Bargains at auctions are useful for property buyers. In Australia, well over 80% of residential exchanges occurs via auctions as opposed to show houses, and South Africans would do well to consider this medium of property transfer in addition to the mainstream practice of using an estate agent.
ClareMart Auction Group has hammered away a R250-million portfolio of investment properties at its monthly multiple commercial in October this year.
“The world works in systems – for anything to work, that system must feed into another system,” says client relations manager of IsimoSethu Investments, Yongama Skweyiya, who advises that this basic axiom should serve as a useful guiding statement to investing in South Africa.
Skweyiya advises that each investor develop a solid strategy that needs to be adhered to quite religiously in gaining assets which are complementary to each other. “Until I can fully understand, in very simple terms, how a system, industry, market or company works, I refuse to embark on it.”
According to his projections, South Africa, in the next few years, will see a substantial climb and demand for commercial property due to increased entrepreneurial opportunities that will be unleashed due to the development of our telecoms and consequently our information technology (IT) industries.
Skweyiya’s observations further indicate that more IT companies will arise as newer and younger entrepreneurs break into the market with fresh innovations.
His views on prospects in property are equally optimistic: “The current trend, where interest rates are continually declining, will lead to a relative rise in the demand for residential property. Though a substantial oversupply currently exist, those investors with the inventory will gain most of the losses attained.”
However, a new dimension to the property market is on the rise. As South Africa is currently producing more graduates now than it has ever in the past, regardless of its low numbers comparative to other countries, more young people with great ambitions are entering the working world. Some with loans to pay back and others with small and young families; all require relatively one thing: low-cost accommodation with the dream of home ownership at the forefront of most of these individuals.
For Skweyiya, it translates into an eye for urban residential developments, particularly one-, two- or three-bedroom units. “This will be a new growth platform and investors need to take advantage of that now.”
Shares remain a good option, particularly as volatility is easing, according to IsimoSethu Investments research. “The recent publication of the top 100 companies in the country has been good news for many investors in companies such as Basil Read. The strengthening of the spot price of gold and platinum respectively has been a good sign for South Africa’s top four export products.”
This has, however, been downplayed by the weakening of the US dollar and consequent strengthening of the rand.
“Small cap stocks have in general been doing quite well, some of our banking stocks are good for the long run.
“Our retail stocks have not fared as well as expected, but they still have great value. Shoprite is growing from strength to strength – and Pick n Pay is about to embark on a new dawn with the chairperson and patriarch [Raymond Ackerman] stepping down,” Skweyiya observes.
“Steel exports have been declining systematically over the year, leading to major decline in these shares. The mining industry as a whole has not been performing as investors have come to expect, want and demand.”
However, our cellular companies are faring well: “Vodacom shares are still finding their footing on the JSE and the rapid expansion of MTN is showing great aggression and future growth for this stock. The same can also be said about the long-term benefits of Naspers shares,” says Skweyiya.
As head of a successful investments firm, Skweyiya is part of the fabric of the country’s new generation of innovative financial geniuses who have no doubt that the country of their birth offers the best opportunities in a globalised world.
“South Africa, more than most countries, is alive with overwhelming possibilities. I believe in investing not just money but my time, effort, sweat and tears in making this democracy work. Not many other countries offer such opportunities – we just need to get our systems in order and we will reap the benefits,” he concludes.
Garreth Bloor
