Proudly South African investment in domestic equities is a paying proposition by a huge margin. The trouble is, not enough South Africans think so and consistently lose out — never more so than in the past three years.
Figures from Stanlib, the country’s largest unit-trust marketer, demonstrate the scale of the equity opportunity, and how foreigners have been quick to seize it at the expense of less confident locals.
In the first eight weeks of 2007 alone, foreigners accumulated a net R20-billion in South African shares, while in the three years to the end of 2006, foreign buyers acquired R155-million in JSE stock.
Over this period — a strong equity bull run despite the 18% market dip in June last year — foreigners saw continued value in the JSE and used short-term corrections as buying opportunities.
Paul Hansen, Stanlib’s director of retail investing, commented: “It has to be a concern that, in the last three years and two months, our own people have tossed away R175-billion in JSE shares, willingly selling them to foreigners in the middle of one of our great bull markets and during one of our best periods of economic growth.
“In effect, local equity investors have been selling South Africa short at a time when there is no justification for it. Recent history shows that a strategy of buy and hold by proudly South African investors would have made much more sense.”
Total returns on the JSE all-share index, including dividends, are up 281% since April 2003.
Hansen believes South Africans fail to spot positives because they are too close to day-by-day negatives.
He explained: “Take a situation like regular power failures. For a South African, this is proof of shortcomings by the authorities and poor planning. It’s a major irritant.
“For a foreigner, the power failures confirm that the economy is growing faster than even the most optimistic national planners expected. The fact that the country’s power grid can’t keep up with huge increases in demand is a sign of success; that our economy is going like a train and that confident consumers are pumping new-found wealth into household appliances and new homes.
“The foreigners see indicators like this and draw positive conclusions. We see the same indicators but fail to spot the silver lining.”
Foreign buying tends to be spread across various sectors and is not linked solely to the government’s infrastructure spending and 2010 initiatives. Retail sectors, banks and consumer goods have also benefited from offshore interest.
“Black entrants to the South African middle class grew by 421 000, or 30%, in 2005,” Hansen noted. “This is part of the big, positive story that is currently unfolding in this country and one of the reasons why foreigners have bought billions in equity in South Africa Incorporated.
“A broader perspective pays off. Perhaps it’s time we South Africans took a step back and took a look at the big picture.”