Investment portfolios positive despite volatile markets
Looking back over the last 12 months, we have seen many surprises on a global scale, including Brexit, Donald Trump winning the US presidential election and in South Africa, political and economic uncertainty have resulted in a challenging year for investors.
“The uncertainty, together with the recent Cabinet reshuffle, credit downgrades and poor economic growth rate, created negative sentiment among foreign investors and local businesses alike,” says Sean Samons, principal executive officer of the National Fund for Municipal Workers (NFMW).
“Recently, South Africa’s economy slipped into a technical recession as GDP declined 0.7% in the first quarter of 2017 (and 0.3% in the last quarter of 2016). This poses a serious challenge for our policymakers, who are wrestling with high unemployment and budgetary constraints.
“Economic growth in South Africa is desperately needed as the South African consumer is under severe pressure.”
Samons says that in June 2017 local equity markets fell sharply amid the uncertain business environment, with foreigners selling out of local markets.
The All Share index lost 3.5% in the month with all JSE sectors being similarly affected. The rand remains extremely volatile and appears to react quickly to any political news. For example, before the release of the mining charter and the public protector’s recent comments, the rand traded as high as R12.62 before quickly weakening to R13.08 after the reports.
Samons reports that given the backdrop of the market performance, the various NFMW investment portfolios delivered excellent returns when compared to the South African investment industry.
“We are proud to say that on a like-for-like basis (gross of fees) the NFMW Aggressive Growth portfolio is ranked fourth over a one-year period, third over a three-year period, and first over a five-year period.
“Although South Africa is currently in a weak economic environment, sentiment and policy changes can happen and [things can] improve quickly.
“In times like these it is always a good idea to remain focused on your long-term investment strategy and not make any decisions based on the short term,” concludes Samons.
South African employers should encourage employees to become financially literate
South Africa has one of the worst savings rates in the world, according to statistics released by the South African Reserve Bank, which found that the country’s savings rate is only 15.4% of GDP — far below the desired rate of 25%.
Businesses should be looking at how they can assist their employees with becoming financially literate, according to Lyndy van den Barselaar, ManpowerGroup South Africa’s managing director.
“South African employers should definitely integrate financial education and training into their employee relations strategies. This becomes even more prudent as the country has just moved into a recession,” says Van den Barselaar.
Statistics compiled by debt management firm Debt Rescue (2016) show that South African consumers owe the bulk of their monthly salaries to creditors. Only about 23% of South Africans have funds available at the end of the month, while the other 77% are left flat broke, with no hope of saving any money. More than 11 million of South Africa’s credit active consumers are described as over-indebted.
Individuals with a low degree of financial literacy tend to borrow more, accumulate less wealth, and pay more in fees related to financial products.
“Dealing with financial stress and worries about debt has been known to cause depression, anxiety and even lead to suicide in extreme cases. Employers should be taking this seriously, as employees are the most important assets to any business,” says Van den Barselaar.
She encourages businesses to build financial literacy education and training of some sort into their employee relations strategies.
Some of the methods by which organisations can provide education and training on financial literacy include voluntary classes, newsletters, emails, workbooks, online resources, courses, or even consultations by third parties such as an organisation or individual who operates within the financial services space.
“Not only will this bode well for the employer as their workforce will be financially literate and on the path to financial security and freedom, it will also bode well for each of the employees – and therefore for the economy at large,” explains Van den Barselaar.
By taking the lead in helping their employees learn to make better financial decisions, employers are playing a bigger role in building awareness around financial wellness, retirement, savings and investment planning.