South Africa’s collective investment schemes industry saw a net outflow of R10.4 billion, as under-pressure consumers turned to their unit trusts for financial relief.
According to statistics from the Association for Savings and Investment South Africa (Asisa), collective investment schemes attracted new investments of R567.3 billion in the second quarter this year. At the same time, existing investors sold investments worth R577.7 billion, resulting in net outflows of R10.4 billion.
However, R26.4 billion in reinvestments left the industry — which reported assets under management of R3.36 trillion at the end of the second quarter 2023 — with an effective net inflow of R16 billion.
Asisa’s senior policy advisor Sunette Mulder said that unit trust portfolios are designed to give investors easy access to their money. As a result, when consumers are under pressure, and their emergency savings have been depleted, they are likely to turn to their unit trust investments for financial relief.
“During the second quarter, the repo rate increased by 0.5% to a 14-year high of 8.25%, which placed an additional burden on consumers servicing debt like home loans and car repayments,” Mulder said.
“And, in May this year, another petrol price increase meant that South Africans were paying on average R1.50 a litre more than in the previous year. Given the overall increase in living costs in South Africa, we were not surprised to see investors tapping into their investments.”
With the repo rate held at 8.25% in July, the Reserve Bank is set to make its next move later this month. However, amid the prospect of price volatility on the horizon, many economists expect the Reserve Bank will opt for a “higher for longer” approach to interest rates, with the first cut coming sometime next year.
The bank will, to some extent, rely on the country’s August inflation reading, due on 20 September.
Though inflation fell faster than expected in July, the reading may lift slightly in August on base effects. According to Investec chief economist Annabel Bishop, inflation has probably already reached its low point for 2023, coming in at 4.7% year-on-year in July.
The next few months — August 2023 to February 2024 — will probably see inflation rise to, and then remain above, 5% year-on-year, before moving back towards 4.5% for the remainder of 2024, Bishop wrote in a research note earlier this week.
While still-high interest rates could continue to perturb strained investors, Thursday’s consumer confidence data suggests this cohort was less down in the dumps in the third quarter than they were the second.
According to an index compiled by FNB and the Bureau for Economic Research, consumer confidence lifted from -25 — the second-lowest reading on record — to -16 in the third quarter of 2023.
The rebound in consumer confidence was helped by a remarkable lift in the confidence levels of high-income households (earning more than R20 000 a month), after an outsize decline during the first half of 2023, according to the press release accompanying the index.
High-income confidence, according to the release, fell to an all-time low of -40 in the second quarter of 2023, but rebounded to -17 in the third quarter.