The true financial cost of hurricane Jacob | Fin24
 
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The true financial cost of hurricane Jacob

May 29 2019 15:12
Thought Leadership - By Brenthurst Wealth
Brenthurst Management

Jacob Zuma

At least the citizens of ancient Rome only had to endure listening to emperor Nero’s fiddle for about 7 days while their city was burning. South Africans on the other hand have had to endure the sacking of a country, economically speaking, for almost ten years while former president Jacob Zuma graced our political stage, not playing a delicate instrument, but prancing around calling for someone to bring his machine gun.

And after all the destruction, the carnage and pillaging he has the audacity to be quoted on Times Live as follows:

“I remain proud of much of what we and the country achieved over the past decade. Could we have done more? Yes. Could it have been better? Yes. Was it a wasted decade? No.”

Against almost ALL financial metrics the country under Zuma’s ANC experienced a dramatic decline. The damage, in some instances, is irreversible. In most others, it will take a stupendous effort by government and private sector to reverse the damage to the vital organs of SA Inc.

As long-standing Sunday Times columnist Barney Mthombothi wrote on Sunday: “He wreaked so much havoc during his nine-year reign it doesn’t bear thinking about”.

Yet an objective contemplation is necessary to truly comprehend the extent of the damage done by Hurricane Jacob, the one-man wrecking ball.

Take your pick of vital signs: economic growth, foreign investment, unemployment, the currency, property values, government debt, budget deficit, performance of the JSE, retirement fund returns – they all show symptoms of a slow-moving financial tsunami gathering speed and spreading to all corners of our beautiful country.

Over the course of the past four years or so I have often dared to venture outside of the warm-fuzzy circle of sunshine financial journalism. For my sins I have been labelled as negative, cynical, ill-informed and the best of all: a financial pornographer by a colleague in the investment world.

My columns on other websites started to appear with a health warning: “The views in this article does not represent the views of XYZ…”. The small grouping of economists and financial commentators who have, from time to time, raised warnings about our economic decline, are either self-employed or working for small asset management companies.

Key Variables

Let’s have a look at some of the key economic variables over the period when Zuma’s ANC was in power:

  • The unemployment rate increased from 22.5% for 2008 to 27.1% at the end of 2018. By the third quarter of last year the total number of unemployed people stood at 1.6 million.
  • Total Public Debt as a percentage of nominal GDP ballooned from a low point of 26.5% in 2008 to exactly double that (53%) towards the end of 2017. Fin24 reported this scary number in October last year: Government's gross loan debt is expected to accelerate to 58.5% of gross domestic product (GDP) in 2021/22, up from 55.8% - an increase largely attributed to currency fluctuation,
  • Revenue collections are under considerable pressure. In December 2018 company income taxes were 6,6% lower than a year ago.
  • A report by Power Optimal, released in 2018, reveals that over a period of 10 years, Eskom’s electricity prices have increased by about 356%, whilst inflation over the same period was 74%.
  • Per capita GDP declined from 8066 USD per annum in 2011 to 6268 USD per annum in 2017.
  • SA was the only OECD country in a recession during 2018.
  • The SA economy is currently in its lowest growth trajectory since 1945.
  • Residential property market has been in a 10-year bear market. Prices have declined by 22% in real terms over this time. In the 3rd quarter of 2018 new mortgage applications dropped by 16%.
  • Average retirement funds have now not beaten inflation over one, three, five and soon seven years.
  • Annual average returns on the Johannesburg Stock Exchange have been last or second to last when compared to the S&P 500, MSCI World Index,  MSCI Japan and MSCI Europe. Against is peer group –the MSCI Emerging Market—it has been lagging by almost 2% per annum since December 2015. Wonder what happened in December 2015?
  • More than R400 bn has left the SA equity and bond market over the past three years.

So, contemplate we must, because most South Africans have been engulfed by the financial tsunami unleashed by the Zuma years. Poverty is increasingly visible on every street-corner, in declining car and retail sales, in empty rugby and soccer stadiums, in dwindling golf and bowling clubs. The list is almost endless.

It is against this background that it is more important than ever to seek professional advice for your personal financial plan. Although President Ramaphosa has started various initiatives in an attempt to turn things around, the state of affairs is such that will take a very long time to recover from Hurricane Zuma.

It is likely going to be a long, slow process to turn the SA economy around. To learn more about the scenarios and what investors should consider, click here to book for a series of seminars hosted by Brenthurst Wealth in association with Rapport and Momentum. Speakers Magnus Heystek, economist Mike Schussler and Investment Director at Momentum Wealth International, Glyn Owen, will share their insights.

Note that seminars will be presented mostly in Afrikaans.

Magnus Heystek can be contacted at magnus@heystek.co.za.

This post and content is written, sponsored and provided by Brenthurst Wealth Management. 

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