July was a good month! Much needed after months of devastating market returns and daily doses of bad news! It may not be completely over yet –interest rates and the possible recession means there is still medicine that to be taken in the developed world, but it seems that there is light at the end of the tunnel.
We read and hear so much bad news in South Africa. Riots, loadshedding, rising crime rates and a government seemingly more invested in party politics than the interests of the people they serve. It is deeply frustrating when we know that given the right management of our country’s resources and the real interests of the people taken to heart, that we could thrive and uplift so many..
Two interviews that I have listened to recently made me sit up and think “it’s not all bad” in South Africa. It’s not all good either, but in the doom and gloom that we live in, these perspectives stood out as positive! It is not easy to see how things could transform and work out, but it is good to know that clever people are applying their minds to the problems that we face. Both interviews were conducted by Alec Hogg of Biznews and you can find the interviews here:
Frans Cronjé Interview | GG Alcock Interview
Dr Frans Cronje
Previous CEO of the Institute of Race Relations and currently the founder of a small analytical and policy think tank called the Social Research Foundation.
For many years, Dr Cronje was considered to be overly bearish on the outlook for South Africa. At the end of the Mbeki era when the economy was flying, jobs had been created, the deficit left by the Nationalist Party had turned into a surplus by the ANC, the analysis and polling done by the IRR suggested that the country may be heading into trouble. And although there was a lag, their analysis proved correct.
Using the same method of polling and analysis recently, Dr Cronje is now much more positive on the outlook for the country. There isn’t a switch that one can flick that makes things better, and one of the biggest and most unsettling issues is the future of the ANC. By his account, if you press ANC voters for what they think of the ANC they say that they are lazy, corrupt and useless – so why then would you carry on voting for the ANC?
There are few reasons:
- They were great, and voters remember that.
- The people hope that Cyril Ramaphosa will change
- They feel that the EFF is a radical and violent party, which will bring chaos and anarchy – so the EFF vote is capped.
- They concede that the DA may be more administratively competent and less corrupt, but they worry that they may be exclusionary; that they would exist on the periphery – even if it was a better periphery.
- The existing coalition governments squabble and fight, which is an indication that they don’t care about the people of the country.
So they stick with the devil they know. They are scared of change and scared to lose what they have gotten so far. Dr Cronje likens it to a divorce: you may concede that you are in a bad relationship, that you are doing badly out of the deal and logic dictates that youneed change, but it is easier said than done when we don’t trust the alternative. The ANC voter is not necessarily an ANC supporter.
For four hundred years a single group of people or party has had the ability to influence the future of this country – from the Dutch to the British, the National Party to the ANC. Perhaps our country is ready for change. Coalition governments work if they have the interests of the people they serve at heart. Successful countries are run by coalition governments – Germany, Israel and France are all run by groups of parties who have 20 – 30% of the vote.
The ANC seems to be disintegrating – they have run out of money, the country has no electricity, they have no international credibility (seemingly from the East and West). They have less and less public support and they have a poor calibre of people in the party. They know this – we have seen Thabo Mbeki stand up and say that they need to reform the ANC. The elective conference in December is going to be extremely important for the party. If Cyril Ramaphosa is removed as the head of the ANC it is likely that their support will fall to between 30 – 40% of the vote.
We could find that in 2024 we are forced into a broad coalition of parties who each represent different segments of voters. Think of it like the big retailers in South Africa – they may have a niche – it may be food, or apparel, they may have different target markets, they are always competing for market share, but none of them want the market to fail. The key to success in South Africa will be the ability of the various parties to work together for the greater good of the country – instead of trying to take more slices of the pie, to grow the pie so that everyone has a bigger slice.
GG Alcock
GG Alcock has a deep understanding of the informal sector and has helped businesses enter that sector, and helped businesses in the sector to transform and get going. I have always wondered how the numbers stack up – so few taxpayers, so many people receiving measly grants from the government and how it could be that we didn’t have people dying in the streets from starvation and disease. When I read GG’s first book – Kasinomics – I was intrigued by some of the insights into this economy. The business of funerals – whether it was renting out a marquee, catering for hundreds of people, being hired as a singer, making tombstones, and coffins – is enormous. The informal marijuana industry for example, where each small scale farmer “employs” about five people in the “value chain” of growing and harvesting the crop, packaging and transporting it and finally delivering to the wholesalers for distribution on the street. It’s certainly not legal – but it is economic activity!!
In the interview, GG highlights some of the different industries thriving in the informal economy and takes effort to quantify the size and scale. R150bn in the spaza sector, R90bn in fast food (and that is not the typical American brands, but rather kota and vetkoek), R50bn in the taxi industry, R18bn in traditional medicine, R10bn in hair salons. The list doesn’t stop there, but the point is clear. . There are no payslips, and no IRP5’s issued for these jobs. Passive income streams in the form of back room rentals for residential accommodation, or rooms and sheds hired out for spaza shops, is commonplace.
Not everyone who makes up the 34.5% unemployed (45.5% if using the extended definition, including people who have stopped looking for work), is living in dire poverty. Yes – there is poverty, and there are people who live in shacks with eight children and not enough resources to stay healthy, but according to GG’s research, 86% of households in South Africa live in formal dwellings with an average of 3-4 persons per household. Because of Covid, people naturally spent less time shopping in traditional malls and retail outlets, and spent more time eating out and sourcing what they needed closer to home. The so-called unemployed are building extra rooms when they can, buying household appliances and furnishings – this is all growth. The consumer in the informal sector is doing okay.
Cyril Ramaphosa wants to create 500 black industrialists. While that’s all good and well, I think that he is missing a trick. There are entrepreneurs and business people in the townships who are thriving but are left out in the cold when looking for support from the government. If an informal business grows to a point that they are turning over a million rand in a month, with the right support from the government they could scale up and potentially become part of the formal economy. A small amount of help in the informal economy would reap big rewards for both sides!
There is so much hope in South Africa. Please listen to both interviews if you are interested – it makes you realise that we as a nation may be standing on the brink of a reformation equal to the dawn of democracy in our country. There are amazing people out there – normal, man-in-the-street people who all want our country to be successful and to prosper. And there is no reason why we shouldn’t.
Reasons to feel positive about South Africa.
July was a good month! Much needed after months of devastating market returns and daily doses of bad news! It may not be completely over yet –interest rates and the possible recession means there is still medicine that to be taken in the developed world, but it seems that there is light at the end of the tunnel.
We read and hear so much bad news in South Africa. Riots, loadshedding, rising crime rates and a government seemingly more invested in party politics than the interests of the people they serve. It is deeply frustrating when we know that given the right management of our country’s resources and the real interests of the people taken to heart, that we could thrive and uplift so many..
Two interviews that I have listened to recently made me sit up and think “it’s not all bad” in South Africa. It’s not all good either, but in the doom and gloom that we live in, these perspectives stood out as positive! It is not easy to see how things could transform and work out, but it is good to know that clever people are applying their minds to the problems that we face. Both interviews were conducted by Alec Hogg of Biznews and you can find the interviews here:
Frans Cronjé Interview | GG Alcock Interview
Dr Frans Cronje
Previous CEO of the Institute of Race Relations and currently the founder of a small analytical and policy think tank called the Social Research Foundation.
For many years, Dr Cronje was considered to be overly bearish on the outlook for South Africa. At the end of the Mbeki era when the economy was flying, jobs had been created, the deficit left by the Nationalist Party had turned into a surplus by the ANC, the analysis and polling done by the IRR suggested that the country may be heading into trouble. And although there was a lag, their analysis proved correct.
Using the same method of polling and analysis recently, Dr Cronje is now much more positive on the outlook for the country. There isn’t a switch that one can flick that makes things better, and one of the biggest and most unsettling issues is the future of the ANC. By his account, if you press ANC voters for what they think of the ANC they say that they are lazy, corrupt and useless – so why then would you carry on voting for the ANC?
There are few reasons:
So they stick with the devil they know. They are scared of change and scared to lose what they have gotten so far. Dr Cronje likens it to a divorce: you may concede that you are in a bad relationship, that you are doing badly out of the deal and logic dictates that youneed change, but it is easier said than done when we don’t trust the alternative. The ANC voter is not necessarily an ANC supporter.
For four hundred years a single group of people or party has had the ability to influence the future of this country – from the Dutch to the British, the National Party to the ANC. Perhaps our country is ready for change. Coalition governments work if they have the interests of the people they serve at heart. Successful countries are run by coalition governments – Germany, Israel and France are all run by groups of parties who have 20 – 30% of the vote.
The ANC seems to be disintegrating – they have run out of money, the country has no electricity, they have no international credibility (seemingly from the East and West). They have less and less public support and they have a poor calibre of people in the party. They know this – we have seen Thabo Mbeki stand up and say that they need to reform the ANC. The elective conference in December is going to be extremely important for the party. If Cyril Ramaphosa is removed as the head of the ANC it is likely that their support will fall to between 30 – 40% of the vote.
We could find that in 2024 we are forced into a broad coalition of parties who each represent different segments of voters. Think of it like the big retailers in South Africa – they may have a niche – it may be food, or apparel, they may have different target markets, they are always competing for market share, but none of them want the market to fail. The key to success in South Africa will be the ability of the various parties to work together for the greater good of the country – instead of trying to take more slices of the pie, to grow the pie so that everyone has a bigger slice.
GG Alcock
GG Alcock has a deep understanding of the informal sector and has helped businesses enter that sector, and helped businesses in the sector to transform and get going. I have always wondered how the numbers stack up – so few taxpayers, so many people receiving measly grants from the government and how it could be that we didn’t have people dying in the streets from starvation and disease. When I read GG’s first book – Kasinomics – I was intrigued by some of the insights into this economy. The business of funerals – whether it was renting out a marquee, catering for hundreds of people, being hired as a singer, making tombstones, and coffins – is enormous. The informal marijuana industry for example, where each small scale farmer “employs” about five people in the “value chain” of growing and harvesting the crop, packaging and transporting it and finally delivering to the wholesalers for distribution on the street. It’s certainly not legal – but it is economic activity!!
In the interview, GG highlights some of the different industries thriving in the informal economy and takes effort to quantify the size and scale. R150bn in the spaza sector, R90bn in fast food (and that is not the typical American brands, but rather kota and vetkoek), R50bn in the taxi industry, R18bn in traditional medicine, R10bn in hair salons. The list doesn’t stop there, but the point is clear. . There are no payslips, and no IRP5’s issued for these jobs. Passive income streams in the form of back room rentals for residential accommodation, or rooms and sheds hired out for spaza shops, is commonplace.
Not everyone who makes up the 34.5% unemployed (45.5% if using the extended definition, including people who have stopped looking for work), is living in dire poverty. Yes – there is poverty, and there are people who live in shacks with eight children and not enough resources to stay healthy, but according to GG’s research, 86% of households in South Africa live in formal dwellings with an average of 3-4 persons per household. Because of Covid, people naturally spent less time shopping in traditional malls and retail outlets, and spent more time eating out and sourcing what they needed closer to home. The so-called unemployed are building extra rooms when they can, buying household appliances and furnishings – this is all growth. The consumer in the informal sector is doing okay.
Cyril Ramaphosa wants to create 500 black industrialists. While that’s all good and well, I think that he is missing a trick. There are entrepreneurs and business people in the townships who are thriving but are left out in the cold when looking for support from the government. If an informal business grows to a point that they are turning over a million rand in a month, with the right support from the government they could scale up and potentially become part of the formal economy. A small amount of help in the informal economy would reap big rewards for both sides!
There is so much hope in South Africa. Please listen to both interviews if you are interested – it makes you realise that we as a nation may be standing on the brink of a reformation equal to the dawn of democracy in our country. There are amazing people out there – normal, man-in-the-street people who all want our country to be successful and to prosper. And there is no reason why we shouldn’t.
Asset Class Returns
The table below represents a rolling year view of the major asset class returns that we track. It offers a view of the asset classes we use to diversify your portfolio.