Investment overview by Fatima Vawda
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Wits alumna provides an insightful look at the South African financial landscape in recent webinar
网易体育 250 Wits alumni and guests tuned in to listen to Wits alumna Fatima Vawda (BSc 1993, BSc Hon 1994, MSc 1995, HdipCompSc 1997) on 9 July 2020. In one of the first alumni networking events since the start of lockdown, Vawda walked participants through “The Evolution of the South African Savings and Investments Industry”. Watch the video here
Vawda is the founder and Managing Director of 27four Investment Managers. A Witsie with a Master’s in Applied Mathematics, she has over 20 years of experience in the local and global capital markets and has received a number of accolades such as the Ernst & Young World Entrepreneur Southern Africa Emerging Category award in 2016.
She spoke of the key role of a healthy financial sector to facilitate economic growth, which needs to be trusted, efficient and facilitate stability. She provided a breakdown of the size of the South African investment sector providing useful context to the laws that shaped the present financial system in six different periods over 400 years.
“By the end of 1890 there were around 300 companies listed on the JSE. What I find most ironic about it is, present day we have just over 300 shares listed on the JSE,” she quipped.
Other highlights were the stark reminders of the global financial crisis which exposed a range of vulnerabilities in the financial sector such as inadequate regulatory oversight and high-profile malpractices. Although South Africa weathered the storm, there was an overhaul via the “Twin Peaks Model” bringing a tighter regulatory mechanism.
“Our very troubled and weak economy, resulting from poor decisions made over the past 10 years, has plunged into economic despair.”
Since 2018 South Africa’s fiscal position had deteriorated sharply. The arrival of COVID-19 has further pushed the country into financial gloom. “Our very troubled and weak economy, resulting from poor decisions made over the past 10 years, has plunged into economic despair. Government saw this as an opportunity to consider reforms on how it can institute a reform package to crowd in investment from the private sector and retirement funds.”
She demonstrated how the removal of exchange controls attracted foreign investment to the country post-apartheid. This saw an increase in liquidity, activity, increase in foreign ownership – a golden age of investment. “The past 10 years has seen an exit of international investors from our debt and equity markets and seen a decline in the rand.”
“The public sector wage bill is the single largest component of government expenditure – currently at R639-billion for 2020/21.”
“The public sector wage bill is the single largest component of government expenditure – currently at R639-billion for 2020/21. A public sector worker’s salary is higher than that in the private sector.” This is causing strain on the fiscus and is the reason for our sovereign downgrading for failing to reach a compromise on our debt.
“We have played an active role to introduce and incubate black-owned asset management firms. You can see the growth since 2009 from 50 firms and a size of R91-billion all the way to the R579 billion mark, which is very little when compared to rest of R7.9 trillion saving stock in South Africa.
“What we are concerned about is the saturation in the market, the decline in the economy, the level of retrenchments, the disinvestments from the market, the increase in competition. We are expecting to see further consolidation and attrition in this market given the environment.”
Increasingly companies are turning to alternative sources of capital to grow and expand their businesses. Although independent asset management firms have emerged, the historically dominant players remain entrenched. An emerging trend globally is the rise of private equity and the private market. “It can play a phenomenal role in an emerging and developing economy as South Africa. It can be used to successfully provide economic growth and good developmental outcomes.” Vawda said there is research to back this up with a good example being a partnership between 27four and National Treasury Jobs Fund, which focuses on investment in private equity to create jobs.
She said the way forward will see more public and private partnerships as seen through the introduction of the Presidency’s Infrastructure Office to co-ordinate investment through partnerships. “The thinking behind this is to have a well co-ordinated and institutional infrastructure delivery mechanism that involves public private partnerships. It provides mechanisms for blended finance institutions and multilateral development banks.” The government is currently evaluating 276 projects, with a total of R2,3 trillion investment value and a funding gap of R502 billion, and it expects 1,8 million direct and indirect jobs will be created from it.
Another key area of importance are standards that potential investors use to screen potential investment. The key areas are environmental criteria (what are the climate change effects); social impacts (how companies manage relations with employees and clients); governance issues (leadership, executive pay, audit issues, shareholder rights etc).