Become a realist, not an optimist
- Global, South Africa
- Investment, Lockdown, Offshore, South Africa
- July 3, 2020
Close your eyes. Take yourself back a few months. The date is March 26th 2020.
The country watches with bated breath as President Ramaphosa announces a landmark step: the country will shut down for three weeks. Just three weeks. That’s all that would be needed to flatten the curve, save lives and fight this together.
R2bn in support is announced, donated in equal parts by the Oppenheimer and Rupert families. More donations will follow. Other government measures are promised to swing into action too, supporting those who would suffer financially.
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South Africans did what we always do: we rose to the occasion.
Flags flew. Pots were banged every night to celebrate and recognise essential services workers who risked their lives during those few weeks. If only we realised how low the risk was at that stage vs. now.
People prepared themselves to stay home for 3 weeks, eat into their savings and save lives together. Thuma mina – send me.
It’s always too good to be true
Why are we so gullible? For how long can the South African spirit run off good weather and Rugby World Cup wins?
Things got weird and they got weird quickly, didn’t they? Remember the press conferences where bumbling ministers made little sense? On reflection, they were giving us pearls of wisdom compared to Fikile Mbalula’s “planes eat the virus” speech a few days ago.
Entire economic sectors have been wiped out, in some cases so unnecessarily. At one point you could exercise outside around other people, but you couldn’t buy a treadmill to exercise with zero chance of spreading the virus.
A trip to Makro made you want to laugh and cry at the same time, as there was no logic at all to what could and couldn’t be sold. This, by the way, was long after the initial three weeks elapsed.
I’m not going to rehash everything that was stupid about the implementation of the lockdown. It’s not necessary and isn’t worth being reminded of in detail.
Here we are in July, over three MONTHS since the original three-week lockdown was announced. A few industries are still completely shut, although most are operating again. It feels as though everyone I know is worried about losing his or her job, with many companies announcing cuts of 20% or more.
Where will these people find work? How will they afford school fees and bond repayments?
Worst of all, this is what our cases curve now looks like:
Lockdown did flatten the curve, but all it did was buy us time. We probably did save some lives as our health system was enhanced in preparation for the arrival of the beast. The beast is now here, just as people have become so tired of lockdown that they’ve forgotten why we had it in the first place.
It’s such a dangerous position that we find ourselves in, for so many reasons.
Become a realist
This is all helluva depressing, I know. I’m sorry.
If you want to only ever read happy things and forget about your problems, hoping your financial wellbeing will sort itself out, then you’re in the wrong place. I want to help you, not tell you sweet little lies about how it will all be ok. You’re welcome to listen to government’s financial speeches if you would prefer to be lied to.
The problem is that South Africans are eternal optimists and there’s a point at which it becomes silly. Optimists may feel better at night for a while, but realists generally come out in better shape after debit orders on the 25th.
Becoming a realist means analyzing the situation and adapting accordingly, not blindly hoping things will get better without any justification for this view. You may need to pivot your skills base or change career entirely. It’s not the first time in history that careers have had to change and it won’t be the last.
I’m not saying you should give up. I’m not saying you must panic and leave South Africa as quickly as possible. I’m just asking you to rise to the occasion the same way you rose to lockdown back in March.
Adapt or go bankrupt
The Financial Times published an incredible list of 100 companies that “prospered in the pandemic” – unsurprisingly, it’s dominated by tech companies.
People are working remotely, doing more conference calls and playing more online games than ever before. They are shopping online, watching Netflix and buying more groceries instead of eating at restaurants. Sports were replaced by e-Sports.
I often hear people talk about “bouncing back to normal” – forget it. Normal, at least the way we knew it back in 2019, is gone.
Some things will likely come back with time, like international travel. The best restaurants might survive, if they are lucky. As for everything else, the world of cloud computing and virtual living has been accelerated so dramatically that there’s no going back.
When Microsoft released earnings a couple of months ago, they commented that they have seen two years’ worth of digital transformation happen in just two months. Let that sink in.
Office buildings feel like the worst asset on earth right now. I don’t believe things can go 100% remote, but there’s definitely a point at which people can enjoy a 50-50 split between home and work, which means smart companies need half the space they have today.
Where does that leave companies with lots of debt and investments in B-grade offices? You know the answer to that question already. It’s just one example of an asset class or industry that isn’t going to recover.
Act. Now.
Every South African needs to ask these questions:
- Am I going to physically stay in South Africa?
- Am I going to economically stay in South Africa?
- Are my skills going to see me through this crisis and be relevant 5 years from now?
The answer to the first question will depend entirely on personal circumstances. If a single 20-something asked me that question, I wouldn’t hesitate in advising him or her to leave. One can always return if things improve, but it’s looking scary here economically and this will likely hold back many youngsters from opportunities.
It’s a lot less simple when you have a family, with your roots in the ground economically and otherwise. I’m in that position, so for now I’m sticking it out.
The answer to the second question is only relevant if you’ve decided to physically stay, of course. You can invest up to R1m per year offshore with very little hassle, which for almost all South Africans is a threshold that is in no danger of being broken. You can go up to R10m per year if you jump through a few hoops with SARS etc. which means that only the richest of South Africans are at risk of not getting their money out over a period of time.
A useful trick is that you can invest an unlimited amount in JSE-listed funds and companies that have offshore interests. As long as South Africa doesn’t implode and prevent anyone taking their money out, this allows you to financially hedge yourself against South Africa’s problems.
Technically, you could invest every spare cent you have in a way that achieves offshore exposure. As the old saying goes: live in the sunshine; invest in the shade. Considering your house is here and your pension is primarily invested in South African assets, it’s worth considering.
The most important question is actually number 3, but it’s the question that everybody asks themselves last. Considering that you can financially leave South Africa without physically leaving, it’s actually more important that you have the right skills to prosper economically in whichever country you choose to live. Every single country of any importance has wealthy people, regardless of the macroeconomics.
If you lose your income, your investing strategy goes out the window with it, so growing your skills base is more important than growing your investments.
If you’re worried, then you better start upskilling. Luckily the virtual world makes it easier than ever before, with a huge variety of online courses and the ability to quickly build a brand or distribute a product via one of many online channels. Just by reading this blog, you’re already taking a confident step towards enhancing your knowledge.
Whatever you do, please don’t do nothing. Taking an ostrich approach is a guarantee of economic failure even if you escape the clutches of Coronavirus. Be positive, but be a realist. There’s a lot to consider right now and there are no prizes at all for ignorance.
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Sifiso Shezi
”If you lose your income, your investing strategy goes out the window with it, so growing your skills base is more important than growing your investments” this really hit home for me