Greetings from Mark Jurgens
After the Easter festivities and with the onset of our winter, the season of recovery and preparation, may the few months ahead be mild.
As many may be aware, we are in a historic situation in South Africa. Historic due to the fact that money markets returns’ of around 7% in any bank, have outperformed the average return of 5% on the JSE for the last 5 years. Understandably, most investors are discouraged by the poor returns of our local markets and the thought of switching into a cash or a money market fund is often a consideration.
To highlight the briefly, a few “lessons” for all investors to bear in mind. Inflation is our enemy and it is imperative to earn returns in excess of inflation. Although this has not achieved for a number of years, we believe returns above inflation will be generated for patient investors.
The JSE is currently under-valued and offering the best value of all emerging economies markets. We believe that investors who have been positioned for the long term, will be rewarded.
You need equities in a portfolio. Over long periods, equities have proven to be the best performing asset class and we feel certain that this will continue to be the case in the future. Over the last 5 years, equities have outperformed in international markets.
Investing in cash does not generate real wealth over time, it should merely be used to park funds for short a short period. If one takes the return of cash, after tax is paid on interest earned, the returns at best, are equivalent to the inflation rate. This is not the preferred outcome for investors planning for retirement.
Remember, compounding is a powerful wealth generator and can achieve amazing results.
The price of missing out is high – There are normally only a few days per annum that one needs to be invested in the market to be able to earn those inflation beating returns.
Diversification of portfolio is also essential in that there will be times when offshore equities, property and bonds will perform better than local equities underperforming in the shorter term, is largely due to political instability in South Africa.
I am sympathetic to all investors in South Africa, not only clients of Jurgens Finance. Achieving financial security in these difficult economic times requires sacrifice and self-discipline.
With the elections around the corner, we believe the outcome will have a positive effect on our economy and the lives of all South Africans.
Nothing much has changed when it comes to budget 2019 – Alan Botha
The much-anticipated Budget Speech has come and gone, this year warrant extra attention and politicians grapple with balancing the requirements of building an economically sustainable future for SA, whilst ensuring that voters are kept happy in the lead up to our elections on the 8th May 2019. The budget attracted attention because South Africa’s public sector finances are, after misuse for many years, in the deep trouble. It is key to remember that budgets are not merely technical and will always be politically charged, as this is how “the peoples” money is planned to be spent.
Minister Mboweni could have gone about filling our large budget deficit by slapping additional taxes on both business and high earners. However, we believe he was mindful that South Africans have hit a saturation point of how much tax they pay – a we;;-known study which depicts the “Laffer curve” suggests you can tax citizens up to point. When the average citizens feel taxes are too high, they will circumvent and avoid paying tax to compensate their aggrievement of being over-taxed, this translates into less tax being collected even though the tax rate is higher.
Overall, the budget was market friendly and there definitely seems to be an effort to appease Moody’s rating agency who would be the last to downgrade us to junk status, with a definitive honesty as to the extent of our dire current financial position. State owned companies will be closely monitored going forward fore wasteful expenditure. The cuts to the public service wage bill, through voluntary early retirement and not retrenchment, should assist in alleviating fragile balance sheets at state owned enterprises. Time will tell if this reduction in expenditure will be enforced and then maintained.
Mboweni made mention of some form of privatisation of state-owned companies, which met with a backlash from labour unions, and the fact that he reopened this debate after it being taboo for decades, speaks volumes for trying to fix our fiscus. It remains to be seen, if Eskom was even offered at a price of R1, if anyone would be prepared to buy it.
Other noteworthy points were a proposed grant for first time homeowners to support land reform initiatives and “help people build assets and wealth”. Also, more support for smaller business by giving aid to the Small Enterprise Development Agency to expand incubation programmes for small business, and the expansion of VAT zero-rated items, should all assist in creating jobs and alleviating some more pressure on the poor.
In short, the budget suggested that the way out of this crisis is to reduce the size of government and increase business’s role in the economy.
In our opinion, we are still seeing the same rhetoric around cutting expenditure as being our only tool to get our country’s finances in order, while this is important it does not solve the actual structural problem of ongoing weak economic growth – the track record of cutting expenses has been poor in the past.
We believe by removing some of the red tape around starting and doing business in South Africa, doing a skills analysis of the current workforce, and then transitioning the economy to represent these skills, are imperative to engineer growth and improve our finances. In addition, we would have liked to see more emphasis on savings and incentives to encourage more savings from both personal and government standpoint, this would lead growth, increasing wealth, new business opportunities, etc, with the impact of improving the lives off all citizens of South Africa.
Short Term News Update – Greg Brits
Load shedding is “a burden on individuals and business alike”. However, with adequate planning, its impact can be minimised. On the bright side, it disconnects us from the world for a while and affords us more quality time with our loved ones.
To avoid incidents which could be caused at such times, it is vitally important to unplug or switch off ALL appliances that were being used before the power outage to prevent them turning on unattended when the power is restored. In doing this you will also protect these items from electricity spikes or surges. Ensure fire safety, save lives and save property!
A few points from our insurers to implement to minimize load-shedding inconvenience and security breaches:
- Keep a few high-wattage solar powered lights for your garden, and a few LED lights for inside. Lights is a deterrent to would-be burglars.
- Make a habit of keeping cell-phones and a portable phone charger charged.
- Have someone with you at your gates should you need to manually open and close them – or arrange with your security company.
- Use non-power dependant devices for extra security i.e. padlocks, burglar bars and deadbolts. Ensure back-up batteries on automated systems are in good order.
- Keep a load-shedding schedule handy beforehand preparation together with a torch or a solar battery-powered light that is charged – have spare batteries available.
- Fridges and freezers contents should keep overnight – avoid opening repeatedly.
- A generator, battery system, solar panels or combination of these, is a wise investment.