August 27 2017 – THE rand will continue to devalue as SA is not attracting long-term “sticky” capital, says , managing director of forex and international projects at Sable Group, Andrew Rissik.
“Recent rand strength is in line with the emerging markets peer group, but in the light of state capture (revelations) I think we will again see a lot of downward pressure on the rand,” he said at an international retirement seminar hosted by Sovereign.
The lack of labour productivity is another factor putting pressure on the rand, he added.
“After Nenegate, business, labour and government held talks, but after the latest Cabinet reshuffle I think the mistrust is back,” said Rissik.
At the same time, he said, it has been the quietest time regarding outflows from SA since 2011. Yet, he cautioned that this could change suddenly once “yet another trigger” happens.
“The big question is how the rand is influencing investments at the moment. South Africans are feeling unsure regarding the rand and there is a risk of moving money offshore at the wrong time,” he said.
In his view, it is currently actually a good time to take money out of the country.
“I think in the short to medium term there will be more rand strength, but over the long term it will become weaker. One has to take out emotion when deciding on when to take money offshore,” said Rissik.
There are lots of reasons why the rand should not be as strong as it is at the moment, according to Joanne Baynham of MitonOptimal SA.
“It is the search for yield which is keeping the rand better, despite massive problems in the country. These include politics and a lack of productivity,” she said at the seminar.
“I am amazed that the rand is not weaker. It is because emerging market bonds still offer better returns.”
Dominic Wheatley, CEO of Guernsey Finance, told Fin24 more and more South Africans are turning to Guernsey as an offshore option.
“There are a lot of SA businesses in Guernsey and vice versa. South Africans are looking to diversify in respect of mitigating risk in SA,” said Wheatley. “We understand SA business and the SA environment,” he added.
“Globally we see a lot of political and economic uncertainty and people are looking for a stable base and good business environment with high quality regulations, financial and legal systems. They want to place their money with certainty of outcome and good governance.”
Baynham said the world economy is actually in far better shape than in years. Europe is doing a lot better and consumer confidence is picking up in the US.
Inflation also seems “non-existent” in the world today because of what she calls “the three D’s”, namely disruption, demographics and debt.
“There is far better value to be had in emerging markets – especially in Asia where productivity levels are incredible compared to SA,” she said.
She sees great opportunities in Europe and Japan as well as in tech stock, which she calls “exciting”. – Fin24