MAGNUS HEYSTEK & ROB HERSOV: SA’s Investment Reality?

Added: 2026-05-07

[00:00:00]Are we up against the wall? Well, we are up against the wall, but governments can always increase the taxes. And we say, well, and and and I predict that the offshore money, the offshore money is going to be a target. One way or the other, they're going to say there must be a way we can target that money. And that's why I recommend to my clients, if you got money offshore and it's still in your hands, put it into a trust. Cut the link and you can that's the best you can do to protect yourself.

[00:00:29]So South Africa was top five mining country in the world. I mean it was number one in gold at one point.

[00:00:34]>> The world came to us to to learn how to mine. 1980 it was 20% of the economy.

[00:00:40]Today it's less than six. And we had a million people employed in mining. We're under 500,000 and I think we haven't opened a new mine in 5 years.

[00:00:48]>> That's absolutely true. We've had a humongous bull market in commodities and humongous bull market in gold. And the the reason why they're not investing in our gold mines or even exploring for gold mines is the uncertainty about government policies. Guantas has destroyed the mining industry.

[00:01:06]>> We should actually have a uniform approach in dealing with major parties.

[00:01:12]If we don't do that, we're going to be easy meat.

[00:01:15]>> So they're not investing because they're not sure what's going to happen. A mine is a 10 to 15 year project. They need certainty on electricity, the price of electricity, the supply of electricity.

[00:01:26]They need to know when I switch on the power 10 years from now, it's there and the price is predictable. So, you can't do that.

[00:01:33]>> South Africa's GDP growth slowed to 0.5% in the third quarter. Now, that compares with 0.9% recorded in the second quarter, reflecting a mixed performance across key industries. The trade, mining and government sectors were among the primary drivers of growth. Though momentum was tempered by a significant contraction in the electricity, gas and water supply industry.

[00:01:57]>> The roads, can I get the oil from the mines to the railway roads? So, our railway has collapsed. The guys are saying it's too expensive to truck it all the way from wherever it is to the ports. And then you have the ports that have collapsed. So, you put that into one big pot and it's a country in deep, deep trouble. And it's been financed by borrowings, borrowings, borrowings. And you can we already pass the left curve in terms of t taxes and so on. And this has been happening for a long time. And you've been calling this out for a long time. And your investment strategy has been off the charts the results, but has been consistent, hasn't it? It's you look at South Africa, you're not seeing any real movement. You're investing in dollar based.

[00:02:39]>> I try and be very objective. If I try and analyze what I see and I analyze and I try and hear the good news and the green shoots and then I go and scratch a little bit. I just don't find it. It's nice speeches to make and it's now turning around but I just don't see it and and the numbers don't lie.

[00:02:54]>> And even today people are talking budget surplus unexpected green shoots in the economy but that's nothing to do with South Africa. Pure luck.

[00:03:03]>> Okay. Gold price in fact 20 December 2024 the gold price went from $3,000 to $5,000. It's just money for jam coming in. Nothing to do with the government or government initiatives or policies. The same with manganese copper and platinum.

[00:03:19]So that's pure luck. So plus as an added benefit, they got the the rank strengthening because of dollar.

[00:03:25]>> Gold has surged to an all-time record high of over $5,000 an ounce. The rand has also strengthened to below 16 rand to the dollar for the first time in almost 4 years.

[00:03:37]>> You cannot project that going forward.

[00:03:38]In fact, you know, I think we've already reached the peak for a for a very long time as far as that's concerned. So, if you want to use last year's economic performance in the stock markets to predict forward or I I just think you're going to make a very big mistake because it's just an unnaturally high plateau.

[00:03:54]So, nothing that government has done. In fact, coming back to the economic growth of 1.1, if you analyze it even further, manufacturing in that number was minus 4%.

[00:04:07]um everything was minus minus minus was falling and that's driven by the rain and secondly was financial services or the stock market that just had a tremendous boom. So let's take your competitors a basket of you know old mutuals and standard banks and whatever the sort of quasi indust the quasi South African institutions pension funds investment funds who's pulling their chain why can't they see the light well I think you know you're going to look you're going to go look at top you're going to look at all the money that is being managed by the big institutions via pension funds there's there's your control you have this amount of money money being managed by the large asset managers and it's extremely extremely profitable business if you can manage large amounts of money and there's my no doubt about it there's discussions you know you've got to push the South African markets don't don't rock the boat so if you look at old mutual and standard bank just two examples there are many more and the money that's deployed with their various investment vehicles and funds the a lot of that money comes from the pension funds the big pension funds are >> Escom transnet PIC I guess is a is a separate entity and do they have influence on the investment thesis of those big institutions >> absolutely at top level and if you look at the returns the longer term of returns of those large companies a they're very very expensive another reason why we take money offshore >> well it's much cheaper I mean the cost of making investment offshore on a retail level on institutional level is a fraction how can you tell the viewers how why is that the case on a general equity or a balanced fund in South Africa, you'll probably pay about 1 and a.5% kind of fees all in maybe somewhere 2%. Now we take money offshore, we can buy ETFs um comma 1% comma 07%. I mean it's just it's just it's almost more than >> and Brenhurst fees and old mutuals fees for example are they pretty much the same? We significantly cheaper if you do a total comparison ter I mean there's about a percent difference because we use the we we get the cost saving on the >> and that percent difference makes a hell of a difference over 10 years.

[00:06:20]>> Not only that the choice is so much wider when we go offshore you know I feel like when I sometimes when I go into the offshore markets I feel like a a kid in a toy shop. It's just so much to choose from you know I've got biotechnology funds I've got blockchain funds I can get commodity funds. I'll give you an example. Africa X South Africa last year returned 68% in dollar terms. Nobody knows about it. Nobody talks about it. But it's there. If you go and scratch, it's there. And where where is it? Just give us an example.

[00:06:52]>> Nigeria, Egypt, Morocco, Kenya, financial services, banks, liquid. Um, you know, that's always been an issue.

[00:07:02]How liquid. So you got 68%. Nobody talks about it. So, uh, Japan has been for 10 years has been one of our top holdings.

[00:07:10]We, we've been using a fund there that's been returning 22% in dollar terms.

[00:07:14]Nobody talks about Japan.

[00:07:15]>> Funny enough, at the BRZ news conference, he said, "Put up your hand who's invested in Japan." I think I was one of, but I'm I'm there in private equity in not in public equity.

[00:07:23]>> So again, you go, I feel like Jim Rogers who wrote the book, The Investment Bike.

[00:07:27]We went to Japan, spent two to three weeks, we met business people, we met the Reserve Bank of Japan. We asked question, we spoke to people, we looked around us, came back to South Africa and I said, "I like that country. I like the culture. I like the people. How do I invest in that country?" Couldn't find it. I had to go and find the Japanese fund. So, our clients have got a totally different type of portfolio than the average South African, which was all the same. If you take our top 10 equity funds for instance over the last 10 years, the returns are almost identical cuz they're all fishing in the same pond.

[00:08:02]>> It's Naspers, Rishmont, couple of banks, couple of retail, couple of Mnet, Nasp.

[00:08:09]>> So your returns are almost identical. So you can go eeny mini money mo and you'll get the same returns. Now I wasn't happy with that. So I spend a lot of my time and with with our team we go and find stuff which intrigues us which and then we go and find the the stock >> and when you invest on behalf of a client um you are direct investments so you hold stocks directly you hold via ETFs and then you invest in funds are these funds liquid or is there a lockup period >> they're all liquid I don't like lockups as as it starts I try and avoid it as much as I can there might be special circumstances where there is a lockup and If I'm really convinced of the investment merits of that product, I'll say, "Okay, I will do or I'll agree to a lock up."

[00:08:51]>> But that's a limited percentage of your fund. So, it's under under five or under 10%.

[00:08:56]>> I like trading plus one kind of product.

[00:08:58]If I trade today, I want my money tomorrow.

[00:09:00]>> And you'd only go into a private locked up situation if you saw unbelievable upside. So, it would be like, you know, SpaceX 10 years ago.

[00:09:09]>> Well, now that we're talking about SpaceX, I am avenue to give my clients some access to SpaceX right now. So that's that's something that we we go we go and look for stuff and we ask we beg we plead and if you ask if you ask nicely sometimes sometimes you but that's a liquid that would be >> a 5year period and and but you know that's I'll make an exception with that.

[00:09:31]>> SpaceX reportedly planning to go public next year.

[00:09:34]>> SpaceX it won't just be one of the biggest listings ever. It will help set the terms for the next wave of AI IPOs and force a big question for the trade at large and that is are public markets willing to fund strategic capital inensive companies with massive capex and delayed profits. Now those are similar economics that are sitting under the AI model training and infrastructure buildout right now.

[00:09:55]>> So you don't just invest money on behalf of your clients, you help them with structuring too.

[00:10:01]>> It's a very good question. The money part is only part of it because you operate as a almost a family type of office. You get involved with everything. You do the will, you do the investments, you do the trust offshore, you do the you do you do almost everything and under one roof and more and more it's the structures where you house it. You look for tax efficiency.

[00:10:23]People like to know that the money will be passed on to the next generation and they want it with one company. So that's why we've expanded aggressively in Maitius and a lot of South Africans who have immigrated still want us to manage their money but they don't want to link with South Africa. So we set up in Maitius and that's done very well.

[00:10:41]>> One of the attractions about Maitius is that it's a low tax jurisdiction.

[00:10:45]Corporate income tax and value added tax are a mere 15%. While personal income tax ranges from zero to 20%. And a real lure for high netw worth individuals and families is that there is no capital gains tax.

[00:11:00]>> A big issue in South Africa is our tax base is shrinking and shrinking materially. Last year 200,000 taxpayers disappeared. We had $3 and a half thousand dollar millionaires leaving the country. A lot of them to maicious and and and even the SARS admits we are extracting 27% of the economy in tax.

[00:11:21]They say it's it's too high. it's higher than the average. So yes, if you admit we're a high tax country and of course as a taxpayer you ask how much do I get in return? Uh we don't we know the answer to that question. So those are the trends that I track. I look at taxes as a percentage and how much more can they X