The current economic and political crisis overshadowing SA growth is becoming a major concern to foreign investors and an emerging markets analyst and self-confessed contrarian Evans Osemwegie says it’s time investors begin to move out of SA and find a greener pasture.
Evans Osemwegie, who is MD at Evago Global Capital encouraged investors to liquidate their financial holdings in South Africa as the country faces severe challenges.
Osemwegie believes that the Johannesburg Stock Exchange (JSE) All Share Index will fall to the band between 35,000 and 40,000 within 12 months.
Osemwegie postulates that the current economic crisis could get worse following the exit of the UK from the EU.
According to him also, though the current media attention around President Jacob Zuma is not good for the prospects of the country, President Zuma alone should not be blamed for the situation.
“An understated but important dimension of Brexit is its effect on emerging economies particularly from Africa. While many campaigners to leave the EU have emphasized deepening and restoring commonwealth trade relationships with African nations, it is unlikely to get very far because these nations simply do not trust the Western nations, they prefer to work with China with whom they believe trade relations are fairer,” he said.
The index reached a record high of 55,355 points in April 2015, but has since receded to 51,300 points, although it traded at nearly 54,500 points as recently as May 2016, before the Brexit vote, which left global markets reeling.
Speaking further on the SA situation, Osemwegie said that there is mass disenfranchisement within the country which is split into two groups – a rich and affluent South Africa and a poor South Africa.
“Artificial programs of inclusion like the land redistribution and black empowerment programs can only be useful if skills gaps are bridged to help the great majority of the population utilize the opportunities to better themselves, the nation and future generations,” Osemwegie said.
He said that the government is short-sighted, content to maintain the status quo while paying lip service to the concept of deep social and structural reforms and that those areas of the economy that will pay the largest dividends like education, healthcare and skills development have been left far behind.
“The truth is South Africa is really on an interest rate precipice, they are very exposed to external shocks,” Osemwegie said.
“Looking at the South African economy, a casual observer would not really notice anything dramatically amiss, in fact inflation is gradually falling but beneath the surface, the social discontent in the rainbow nation is really palpable,” the analyst said.
“What we are witnessing in South Africa is a very challenging situation, an edifice whose centre has been hollowed out.”
He said that though the country may look attractive on the outside, its inside is as dead as a dead wood which might crumble at the slightest weight placed on it.
He said coupled with the current political crisis facing the nation, the inevitable crisis coming will be the opportunity that they need to rebuild the economy again from the ground up.