Johan Minnie, CEO of Consult at Momentum
South Africa is having a moment. After years of worrying about everything that could go wrong – loadshedding hammering businesses, the rand freefalling, political uncertainty making people nervous – investors are now finding reasons for optimism. In recent months, local markets have performed better-than-expected, and the mood is cautiously hopeful.
But while there are positive signs, investors should be careful not to mistake green shoots for structural improvement. South Africa still faces numerous challenges, including low economic growth and stubbornly high unemployment, making it a little too early to declare a full recovery.
As proud South Africans, we’re all thrilled when the country is doing well. But from an investment point of view, it’s not necessarily a reason to bring all your money home. Investing and patriotism are not the same thing. Just because we’re all cheering for Bafana Bafana or the Springboks, doesn’t mean we should abandon our offshore investments. Investors would be wise to bear in mind that markets tend to move ahead of economic reality, meaning much of the positive sentiment may already be reflected in asset prices.
However, South Africa’s improving outlook does offer an ideal opportunity to revisit why we invest offshore in the first place.
For years, many investors moved money offshore because they were worried about what was happening at home. That thinking misses the point. Offshore investing was never about running away from South Africa; it was about putting together a portfolio that wasn’t dependent on a single economy, currency or market to deliver all the returns.
The strongest argument for offshore investing has always been diversification. South Africa represents a small share of the global economy and the JSE – while home to many excellent businesses – can only offer investors access to a limited range of sectors and opportunities. Looking beyond our borders opens the door to companies and opportunities that simply aren’t available locally, and this remains true whether the local market is having a good year or a bad one.
Currency diversification matters too. Nobody knows where the rand will be in five or 10 years’ time. Offshore assets help ensure that an investor’s future wealth is not tied entirely to the direction of a single currency, which is an important consideration for anyone building long-term wealth.
South African assets arguably deserve more attention today than they did five years ago and investors who shifted aggressively offshore during periods of heightened uncertainty may find they have become over-diversified offshore and that their portfolios are worth revisiting.
There is a difference, however, between increasing local exposure and abandoning offshore investments altogether. Too often, investors move from one extreme to another. They frantically move offshore when things are looking bad and then scramble to return when the pendulum swings back to positive. Fear and greed have always played a role in investment decisions, but successful investing requires a steadier hand. Rather than reacting to emotion – whether despair or elation – investors should focus on building balanced, resilient portfolios that can adapt to changing circumstances without sacrificing long-term growth potential.
The question is not whether investors should choose South Africa or offshore markets, but rather whether their current investment balance remains appropriate for their goals, risk tolerance and time horizon.
South Africa’s recent progress is encouraging and local opportunities may well justify a larger allocation in some portfolios than they have in the past. Exactly what that looks like will depend on the investor and their goals. Local assets deserve their place in a well-constructed portfolio, just as offshore investments continue to provide access to currency diversification and exposure to the wider world.
Rather than choosing between the two, investors should use this moment to ensure they have the right balance, allowing them to benefit from our progress while drawing strength from global markets. This is why it is critical to consult with a qualified professional, such as a Consult financial adviser or wealth manager, who will help you to build a resilient and well-diversified portfolio.
ENDS
