• Bruce Cameron

There are pensioners who beat both the Covid-19 pandemic and the Zuma regime kleptocracy

Many pensioners were not seriously affected by the Covid-19 pandemic and the corruption that undermined the South African economy – the reason was the value of the rand.

Pensioners who beat both Covid-19 and the Zuma-era kleptocracy generally had one thing in common: they had the benefit of a financial adviser to make sure they had a sound and well-considered plan upfront.

Many pensioners who invested the bulk of their invested linked living annuities (living annuities) offshore have found themselves in a stronger position, even when foreign investment markets and the rand were at their worst. The rand dropped by more than foreign investment markets. This meant that both foreign equity and bond markets benefited local investors.

Foreign markets have recovered significantly, but the rand has not recovered by anywhere near as much, placing foreign investments in an even stronger position.

Pensioners on living annuities, particularly those who had less than 5% drawdowns, must be feeling pretty good about what has happened and thankful to their financial advisers.

Here is a table to show how markets bounce around. (Graph1)

But this does not mean that those who did not benefit should now rush off and do a major reassessment of their investments. Do a reassessment, but make very considered decisions, particularly with the help of your financial advisers.

Three big warnings:

  • Don’t rush and sell all your local investments now and invest offshore, or quickly buy and sell or sell any other investment.

  • Don’t think the crisis is over or even nearly over (no matter what Trump says). The Covid-19 pandemic has affected markets in entirely new ways. No one really knows the future outcomes. Never before has there been an international shutdown of businesses keeping employees locked up at home that led to a cut or reduced pay.

Many businesses will go bankrupt while others will flourish. There will be a lot of collateral damage to businesses you might expect to survive. Take for example the ban in South Africa on alcohol sales. The biggest threat is to the glass manufacturing businesses which have breweries as a major source of income, who have stopped ordering glass bottles. Everyone is going to have to stay on their guard, even if a Covid-19 vaccine is discovered early, as the fallout will last for a long time.

The biggest question mark is how successful is the relaunch of business, from micro to macro, going to be? Look at it this way. People around the world have lost their jobs or been put on short-time. This means they will buy far less and those with jobs will save a lot more, impacting on the sale of consumer goods and production processes. And with this comes less travel, more working from home and the reduction of fuel sales. Tax income of countries will be down, while the world has reached record levels of debt.

  • The impact on yourself: Some pensioners, no matter how rich or poor you may be, can expect other fallouts such as adult children losing their jobs on a lengthy or permanent basis and relying on them for an income. It is worth remembering that prior to the current crisis it was found that five people lived off one state old age grant. There are likely to be a lot more now!

This all shows that even those who have followed the right route may still suffer from both economic fallouts and/or from personal circumstances.

What you must do is: