Lack of urgency to fix problems tragic for SA economy, says Ninety One’s Du Toit

“I just cry for the country”, those were the words of Hendrik du Toit, CEO of South Africa’s largest listed asset manager, as he bemoaned the country’s economic crisis on Wednesday.

Du Toit was responding to media questions following the release of Ninety One’s annual results, which showed outflows of £10.6 billion (R237 billion) for the year to end March 2023.

Read: Ninety One sees outflows of R237bn as clients ditch risky assets

He lamented a lack of urgency to solve problems in the country, which faces challenges such as a globally high unemployment rate and incessant load shedding among others, all of which are impeding economic growth.

“What’s happened in South Africa is tragic,” he said, referencing this week’s announcement from Stats SA showing the country’s jobless rate jumped to 32.9% in the first quarter of the year.

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“The lack of decision-making, and the lack of urgency to solve the problems, is just not good for the long-term economic growth of our country, and therefore the generation of wealth to be managed,” Du Toit said.

“All we want is [for] the economy to grow so that more saveable [income] or net savings are generated which we could then reapply there in a productive way.”

The South African-founded company, which is dually listed on the Johannesburg and London stock exchanges, saw its assets under management (AuM) fall 10% to £129.3 billion during the reporting period.

It said the deterioration of economic prospects in its home market impacted net flows and that it considers it its duty to work with the government, civil society and other stakeholders to improve current conditions.

Domestic savings needed to bridge investment gap

“Our industry is really important for the reconstruction of South Africa, because with a low level of foreign confidence in the economy at this point in time, domestic savings will be needed to finance rebuild projects,” Du Toit said.

He added that domestic savings could be directed to improving the country’s power grid, water, and physical infrastructure.

“All of those need massive investments, and the domestic savings pool is going to be incredibly important for that, and we want to play our role in that rebuilding when it starts.”

The company said the majority of its outflows were the result of mostly institutional investors lowering their allocations, with the latter half of the financial year seeing the bulk of its outflows.

Read/listen: Enoch Godongwana and Hendrik du Toit talk about the FATF greylisting

AuM across all asset classes dropped, with equities, fixed income, and multi assets taking the biggest hits with double-digit decreases.

Equities declined 12% to £59.7 billion, while fixed income and multi assets fell by 10%, to £32.9 billion and £22.6 billion respectively.

“On top of that,” said Du Toit, “what we’ve had in South Africa was the relaxation of exchange controls on retirement assets [making it possible for retirement funds to invest more cash in offshore markets] – at a time when the country is not attracting [investments].”

This offsets flows and puts pressure on asset prices, he added.