We had barely managed a smile about the good news – the arrest of the Gupta brothers and other high-level NPA actions – when we were hit by the puzzling accusations against Cyril Ramaphosa regarding 4 million US dollars in cash being stolen from his farm but not reported by him at the time. Of course we do not know what really happened – yet – and there may be a perfectly acceptable explanation. But at this time the mere facts: that it was such a large amount; in a foreign currency; and not headline news when it was stolen; conjure up ghosts of money laundering, tax fraud and other unspeakable crimes.
Politics can be one of the dirtiest professions in the world and most people try to avoid it, but unfortunately it can have a gigantic impact on all our lives. As a citizen, you are subjected to the frustration of collapsing infrastructure such as potholes; load shedding; polluted water; the list goes on. As an investor, you will feel the burn via collapsing SOEs; bad economic policy decisions; unstable currency; labour laws; tax laws; BEE; state capture; and the like.
The negative impact of leaders compromised by ideology, greed, etc., on a country can be seen all over the world. Just imagine you have a business in Russia and your leader starts a war resulting in sanctions which destroy your business. Or you are a successful farmer and your leader decides to nationalize all the productive farms in the country.
As money managers we have to pay attention to these things. If you look at the graph below, borrowed from David Shapiro, you will notice that commodity companies have been the saving grace of our stock exchange over the past five years. Our exports have helped to strengthen our currency and have provided SARS with billions of rands to support our national budget.
International investors will only invest in a country where they have a sense of political certainty. If Ramaphosa cannot explain the allegations against him, who will be our next president? What will the implications be for our currency and the fight against corruption?