2019 has started off at a ferocious pace and it is tipped to be one of the most significant years in South Africa’s history.  The economy is treading water, as we missed out on significant international growth between years 2014 and 2017.  We are hearing more and more stories of corruption at vast quantities, with the state capture inquiry currently happening and we can only be glad we are afforded the opportunity to hear these stories as they are brought to light.  With this comes a glimmer of hope that things can be turned around in South Africa.

A letter from one of our colleagues, Ronnie van’t Hof, summed it up very succinctly and he agreed that we could share it with you:

We began 2018 in a state of euphoria.  Being warm, optimistic and colourful South Africans, we called it Ramaphoria and confidently predicted the return of that elusive pot of gold at the end of our tarnished rainbow.

Over that festive season I was reading Jacques Pauw’s book “The Presidents Keepers” – now the highest ever selling SA book – and one thing was very clear: If Jacques Pauw was right, the extent of state capture was beyond belief.  He was wrong! But he was wrong to the extent that we now see that it was much worse.

Ramaphoria quickly dissipated, and being warm, pessimistic and colourful South Africans, we went into Ramageddon as the debate around EWC became toxic and the state of Eskom’s woes showed us how close to the precipice we are.

So, what should we be feeling?

Before going any further, I would like you to read the article written by Branko Brkic, the editor of the Daily Maverick.  I’ve attached it.  In the article he picks Cyril Ramaphosa as Person of the Year. The position we could have been in, but for 179 votes. What a difference, and we need to keep that perspective and be thankful.

Jan Smuts is attributed with the comment that whenever South Africa was poised for greatness, it stepped back.  Similarly, whenever we stood at the precipice fortunately, we also stepped back. We’ve had two near precipice experiences recently – one we avoided by 179 votes, the other was the non-signing of the nuclear treaty by our ex finance minister, Mr. Nene.

Optimistic? Pessimistic? Those are personal perspectives. Let’s be realistic.

The world is not in a good place. President Trump is personally, without any cabinet or adviser assistance, seeing to that. While I cannot deny that it seemed that he had some good ideas and workable different policies – the markets initially thought so too – reality has now hit home – the markets this last week spoke again, and the message is not positive. The worst ever Christmas Eve decline in the US. With uncertainty comes volatility, and with the 2 biggest economies at loggerheads, economic growth can only be negatively affected.

Europe is sparring with the UK about an exit. Any similarities with our own DA sparring about an exit? The eye is taken off the ball and delivery and growth suffer.

EWC – Expropriation without Compensation?  I have not come across anybody who does not believe that the land question must be settled, not one.  Yet unfortunately the debate has become toxic.

EWC remains a problem, not because of EWC, but because of the uncertainty. It is a major factor affecting growth going forward.

I’ve mentioned Eskom.  There are the other SOE’s, unemployment, education, corruption, the problems we are having with SARS, service delivery.  The list is endless. But…

There are commissions of enquiry, which unquestionably have been good for the country, investment conferences, which have raised investment capital, a judiciary which is showing increasingly how important impartiality and the rule of law is, and in my view most importantly, a free and strident press.  Support them!

In line with the Time person of the year award, our person of the year should also be those journalists who kept at it – who published truth in the face of overwhelming odds.  The likes of Jacques Pauw, Pauli van Wyk, Scorpio, Amabungane.  Were it not for them, I doubt that the structures which led to the election of Cyril Ramaphosa would even have been there.

While I have no doubt that for now, we will again avoid falling off that precipice, ultimately it is economic growth that will keep us “safe”.  We have recently struggled to come out of a zero-growth phase, but even that is now in jeopardy as the world’s largest economies lurch towards recession.

The message is therefor: Expect more volatility and downward movement in your portfolios, review but do not under any circumstances sell off.  The markets will turn, and when they do you have to be there.  While it may just not be in 2019, do not take that chance.

At times like this what is particularly important is take time to reflect and plan ahead.

Wishing you all a peaceful and low stress 2019, and we will certainly endeavour together to make it prosperous too.

I think Ronnie’s perspective is sound and we at Ultima always strive to make sure your portfolios are structured in such a way as to weather storms, but also capture growth when it happens.

Gerrit Viljoen