South Africa presents a very rare investment opportunity for English speaking investors. It is a country with a great infrastructure, which has an up-and-coming black middle-class and access to a large lower-income market. It is one of the few countries that is self-sufficient (it has so many natural resources that it could survive for a while without any imports).
South Africa has the world's largest gold and platinum reserves, and is the world's leader in gold and platinum mining. The gold and platinum prices have been increasing over the last few years and are breaking new records almost daily. South Africa also produces base metals and coal, is the fourth largest diamond industry in the world and produces fuel from coal.
South Africa has a world-class financial system, a well established manufacturing sector, a large telecommunications infrastructure, and a large and growing tourism industry.
But for the potential investor, South Africa offers much more than just that. South Africa is a growing third world country which has incredible growth opportunities. South Africa has a low average wage for workers, enabling foreign companies to use South Africa's modern infrastructure and low costs to get a foothold in Africa. Motor companies such as General Motors have signed multi-billion dollar deals to manufacture their cars in South Africa. Barclays Bank acquired one of South Africa biggest banks, ABSA Bank, in the largest ever investment in the country at R30 billion in 2005. In November 2005, Vodafone increased its stake in South Africa's biggest cellular company, Vodacom, from 35% to 50% in a deal worth R16 billion.
South Africa provides all its own food and companies such as Cadburys-Schweppes, Coca-Cola, Kelloggs and Unilever have processing plants in South Africa. BMW, Ford, Volkswagen, General Motors, Daimler-Chrysler, and Toyota have production plants in South Africa. Recently Volkswagen invested R6 billion in new plants in South Africa.
Investment opportunities are always around the corner. I believe that there is an opportunity for foreign investment in the flourishing retail sector. There is a large lower-income group which low-cost retailers such as Mr Price and Jet have done extremely well with over the last twenty years or so. Retail shares on the JSE have done exceptionally well over the last five to ten years and South Africa's largest clothing retailer, Edcon, has had returns in excess of 2300% in 5 years!
Foreign investment in South Africa continues to pour in and South Africa's stock market has done very well over the last 3 years. In 2004 GDP was 4.5% and in excess of 5% in 2005. GDP of about 5-6% looks likely over the next few years. All in all South Africa is a brilliant opportunity to invest in a growing and thriving economy.
Having read several magazines, newspapers and online sites, I have gathered that the general investment community of South Africa believe that there will be a stable yet satisfying 15-20% return in 2006 on the JSE.
Well I would like to place a spread bet and go up on 20%. If there are any bookies out there interested you can e-mail me and I'll place my bet. This offer stands for the next 30 days...
But seriously, I have a great belief in the South African economy and the market. I'm gonna take a flyer and say that the JSE will increase by between 25-30% this year. We are in the middle of a bull market that I believe will continue for a few years to come. There are no signs to any slow down and earnings updates are looking good going forward.
So what return do you think we'll see in 2006? Anyone cynical enough to say it'll be negative?
Today's related articles: local equities the place to be, and SA confidence on a high.
