Stanlib, one of SA biggest’s asset managers with more than R600bn of clients’ money under its custody, has flagged the flight of wealthy individuals as one of the reasons the industry will in the next two to three years face more headwinds than tailwinds.
Stanlib CEO Derrick Msibi painted a bleak picture for the industry over the next few years, saying how well the sector does depends on how much savings there are for them to manage and this is influenced by how fast the economy grows, how many people have jobs, returns from capital markets and whether money is being saved or taken out of SA.
“One of the biggest pools is the pensions pool which has systematically seen outflows with the overall growth being dependent on market returns. What we can see is that returns have been muted across most asset classes, there is no respite to job losses, economic growth is equally tepid and high-net-worth individuals continue to emigrate and externalise their wealth,” Msibi said.
“At the same time, the costs of running firms are outstripping inflation as a result of rising employment costs and the rand/dollar weakness means that technology costs increase more,” he said, referring to the cost of the desktop terminals provided by data providers such as Bloomberg and Reuters that are priced in dollars.
Henley & Partners in its latest Wealth Migration Report for 2023 published last month said SA saw about 400 high-net-worth individuals, or those people worth at least $1m, emigrate in 2022 with a further 500 expected to leave this year.
Msibi said SA’s energy crisis is unlikely to be solved without asset managers mobilising funds, but there is little appetite to fund coal projects.
“It is highly unlikely that the asset management industry in SA will fund new coal projects as a result of most of their ESG [environmental, social, and corporate governance] thrusts and commitments.
“I am not aware of any ESG-conscious asset management firm in SA that can reconcile sustainability and/or ESG commitments with funding new coal projects, even the so-called clean coal is questionable from an ESG point of view,” he said.
Green alternatives
“So the greatest contribution is to continue to mobilise debt and equity finance to go into green alternatives as opposed to coal. There is a great deal of investor appetite for these longer-dated energy projects — the issue is not the capital available but the speed with which projects focused on green energy alternatives are implemented.
“Asset managers play an important role in both raising capital and getting it deployed in a responsible manner.”
Msibi’s comments on funding new coal projects echo similar sentiments from other financial services groups, which have all but closed the door on financing coal projects.
Investec CEO Fani Titi told Business Day in May that Eskom will struggle to source funding from major financial institutions to extend the life of its ageing coal fleet when there are viable cleaner energy alternatives.
“There is in our minds no evidence at the moment to indicate this is the best course of action. The work that had been done by Eskom and other stakeholders had indicated that we can get much better funding to try to accelerate investment in renewables,” Titi said.
Groups like Standard Chartered, Allan Gray and Futuregrowth have also shot down the idea of mobilising private capital in investing in Eskom’s ageing coal-fired plants.
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