I remember being taken aback at a seminar on inclusivity at Harvard University’s Kennedy School a few years ago when one of the invited speakers, an Italian, suggested that poor people may stay poor not because of some inevitable widening of inequality in a capitalist economy, nor any cultural characteristic that might, in the minds of some people, attach itself to the poor.
No, he said; the reason poor people stay poor is that they invest poorly. The rich tend to invest better. Or more wisely. Poor investments mostly do badly. Good ones do well. Most of the time.
My point is to try to imagine an SA with a supercharged, well-run politically unfettered sovereign wealth fund with a brief to invest for future generations. Not for tomorrow, not for next year. But for a decade ahead. For the country. For rich and poor.
Imagine an SA sovereign wealth fund invested in Tesla, now. Shares in a company started by an SA kid with a seriously crazy dream rose 743% in 2020. Earlier in January, Tesla was more valuable than Facebook. We, as a country, could have had a stake in it. Alas, we have zero. Nimble and audacious we are not.
This time in 2020, the share price of small but ambitious pharmaceuticals company Moderna, by way of an irritating example, was $19. Today, with a Sars-CoV-2 vaccine under its belt and tens of millions of vaccinations ordered, its share price is $156.
Let me go back. Obviously, there is no SA sovereign wealth fund, and if there was it would be a political cauldron. But we do have the Public Investment Corporation, the PIC, whose job it is to manage the funds (pensions) of former and current public servants. The PIC is the biggest single investor in the JSE and has about R2-trillion (two thousand billion rand) under management.
None of it is directly invested in a foreign listed share, which is just not right. About 9% of its funds are invested in offshore funds, which would buy fractions of equities and bonds. But 9% offshore is desperately low. In SA, public servants are often seen as protected game, a charge repeated virus lockdowns have intensified. But the reality is that most will have to retire on very little. The SA middle class is a flimsy thread, the bedrock of nothing. An illusion. The PIC invested their funds in Iqbal Survé and his newspapers, and their children deserve better.
Investing abroad is just common sense. Every South African should have a stake in the Apples, the AstraZenecas and the Modernas of this world. And when we (and future generations) need the money, like we sure as hell do now, it’s there. Buying vaccines is literally life and death for us. The fact that we don’t have the money is due to a combination of a lust for theft and a fear of adventure. A responsible government would, right in the middle of this global crisis, start a sovereign wealth fund immediately and protect it, constitutionally, from all politics.
It would copy the Norwegians, whose huge sovereign fund is simply not allowed to be swayed by any politics. Housed inside its central bank, the Norwegian fund is worth about $1.5-trillion and owns roughly 1.5% of all the world’s equities. Put another way, it is worth about $200,000 per Norwegian.
Its success brings occasional controversy, but all SA has to do is find a funding model and stick to it. We could raise mining royalties and put the increased take into the fund in perpetuity. It could take 1% of the annual national budget each year. The key would be to keep it well away from politicians, who would spend it on saving dead airlines and on expensive cars.
And, for the most part, you have to forget about it, other than to make sure it reports regularly and accurately. I’m no expert, but watching how money grows offshore and how much the basically ever-falling rand helps is really heartening. Seriously wealthy South Africans do this all the time. They are alert, opportunistic when the need arises, and ambitious. Magda Wierzycka, a high-profile local fund manager, is an excellent example.
She set up a venture capital business in the UK and raised R5bn from SA pension funds (none from the PIC, sorry guys) to start two funds, both of which invest in companies that start life at Oxford university. She is also the biggest shareholder in a company that has preferential access to all the intellectual property of Oxford. That’s how you do it. Wierzycka may not be everyone’s favourite person but, damn, she’s an investor for the future.
I don’t know how you transfer smarts like hers to a government, and ours is not the only state lacking in vision. But instead of looking for ways to squeeze more money out of wealthy South Africans, the government should be asking the wealthy to help it think better and act smarter.
We’re in trouble because we’re slow and ponderous and terrified of making mistakes. Wealthy people are in large measure none of those things. A sovereign wealth fund run by serious but savvy investors, however small it starts, would completely reshape our future. Other countries have done it. So can we.
• Bruce is a former editor of Business Day and the Financial Mail.
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