The future of investment

The new normal is redefining the new investment landscape, but is it really that bleak for Africa?

There is plenty of cynicism and negativity when it comes to South Africa and investment in its future. The recent downgrade by Moody’s was felt particularly keenly in light of the COVID-19 national lockdown and the inevitable economic slump that it would bring. If globally significant economies such as the USA and UK were floundering on their economic feet, then South Africa’s already shaky outlook was hardly going to thrive in the time of corona now or in the future.

But what if now was the right time to invest in South Africa? What if its growing population, born into economic adversity, is a market ripe for growth and development? As technology increasingly makes it easier to access services and solutions, the country will see change on multiple fronts.

The impact of COVID-19 will not exclusively be felt by South Africa. The Dow Jones Industrial Average, FTSE and Nikkei have dropped significantly since December, with the Dow and FTSE experiencing declines on a par with the collapse of 1987. This has led to interest rate cuts as governments race to mitigate the economic decline. The United States saw a record number of unemployment applications at nearly seven million in the early half of April 2020. In China, the economy shrank by 6,8% during the initial phase of the outbreak, and a report published by the Office for Budget Responsibility in the UK has predicted an economic shrinkage of up to 35%. France’s central bank has said that the country has entered a recession with a 6% GDP contraction and Germany is expecting to shrink by 4,2%.

While these numbers are dire and the outlook challenging, this is not the end of the road when it comes to economy and growth. Yes, the impact is likely to last for several years – experts have warned that the hits to the economy will take some time to stabilise – but this does not mean forever. Nor does it mean that the outlook is dire for South Africa. Strong economies are going to take a knock on their GDP, but the South African rand has been hugely undervalued, COVID-19 or not, which will create solid investment opportunities for investors in the next two to three years. This is a forward-thinking outlook on investment that is shared by many investors and financial institutions.

Another consideration is South Africa’s growing young African population. This sits mostly in the informal sector, which is a fertile ground for creating opportunities in technical innovation projects. South Africa has a relatively solid market right now if you take the virus out of the equation, but much needs to be done in terms of strengthening the fiscus and limiting political interference.

The reality is that innovation is an inherent part of Africa’s culture. The challenges that perpetuate and continue on the continent are the building blocks of change. It is also a continent that foreign investment often misunderstands and does not quite get right when it comes to executing a workable strategy. As Africa emerges from COVID-19, the continent will be in for tough times – the world will be in for tough times – but the opportunity exists to build a new future driven by innovation, technology and strategic investment.

This will be further driven by changes in human behaviour. Many experts and analysts are already referring to the world post-COVID-19 as the ‘new normal’, but few can quantify what that will look like. Nobody knows what the economies will do, how the markets will respond, or even how humanity will return to work. Some things can be predicted with some measure of certainty but the ways in which people interact and engage across social and business settings will undergo some fundamental shift. This will create further opportunities in digitisation and analytics, opening up investment gaps that were previously not considered.

Nobody knows what the future holds for South Africa or the world as a whole, but if opportunities existed before the lockdown, then they will exist again. There is no Magic 8-Ball that will determine how economies will shape up once the lockdowns are lifted – the when, the how and the management of movement post-lockdown will have a massive impact on how any one economy will recover – but investment opportunities will always be available to those who can look past the negative right now towards the possible positive tomorrow.

AUTHOR │ Chris Ogden, CEO of RubiBlue