{"id":969,"date":"2022-04-01T06:29:51","date_gmt":"2022-04-01T06:29:51","guid":{"rendered":"https:\/\/www.innov8fs.co.za\/blog\/?p=969"},"modified":"2026-03-18T11:46:28","modified_gmt":"2026-03-18T11:46:28","slug":"sa-no-country-for-rich-people-heystek-vs-gore","status":"publish","type":"post","link":"https:\/\/www.innov8fs.co.za\/blog\/2022\/04\/01\/sa-no-country-for-rich-people-heystek-vs-gore\/","title":{"rendered":"SA no country for rich people \u2013 Heystek vs Gore"},"content":{"rendered":"

You could argue that if enough people see the glass as half full, the storm clouds will gather, and the rain will come pelting down to fill it. So long as we remain positive, there\u2019ll be enough water to see us through any drought. Except that the universe doesn\u2019t work quite like that. For\u00a0Magnus Heystek\u00a0of Brenthurst Wealth, the storm clouds have been gathering for quite some time and it doesn\u2019t bode\u00a0well for South Africa. Certainly not as well as the ebullient and positive\u00a0Discovery CEO Adrian Gore\u00a0would have us believe. Gore\u2019s can-do attitude built an empire now at the cutting edge of health funding, but Heystek believes his characteristic buoyancy and outlook are out of kilter with the reality we live with today. He goes further to say it\u2019s politic, given the incipient\u00a0NHI\u2019s existential threat\u00a0to Discovery Health. Then to add insult to injury (nothing personal, he likes and admires Gore), he provides a host of real-life examples of why this country will likely go to the dogs. \u2013 Chris Bateman<\/em><\/p>\n

\"\"<\/h2>\n

SA no country for rich people<\/h2>\n

By\u00a0Magnus Heystek*\u00a0<\/strong><\/p>\n

Adrian Gore, CEO of the Discovery Group, is one of the smartest and most likeable people I know. He has also built up several great local and international businesses over the past 25 years or so, ever since he left Liberty when the old guard there didn\u2019t buy into his vision of what he wanted to achieve. Instead, he trotted over to the much younger and gung-ho RMB-threesome of\u00a0Paul Harris, GT Ferreira and Laurie Dippenaar\u00a0who had \u2026 in the process making great fortunes for all.<\/p>\n

I wrote an article for\u00a0The Star<\/em>\u00a0at the time when all of this was going down and compared the average age of directors at Liberty (57) to that at RMB (33) and concluded that the Liberty directors were winding down the clock to their retirement and were not going to be doing anything to upset the value of their share options, meant to fund a very cosseted retirement, either in SA or in other parts of the world, as what happened to Donny Gordon.<\/p>\n

The RMB founders saw the upside and provided the seed capital for Discovery and the results are here for all to see today.<\/p>\n

In this instance, the blue-sky potential and optimism were rewarded, mainly for the founding directors and early shareholders. We are talking billions here,\u00a0not mere millions.<\/p>\n

Gore, over the years, was always the fount of optimism, wherever and whenever he spoke in public. First at the Investment Planning Summits sponsored by Discovery where world leaders and rock stars were flown in to inspire and motivate an increasingly demotivated South African audience who were starting to feel the impact of the slow deterioration of business and society in general. This was during the height of the Zuma years and\u00a0the era of state capture.<\/p>\n

Last week, at Cyril\u2019s Investment Summit in Sandton, he was at it again. \u201cSouth Africa has tremendous potential and the narrative around the country is much worse than the reality,\u201d\u00a0he was quoted as saying. \u201cAssets are underpriced, opportunities are overlooked and underpriced and people are distracted \u2026 I think that is the opportunity in South Africa. The economy is less risky than people tend to think. Forget about emotions and opinions \u2026 look to crunch the data,\u201d he said (Businesstech).<\/p>\n

Unemployment at record levels<\/h3>\n

Almost on the same day, three different pieces of economic news broke.\u00a0 First, Statistics SA announced SA\u2019s unemployment rate\u00a0was at a new record high of 36,5%. If one included those people who have stopped looking for work, the number was well over 40%.<\/p>\n

Then, Massyns\u00a0\u2013 a well-known national road transport and logistics group whose trucks are very familiar on roads all over SA \u2013 announced it was closing shop. Company director Frans Massyn said the closure was mainly due to the market conditions in the road freight industry and the vandalism and damages the company experiences on our roads, which included among others, theft, looting, arson, poor road conditions as well as corruption by law enforcement agencies.<\/p>\n

A few days later,\u00a0Bell Equipment, producers of the world\u2019s largest range of articulated dump trucks, announced it is moving more of its manufacturing away from SA and the \u201crisk presented by the volatility of the SA landscape going forward\u201d. Bell said that South Africa remains a tough environment with\u00a0low business confidence\u00a0and that the\u00a0civil unrest in KwaZulu-Natal last year in July\u00a0\u2013 which temporarily closed its Richard Bay factory \u2013 exacerbated supply-chain challenges and logistical issues created by the pandemic.<\/p>\n

There are many other \u2018Massyns\u2019 or \u2018Bells\u2019 in South Africa at the moment. They do not announce anything but simply close up shop and walk away. A visit to almost any town or city in South Africa will reveal hundreds, if not thousands of such ignominious business endings with a loss of production, employment and tax revenues.<\/p>\n

Even Cosatu last week warned the government that entire small towns in many parts of the country have been abandoned by people and businesses, leaving locals nowhere to go than the larger cities.<\/p>\n

Last year,\u00a0Clover announced\u00a0the closure of its milk- and cheese-processing factory in Lichtenburg in the North West to somewhere in the Durban region. Clover blamed this move on the collapse in the roads, infrastructure and unhelpful municipality. Talk about jumping from the frying pan into the fire!<\/p>\n

And during the national unrest in July last year,\u00a0Toyota came very close\u00a0to shutting up shop. In a letter written by Toshimitsu Imai, Toyota\u2019s regional head for Africa, to eThekwini mayor Mxolisi Kaunda expressed his concerns about the state of affairs. It is very rare for a Japanese company to air such grievances in public. It was rumoured at the time that Toyota was very close to pulling the plug on its SA operations. That would have been catastrophic to SA\u2019s image in the business world.<\/p>\n

Unfortunately, he said the incidents in the city (Durban) have left Toyota feeling very uncertain about the future of its business in KwaZulu-Natal.<\/p>\n

Misplaced uber-optimism<\/h3>\n

Gore has taken some serious flack \u2013 rightly so in my view \u2013 for this uber-optimistic view of the economy, which is not backed up by many facts. Gore feebly tried to protest that the general narrative is misplaced and that investors are not seeing the blue-sky potential that South Africa offers.\u00a0His comments about how rapidly the\u00a0SA economy had recovered\u00a0post-Covid-19 had all the elements of a little porker. It simply wasn\u2019t true as many studies have shown the SA economy had fared very poorly in its recovery relative to other developing countries.<\/p>\n

He also omitted to mention that SA had lost two million jobs during the Covid-19 pandemic, which have not been recreated again. Facts and reality come before the narrative, not the other way around. South Africans from all spheres of life \u2013 from the lowly paid worker catching (or not) a train to the executive dodging the potholes to his offices \u2013 are experiencing the slow-moving destruction of infrastructure, state-owned entities and general failure of our towns and cities.<\/p>\n

In Cape Town, the municipality cannot move people squatting on a railway line that was abandoned because of the\u00a0continued arson of trains\u00a0in SA\u2019s second city.<\/p>\n

Many other prominent businesspeople in recent days and weeks have been warning about SA\u2019s trajectory towards being a failed state. These include Mike Brown from Nedbank, Claude Baissac from Eunomics, and Neil Froneman from Sibanje-Stillwater.<\/p>\n

If SA\u2019s potential is lurking somewhere in the statistics, as Gore says they are, I am failing to find them. In fact, the more I delve into the numbers, the more I remain convinced that SA\u2019s trajectory towards becoming a failed state in parts will not be arrested or stopped altogether.<\/p>\n

Almost every day brings yet more proof of the wholesale and systemic looting and destruction of infrastructure that still takes place. The Lotto, SA Post Office, municipal debt to Eskom, Charlotte Maxeke Hospital, roads and railway, the ANC stealing money from its own workers and\u00a0not paying SARS\u00a0and then calling it a cash-flow problem. These are but a few of them.<\/p>\n

It\u2019s these things, Adrian, that create the narrative, not the other way around. If things were going well, you would have seen the full-throated roar of unbridled capitalism and opportunity-seeking ventures. But we are not. Instead, SA\u2019s high-net-worth individuals (assets of $30m or more) are heading for hills in ever-increasing numbers.<\/p>\n

SA no country for rich people<\/h3>\n

Last year, during the BizNews Investment seminar in August,\u00a0mercurial speaker Rob Hersov\u00a0\u2013 who obviously moves in those circles \u2013 warned that SA\u2019s rich are fleeing the country. This has now been confirmed by a report from Knight Franks that SA\u2019s already under pressure HNWIs shrank from 603 to 561 during 2021, a reduction of 7%, mainly due to emigration and declining local fortunes. Hell, we can now get almost all of our HNWIs into one Airbus 380 heading to Dubai or\u00a0Mauritius.<\/p>\n

Financial Mail<\/em>\u00a0editor\u00a0Rob Rose writes\u00a0about this as follows: \u201cIf indeed SA\u2019s wealthiest individuals are fleeing the country, as the new Frank Knight wealth report suggests, this could have a worryingly disproportionate impact on the country\u2019s tax base.\u201d<\/p>\n

SA\u2019s fall was the most pronounced on the list, alongside Vietnam. Furthermore, and in a finding alluding to rising emigration, it added that 31% of SA\u2019s HNWIs plan to apply for a\u00a0second passport or citizenship.<\/p>\n

SA\u2019s rich and even not so rich are very well informed as to what is happening in the country. They are concerned about many things: retaining their wealth, the safety and security of their families and also future levels of taxation. The biggest concerns right now, in my view, are the proposed health insurance scheme being contemplated by the government, and how to fund the soon-to-be-announced basic income grant.<\/p>\n

First-hand experiences<\/h3>\n

I am more than convinced that Discovery \u2013 either the medical aid or investment company \u2013 are experiencing these\u00a0things first-hand. It\u2019s a well-known statistic that medical aid membership numbers, including at Discovery, have been stagnant or declining in recent years.<\/p>\n

One of its competitors, PPS recently warned that emigration among its members has risen sharply. In September last year,\u00a0CEO Izak Smit\u00a0\u2013\u00a0of the company that offers investment and insurance products to graduate professionals \u2013 red-flagged the exodus of SA\u2019s most skilled workers who not only provide tax revenues, but also support jobs across the economy.<\/p>\n

According to a report in\u00a0Business Day<\/em>\u00a0on 21 September 2021, about 600 of the 2,500 members who left\u00a0PPS cited emigration\u00a0as a reason for leaving. In the same report, it quoted Jannie Rossouw from Wits Business School as saying emigration among high-income earners is bedevilling SA\u2019s already stretched\u00a0personal income tax base.<\/p>\n

In the last two years, about 9,000 people earning a taxable income of R750,000 or more had emigrated. \u201cSA is losing its tax base,\u201d Rossouw is quoted as saying.<\/p>\n

No wonder SARS in the recent Budget announced that all people with assets in excess of R50m must now provide market-related valuations for their assets. This is another additional administrative burden to taxpayers (how do you evaluate private, unlisted businesses?). It is also a clear sign that SARS is gearing up for a major assault on the remaining wealth left in SA via a\u00a0kind of wealth tax.<\/p>\n

One gets the impression that Gore is desperately sidling up to the ANC and Cyril Ramaphosa in order to protect his Discovery medical aid business, in light of the plans by the government to virtually do away with medical aid schemes. The market, as yet, does not seem worried about this happening, but at some stage, it could. Perhaps Discovery is trying to convince the government that it should manage the\u00a0NHI scheme. I don\u2019t know first-hand, but one can speculate.<\/p>\n

In a strange way, I hope that Gore is right that I am (and the others who agree with me) are wrong.<\/p>\n

I live in this country and so do my six children and four grandchildren. But I must be looking into a different crystal ball than the one Gore looks in every morning before he drives to that shiny new head office of Discovery in Sandton, where office vacancies are now running at about 25%.<\/p>\n","protected":false},"excerpt":{"rendered":"

You could argue that if enough people see the glass as half full, the storm clouds will gather, and the rain will come pelting down…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-969","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/969","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/comments?post=969"}],"version-history":[{"count":1,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/969\/revisions"}],"predecessor-version":[{"id":971,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/posts\/969\/revisions\/971"}],"wp:attachment":[{"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/media?parent=969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/categories?post=969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.innov8fs.co.za\/blog\/wp-json\/wp\/v2\/tags?post=969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}