The Johannesburg Stock Exchange is the best performing stock exchange in the world over the past 117yrs, with an average nominal return on investment of 7,2% after inflation.
Despite more than 30yrs of sanctions, the JSE still out-performed the rest of the world in the past century. Nonetheless, the South African economy was not the best performing in the world over the same period, why? Where did all this value go?
At $1.1tril market capitalization, the JSE is also one of the 12 biggest national stock exchanges in the world. To put it into perspective, the National Stock Exchange of India is only worth $1,6tril, yet the country’s GDP is nine times bigger than South Africa’s.
Albeit, the South African economy is no 29 by GDP purchase power parity, while India is 3rd, so how is this SA stock market performance possible? For if the JSE is going to continue returning an above 7% return over inflation [about 13% in real terms] to $1.1tril of capital invested, where is this return coming from in an economy with a GDP of about $300bil/yr and an average 2% growth rate? What is the true value of South African output?
This is not a good sign, it’s actually a sign of gross exploitation and possibly a gross mis-calculation of the true value of the South African economy as the capital invested in South Africa illustrates extremely higher, more attractive returns than accounted for by the current documented economic figures.
It’s also important to note that capital inflows invested in the country are responsible for greater capital outflows earned as dividends, hence the performance of the stock exchange does not mirror national economic growth or performance.
Why are South Africans not the 12th richest country in the world? Foreign investors are milking her surplus, but it would seem we are not entirely sure just how much output is being sucked by this incessant investment of capital. In other words, investors are sucking South Africa’s wealth with the straw of temporary capital investment that will one day suck greater return to its home....😫😫😫.
By Rutendo Bereza Matinyarare