When I was a young man, my favorite subject in school was geography… and it still is. Even though I’m a “numbers guy” by profession, I’ve never lost my love of learning about places all around the globe – often visiting them and seeing them for myself.
My wanderlust has led me around the world many times over. There was always one place I wanted to see, but had no good reason to visit… until now: Cape Town, South Africa.
As I write to you, I am sitting at the Two Oceans Restaurant sipping a double vodka with a splash of cranberry and scanning the horizon. In the distance, not more than a mile away from where I sit, I can see the southernmost point of Africa.
It’s the Cape of Good Hope, so named by Vasco da Gama, the Portuguese explorer who was in search of a new spice route from India to Europe to end the monopoly of the Turks and Venetians, who controlled access through the Mediterranean. His predecessor, Bartolomeu Dias, made the journey first, but did not manage to make it all the way back to Lisbon.
The Cape of Good Hope overlooks one of the world’s most treacherous sea lanes – the merging point of the Indian Ocean and the Atlantic Ocean. Ironically, many mariners lost all hope of survival while trying to navigate around this cape. The coastline near the Cape is the “graveyard” of more than 3,000 sunken ships.
But on land, Cape Town is a very safe and beautiful city surrounded by mountains, wine country and magnificent ocean views. It is a very different kind of city than Johannesburg, which I visited a few days ago. As far as the potential for investing in South Africa, Johannesburg left a very sour taste in my mouth.
But economic conditions are much more inviting in Cape Town. It has a bustling port, a thriving tourism business and a strong commercial sector that boasts major investments from Amazon.
As part of my meeting schedule, I met with Lance Greyling, the director of trade and investment for Cape Town. He was an affable character with volumes of knowledge and statistics about the city and region.
Unemployment in Cape Town is half the national average of 40%. Business and industry flock to the city to set up operations. The entertainment and convention business is booming, and real estate prices are moving higher.
It’s the opposite of Johannesburg, and that’s mainly due to the city’s government not being an arm of the national ruling party, the African National Congress. The city is run by the opposition party and seems better for it, which seemed to be the sentiment throughout the journey.
The African National Congress, Nelson Mandela’s party, is running the country into the ground as a result of high levels of corruption and mismanagement since Mandela stepped down as president… more so since his death in 2013.
Real estate is a bright spot in Cape Town. You can have California coastline views, with mountains in the background or spectacular views of the country’s Stellenbosch wine district, for about a tenth of the price you would pay in California for the same type of property.
But ultimately, you are still in a country where the masses are uneducated, impoverished and lacking hope for the future.
I spoke to one white South African farmer, and he was packing his bags for Indiana, of all places. His farming operation in Gaborone, in the north, was faring poorly. Between the drought and rumblings of Zimbabwe-style nationalization, he was packing it in and moving on to greener pastures.
That is the problem in a nutshell. The local African population, the vast majority, just doesn’t have the professional class to manage the country despite its massive resource wealth.
During the period of apartheid, blacks were not allowed to study beyond a rudimentary low-level education. Suddenly an entire functional and prosperous country was theirs, but they had little to do with governing it and everything to do with building it.
Higher education was taught in Afrikaans and was only really available to the minority. Hence you end up with a small group of highly educated blacks who are benefiting mightily from the system while the rest suffer.
In the meantime, resentment is building and access to free education is the new battle cry of the masses. It will be a generation or two before the country is able to realize its potential again… and that’s only if it doesn’t suffer from an economic civil war, or worse, in the meantime.
South Africa is a beautiful place to visit if you’re okay with sleeping with one eye open at all times. But from an investment standpoint, unless you have an extremely high tolerance for risk, there are many better options out there.
Good investing,
Karim Rahemtulla
For The Non-Dollar Report
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