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Anchor Group CEO: This is how much corporate South Africa has lost on offshore forays
SA-based companies are having a horrific time in 2020, with the impacts of a struggling economy and COVID-19 taking their toll. However, for many of these businesses it started a long time ago, as corporate SA went on a global diversification spending spree over the past decade. It is estimated that corporate SA has destroyed over R300 billions of value over the past decade through these offshore forays. Anchor Group CEO, Peter Armitage joins CNBC Africa for more.
Mon, 20 Jul 2020 15:37:51 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Corporate South Africa has lost over R300 billion in value through offshore investments over the past decade.
- Companies expanded into unfamiliar territories, resulting in overpriced acquisitions and poor management decisions.
- The need to build confidence and predictability in the local economy to attract private sector investment and drive economic growth.
South African-based companies have been facing significant challenges in 2020 due to a struggling economy compounded by the impacts of the COVID-19 pandemic. However, for many of these businesses, the struggles began much earlier, as corporate South Africa engaged in a spree of global diversification over the past decade. It is estimated that corporate South Africa has collectively lost over R300 billion in value through these offshore investments. The Anchor Group CEO, Peter Armitage, shed light on this issue in a recent interview with CNBC Africa, explaining the rationale behind this massive loss and the lessons that can be learned from it. The calculation of this staggering figure was based on various factors, including the comparison of companies' share prices at their peak to their current value. One example cited by Armitage is Sasol, which invested $13 billion in an offshore plant in the US. Had they not made this investment, their share price could have been significantly higher today. Similarly, companies like Woolworths, which spent 20 billion Rands on acquiring David Jones in Australia, have seen their investments erode in value, leading to shareholder dissatisfaction. The list of companies that have been negatively impacted by offshore investments goes on, with Braits, Famous Brands, and Mediclinic among them. Armitage highlighted several key issues contributing to this value destruction. One common factor is that companies expanded into unfamiliar territories without adequate expertise, often making acquisitions that proved to be overpriced or poorly managed. Additionally, external factors such as government regulations or unexpected macroeconomic events like Brexit have added to the challenges faced by these companies. Armitage emphasized the importance of building confidence and predictability in the local economy to encourage South African companies to invest their capital domestically. He emphasized the need for the government and private sector to collaborate in creating an environment conducive to investment, where companies feel assured of a good return on their capital. Despite the current uncertainties brought about by COVID-19, many South African companies still hold strong balance sheets and significant cash reserves, indicating the potential for increased investment in the local economy once conditions improve.
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