Stuck in between 150 elephants

An insider’s take on the good, bad and investable in South Africa

It was a scene straight out of Animal Planet.

There, 30 yards away, were legions of elephants, at least 150 of them… with more lumbering in.

Their destination was a giant man-made water tank, which dozens of elephants were now congregating around, dipping their massive trunks over the tank wall for a drink.

This majestic sight was happening at Kruger National Park in South Africa, a mammoth animal preserve about the size of New Jersey.

My three days at the park were a highlight of a one-month trip to this fascinating country.

But the most interesting experience I had in South Africa was a night my friends and I spent on a secluded ranch about three hours west of Johannesburg.

Our host was the ranch owner, Dennis, a burly member of a South African chapter of the Hells Angels.

Around the glowing embers of a braai (essentially the South African version of a barbecue), Dennis kept his guests entertained with fascinating stories about his property and the surrounding area.

My friends and I weren’t the only guests enjoying his gripping stories about his encounters with Africa’s deadliest animals and insects.

There were also three women who had worked in various capacities for the South African government.

They told tales of their own, mainly about the many challenges facing their country.

The biggest, they said, was rolling blackouts – which were common throughout South Africa when I was there.

They said one reason for these power outages was years of mismanagement and corruption in the state-owned utility, Eskom.

They blamed the ruling government, the African National Congress (ANC), for much of this, saying its leaders kept siphoning money from the utility that should have been used for maintenance and equipment upgrades.

Another reason they cited was that two new coal plants were behind schedule and billions of dollars over budget.

As if all that weren’t bad enough, they said efforts to maintain the country’s power grid were continually sabotaged.

The culprits were people who kept stealing copper cables from electric poles, power lines, substations and utility storage yards.

And thanks to the bull market in copper, those thefts are getting worse (it’s even caused some railways to close).

These theft incidents highlight what I see as South Africa’s most obvious problem – crime.

At busy intersections in Johannesburg, Cape Town and other cities, you’ll find scores of people hawking trinkets, toys and newspapers to motorists as they wait for traffic lights to change.

When a red light traps you in one of these situations, you have to make sure nothing of value is in view from the outside, as “smash and grab” thefts happen all the time at busy intersections.

House burglaries are also common – virtually every home I saw was surrounded by barbed wire and electric fences.

And at South African airports, you’ll find people waiting in long lines to have their luggage shrink-wrapped in cellophane in order to deter theft from unscrupulous baggage handlers.

Of course, as is the case throughout the world, the root of most of this crime is pervasive impoverishment.

According to Statistics South Africa, 55.5% of the population lives in poverty.

Unfortunately, corruption, crime and poverty aren’t the only problems facing the country. It’s also plagued by water shortages, rampant inflation and excessive immigration of refugees from other parts of Africa.

However, it’s not all doom and gloom, as the nation features a highly developed economy and advanced infrastructure.

It’s also one of the world’s largest exporters of gold, platinum and other natural resources.

And it’s easily the richest country in Africa, with established financial, legal and communications sectors, as well as the largest stock exchange on the continent, the Johannesburg Stock Exchange (JSE).

So do the country’s positives outweigh its negatives from an investment point of view?

I would say yes.

In fact, the iShares MSCI South Africa (NYSE Arca: EZA) has been on a steady uptrend for the last 15 months or so.

From March 23, 2020 to May 24, 2021, it’s marched up from $24.48 to $51.06.

That’s a gain of 108%.

With the world coming out of its COVID-19 funk, I think this trend will continue… so buying EZA outright (or calling options on it) could be profitable.

You could also consider buying Rio Tinto (NYSE: RIO), which could help you profit from the bull market in copper.

The reason?  The company operates the Palabora copper mine in South Africa, one of the largest open pit copper mines in the world.

I’ll close this missive by saying that if you ever have the chance to go on an African safari, you owe it to yourself to do so.

The three days I spent at Kruger National Park was something I’ll never forget.

To your financial health,

Doug Fogel,

Contributing Editor, Dear Retail

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