Jean Pierre Verster’s investment strategy ahead of the 2024 elections

Protea Capital Management founder and CEO Jean Pierre Verster said they decreased their exposure to equities ahead of the 2024 general elections in South Africa to play it safe.

Verster, who manages his own hedge funds at Protea Capital Management, is well known for predicting the collapse of Steinhoff and African Bank.

Speaking to Business Day TV, Verster said they decreased the gross exposure in their funds, which means they hold more cash.

This strategy is to guard them against something unexpected happening in the 2024 South African general elections in May.

Many polls predict that the ruling ANC may lose its 50% majority, which will force the party to create a coalition government to maintain power.

However, what such a coalition may look like is uncertain. This, in turn, creates tremendous uncertainty, which the market does not like.

Many South Africans are concerned about an ANC/EFF coalition which may result in left-leaning policies which can further hurt the South African business environment.

Others are more upbeat about the election, betting on a positive outcome with smaller, more business-friendly parties gaining more power.

Instead of making a call on the election and betting one way or another, he is taking a conservative approach by holding more cash.

He explained that the market could react negatively to an unexpected result in the 2024 elections, which can result in people losing money if they bet the wrong way.

Verster said political power provides cover to shenanigans happening in the public service sector in South Africa. This includes cadre deployment.

“This has weakened the government and civil service to the point that it has damaged the economy,” he said.

“It is one thing to have a government that is incompetent and does not contribute to economic growth. It is another to have a government that detracts from growth.”

He explained that in South Africa’s case, incompetence turned into something worse – corruption.

Verster said it would be positive if the elections meant that the ruling party lost political power which will end cadre deployment.

This may lead to more professionalisation in the civil service, especially at the local government level, where many municipalities collapsed.

“What you don’t want is a new dominant political power, where the ANC will go into coalition with the EFF,” he said.

“That is the key question. A loss of political power will be good, but a new majority power which is less business-friendly will be bad.”

“Because we don’t know which one of the two we will get after the 2024 elections, we are more conservative and hold more cash.”