AFG unveils investment products to boost black wealth creation
- Author: Andile Ntingi
- Published: Thursday, 15 December 2016 11:40
African Financial Group (AFG), the financial services firm owned by surgeon-turned-businessman Dr Gil Mahlati, has launched a series of investment products that could hasten wealth accumulation for black South Africans, whose gains have been reversed since the global recession of 2009.
Dr Mahlati, who is the chairman of AFG, believes his investment solutions will give black economic empowerment (BEE) a much-needed boost, as the products are aimed at mobilising savings by black consumers and using the funds to invest in companies and projects that advance black wealth accumulation.
“The increase in the black middle class creates opportunities for building a foundation for intergenerational wealth, using modern financial instruments. This will also help speed up wealth accumulation and ownership of the economy by black people,” said Dr Mahlati.
“We have created investment vehicles that are designed to pool savings in black communities, while at the same time investing the capital in fast-growing companies that also embrace transformation.”
AFG says it will invest the funds on behalf of investors across a range of asset classes, such as shares, bonds, property and cash. High net worth individuals can invest in direct share portfolios, which caters for investors with a minimum lump sum of R500 000 and investable assets of up to R5 million. Less affluent clients can invest in unit trusts that require monthly contributions of no less than R2 000 or a lump sum of no less than R100 000.
“Our investment solutions and products provide an excellent opportunity for MTN Zakhele shareholders to re-invest the R4.5 billion cash payout that will be transferred into their hands on the 14th of December 2016. We are ideally positioned to grow their funds, while at the same time utilising the funds to push for real and meaningful transformation of our economy,” said Dr Mahlati.
“The increase in the black middle class creates opportunities for building a foundation for intergenerational wealth, using modern financial instruments. This will also help speed up wealth accumulation and ownership of the economy by black people”
The idea of generating wealth among blacks appears to have been borrowed from the Afrikaner community, which funded its initial phases of economic empowerment in the early 1900s through mobilising savings. Those savings were later used to establish Afrikaner-owned companies like Sanlam and Volkskas (which eventually became part of Absa Bank), and many others.
Today, Afrikaner capital has internationalised and Afrikaner-owned businesses like Shoprite, Naspers, Sanlam, Remgro, PSG, and Steinhoff have tentacles across Africa and the rest of the world. Afrikaners also benefitted from apartheid laws that restricted blacks from participating in the mainstream economy, thereby limiting competition and promoting white economic dominance. Afrikaners further accumulated their wealth behind tariff walls and benefitted immensely from cheap African labour, which also served as a big market for their goods and services.
However, BEE is yet to achieve meaningful wealth creation that is equitably spread across the black society, despite an increase in the black middle class.
Three phases of BEE dating back to 1994 have not delivered the necessary transformation of the South African economy because not enough attention was devoted to developing financial services that create a pool of savings to drive transformation. Moreover, black capitalists did not receive market protection like the Afrikaners did and their listed wealth was exposed to financial market meltdowns.
“We have an opportunity to leverage local and global investment vehicles to invest in our economic initiatives. A sustainable way of achieving this goal is pooling savings and investing these funds in debt-free assets that generate wealth. The current black economic empowerment model has slowed transformation and concentrated wealth in the hands of a few,” said Dr Mahlati.