Remember Zimbabwe!

It is a Sunday afternoon, 16 April 2000. A white farmer lies dead on his farm in the district of Macheke, Zimbabwe. His name was David Stevens.

In 1980 Zimbabwe gained its independence and Mugabe became the leader of the country. Every white person feared the worst and many left the country but for 20 years the country prospered. Then it all imploded and lives, families and fortunes were wiped out.

September 2010, Durban, South Africa. The ANC Youth League screams for Nationalization of mines. The implementation of a Media Tribunal is imminent and the redistribution of wealth is not "satisfactory". It is 16 prosperous years since the ANC came into power. Unemployment is rife and only the selected few ANC top brass became obscenely rich since transformation began. Government officials are living like kings and family members of the President became multi millionaires over night.

Why am I telling you this? Not because I believe that South Africa is going to implode soon or on the other hand that that South Africa is not a Zimbabwe, but for one reason only:

The future is uncertain; you have to put your eggs in different baskets!

In 2006 the Zimbabwe Dollar (Z$) was pegged at Z$101 000 for 1US$. On the black market however, the exchange rate was Z$300 000 for 1US$. This rate, as we all know, deteriorated 100 fold over the last couple of years. The irony in it all is that the Zim fat cats and ruling party officials made millions of US$ with the weakening of the Z$ because only they were allowed to buy US$ at the official rate. This is how it worked:

FAT CAT takes Z$10.1mil and buys US$100 (using official exchange rate)
FAT CAT goes to black market and exchanges US$100 for Z$30mil (using black market rate)
FAT CAT goes back to Reserve Bank and buys US$297 with his Z$30mil again.
FAT CAT made 200% profit without doing anything and continues doing this until he can buy a brand new Mercedes-Benz for US$100!

The question you should ask yourself is why are there still people outside of government prospering in Zimbabwe? The answer is simple, they repatriate foreign currency as and when they need it.

I probably need not say anything more to drive home my point. Anything can happen in the word. If you were an investor in American shares over the last 10 years, you made NO money! Would you have believed me if I told you this 10 years ago?

An investment in South African shares gave you a fantastic return over the last 10 years. Once again hard to believe! The Rand is strong at R7 to the US$. There are international shares that are trading at very favourable valuations currently.

My message is thus:

If you haven't got money invested outside of South Africa, doing so with a strong Rand, a fairly priced International share market and a knowledge that it is always prudent to "spread your bets", might come in handy one day when President MALEMA, calls the shots!