Author: Justin Too

Founder & Managing Director, JTOO Ventures, LLC.

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A Glimpse of South Africa’s Rich Economy

Cape Town, South Africa – Image courtesy of Seascape Tours

From a picturesque coastline to rolling grasslands and one of the world’s most iconic mountains, South Africa’s landscape is a sight to behold. Yet the country is rich in more than natural beauty: South Africa has a competitive, world-class economy that exports to many of the world’s leading nations. With a newly elected President who is known for his forward-thinking policies and investments, this African country has made a name for itself as a developing market to watch.

South Africa by the Numbers

Here are some key figures that explain why sophisticated investors are so intrigued by South Africa:

  • South Africa’s economy is the second largest in all of Africa and the 34th largest in the world.
  • South Africa’s debt to Gross Domestic Product (GDP) ratio averaged 39.5% from 2007 to 2017. The World Bank recommends a ratio below 60%.
  • In terms of Purchasing Power Parity (PPP), South Africa has the eighth highest per capita income in Africa.
  • South Africa’s tax revenue increased from R100 billion in 1994 to R1 trillion in 2014.
  • In 2018, one of South Africa’s main economic hubs, Cape Town, saw 8.5x growth in its luxury real estate market compared to the world’s overall property markets.

South Africa’s Top Industries & Exports

South Africa’s rich ecosystem is one of the country’s greatest assets. For instance, South Africa is the second largest exporter of fruit in the world, with oranges, apples, grapes, and pears making up the biggest share. The fruit industry has a high job-multiplier effect on the local economy that creates hundreds of thousands of jobs for South Africans, boosting the local economy through increased consumer spending.

Mineral resources are also an important industry in the South African economy, worth an estimated R20.3 trillion. In 2017, agriculture, mining, and manufacturing were the main drivers of economic growth during the third quarter, and for years South Africa has been the world’s leader in platinum output, producing over six times more than the next best country (Russia). The country also ranks highly in palladium output (2nd), gold output (3rd), coal output (6th), and wool output (9th).

Image courtesy of Pexels

Here are the top 5 economic sectors that contributed to South Africa’s GDP in Q1 2018:

  • Finance, real estate, and business services: 21.0%
  • Government services: 18.0%
  • Trade: 15.0%
  • Manufacturing: 13.0%
  • Transport: 10.0%

According to a recent report, “South Africa has sophisticated financial, legal, and telecommunications sectors and a number of global business process outsourcing (BPO) operations are located in the country.” Chemical technologies, the automotive industry, and South Africa’s ocean economy each play an important role in the country’s economic prowess.

Vehicle manufacturers such as BMW, Ford, Volkswagen, Nissan, Daimler-Chrysler, and Toyota have production plants in South Africa. At the same time, the country is a world leader in coal-based synthesis and gas-to-liquids (GTL) technologies within its prominent petrochemicals industry.

Image courtesy of Pexels

South Africa Tourism Rates Continue to Rise

With beautiful landscapes, bustling cities, and some of the highest levels of biodiversity in the world, South Africa is quickly becoming an in-demand tourist destination. Since 2006, the number of tourists has nearly doubled and is expected to reach 19.5 million individuals by the year 2022.

There are nine UNESCO World Heritage sites in South Africa alone, and in 2012, South Africa’s iconic Table Mountain was inaugurated as one of the New Seven Wonders of Nature.

Cape Town, South Africa

South Africa has also hosted a number of important sporting events, which has helped attract increasing numbers of tourists. In 2010, the region became the first African country to host the FIFA Soccer World Cup, earning it recognition as the second country in the world to host the Cricket, Rugby Union, and Soccer World Cups.

Other Fun Facts

Here are some other fun facts:

  1. Elon Musk, the founder of Tesla, SpaceX, and the Boring Company, was born in South Africa.
  2. The first MBA programme outside of the U.S. was started by the University of Pretoria in 1949.
  3. The first human-to-human heart transplant was performed by cardiac surgeon Christiaan Barnard in December 1967.
  4. South Africa has the highest commercial bungy jump in the world (710 feet).
  5. South Africa is home to the world’s largest individually timed cycle race (the Cape Argus Cycle Race), the world’s largest open water swim (the Midmar Mile), and the world’s largest ultra-marathon (the Comrades Marathon).
  6. Kruger National Park supports the greatest variety of wildlife species on the African continent.
  7. Since the 1940s, South African golfers have won more golf majors than any other nation, apart from the United States.
  8. Cape Town was named the top tourist destination in the world in the 2013 Traveler’s Choice Destinations Awards.
  9. Cape Town International was rated the best airport in Africa, according to the World Airport Awards 2012. O.R. Tambo International in Johannesburg was second, and King Shaka International in Durban came in third.

Elon Musk, the South African founder of Tesla, SpaceX, and the Boring Company. Image courtesy of FS Media.

With a rich economy, growing influence in the global arena, and extremely favorable trade agreements with the United States, South Africa has caught the attention of sophisticated goal-based investors from around the globe.

Subscribe to learn how our exclusive South African investments can benefit your portfolio.

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Innovative Co-Investments with JTOO Ventures & FWJK Developments

We’re officially announcing today an extremely exciting partnership between our firm and FWJK Developments, the largest private property developer in South Africa. FWJK Developments has, for the past two years running, been awarded the prestigious PMR Golden Arrow award in the top Diamond category for the best property developer in South Africa.

Illovo Central – Johannesburg, South Africa

Our partnership is set to bring a pipeline of incredible real estate co-development opportunities to the US investor market. And we couldn’t be more thrilled to be committing to 10 years of co-investments together with FWJK, who we consider to be one of today’s leading property developers in the world.

Over the last 10 years, FWJK has successfully developed over R4.6B of beautiful medium-to-high rise properties, yielding large returns on equity to their shareholders. FWJK’s mission is to be Innovators of Practical Development Solutions. They value beautifully designed buildings which are economically feasible yet attractive to potential investors.

35 on Main – Cape Town, South Africa

As FWJK’s exclusive US based private equity firm, we’re so delighted to offer US investors access to this in-demand and high growth market.

South Africa is currently the African continent’s second largest economy by GDP and is a gateway into many other lucrative opportunities. And with FWJK’s offices in the country’s main metropolitans: Cape Town, Johannesburg, and Durban, we are strategically positioned to leverage all of the very best opportunities that South Africa has to offer its investors.

Ridge 8 – Durban, South Africa

As a native born South African living in the US, our Founder & Managing Director, Justin Too, has personally witnessed South Africa’s rapid growth and innovations. And he believes the opportunities there are limitless to those looking for global exposure in what we believe to be the best asset class for savvy investors.

South African private equity real estate is our specialty at JTOO Ventures, and together with FWJK’s experience & expertise, we are positioned to offer the world a decade of some of the most elegant properties ever developed.

We’re so excited to co-develop and co-invest together.

And together, make history!

Follow our adventure:
– Get in touch: hello@jtooventures.com
– Website: http://jtooventures.com
– Twitter: http://twitter.com/jtooventures
– Instagram: http://instagram.com/jtooventures
– Facebook: http://facebook.com/jtooventures
– LinkedIn: http://linkedin.com/company/jtooventures
– Medium: http://medium.com/@jtooventures

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BRICS: South Africa Gains Financial Security Through Global Alliance

Brazil, Russia, India, China, and South Africa, known simply as BRICS, are a group of five fast-developing economies that analysts believe will be most dominant in the next thirty years. Originally coined by economists at Goldman Sachs, this prominent group of countries first included just four countries (BRIC), but ultimately South Africa was included in these top ranks.

Today, BRICS is a powerful geopolitical and economic group known around the globe. Spanning four continents and representing over one third of the world’s population, BRICS members are known for their significant influence on regional affairs––all are members of the G20, which includes other countries like the United States, United Kingdom, Japan, Australia, Mexico, and the European Union. In addition, leaders from BRICS regularly meet to share opportunities and discuss policies and actions that benefit one another.

South Africa’s Growing Influence in the Global Arena

Since being recognized as an emerging economy and joining BRICS in 2010, South Africa has gained a greater influence and exponentially more trade opportunities in the global market to boost its own economy. While this has been a huge benefit to South Africa’s economy, BRICS has been great for the entire African continent.

How we made it in Africa says, “With South Africa as a permanent member, Africa is not left out of major decisions made by other developing nations. Africa therefore has the opportunity to contribute to the decision-making process, and reap the benefits from the economic cooperation among the BRICS nations.”

South African Ties to the BRICS Development Bank

As a member of BRICS, South Africa has access to the New Development Bank (NDB), which is the “brainchild” of BRICS countries. Created after the 2008 financial crisis, the NDB “seeks to set itself as an alternative development funder to compete with traditional multi-laterals like the IMF and World Bank.” With access to the NDB, African countries now have an alternative source for major project financing, which has been and will continue to be a huge asset for the region.

Today, the NDB is based in Shanghai, but has regional branches in BRICS countries, such as the Africa Regional Centre in South Africa. In 2017, the local arm of the NDB approved loans worth $1.5 billion to fund infrastructure-related projects in South Africa. By 2021, the NDB is targeted to dispense up to $15 billion to fund relevant projects. South Africa is represented on the bank’s Board of Governors and Board of Directors.

South Africa Increases Trade With China

When South Africa joined BRICS, the Chinese Foreign Ministry spokesperson said, “We believe that South Africa’s accession will promote the development of BRICS and enhance cooperation between emerging economies.”

Since then, China has become South Africa’s largest trading partner. According to the International Trade Centre, China-Africa trade from 2006 to 2016 increased by around 260% to a total of $144.6 billion. More African countries are taking advantage of South Africa’s close ties to China and making trade agreements of their own. Egypt and Kenya are China’s third and seventh-largest African trade partners, respectively.

South Africa Continues to Make a Name for Itself

South African President Cyril Ramaphosa says his country is entering “a new era.”. With the second highest GDP in all of Africa and a luxury real estate market with growth that is outpacing most of the world, South Africa is one of five developing economies to keep an eye on.

Illovo Central – Johannesburg, South Africa

In 2018 after the resignation of South Africa’s President, Jacob Zuma, “international investors upgraded South Africa’s prospects, sending the nation’s currency, the rand, to a three-year high, while bidding up shares of South African companies.”

As a permanent member of BRICS with a heightening global influence and growing trade opportunities, South Africa is attracting the attention of sophisticated investors worldwide who seek high-quality alternative investments for their portfolio.

Subscribe for exclusive insight into South Africa’s emerging economy.

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Selecting the Best Real Estate Investments for Your Portfolio

Ridge 8 – Durban, South Africa

What is the first thing that comes to mind when you think of real estate? For many people, it’s purchasing a home. Yet for sophisticated investors around the globe, real estate is regarded as one of the best alternative investments due to its high returns and low risk.

Former U.S. President Franklin D. Roosevelt encouraged investors to buy real estate saying, “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”

In fact, real estate provides a wealth of investment opportunities depending on a person’s goals, time horizon, risk tolerance, tax situation, and desired level of involvement. As you consider how to incorporate real estate investment opportunities into your portfolio, we hope you keep these considerations and options in mind.

 

Choosing Your Flavor of Real Estate

One of the first decisions you will make when investing in real estate is selecting the type of real estate. Here are some of the most common types of real estate investors can choose from:

  1. Residential Homes – When you purchase a home or vacation property to live in, your return will be through capital appreciation, as you won’t generate income on these properties. However, if you purchase a home with the intention to collect rental income, these homes can be great investments.
  2. Commercial Offices – When the economy is running well, office properties can generate substantial rental income. In fact, they are often an investor’s “flagship” real estate investment thanks to high-quality, well-paying tenants (ie. businesses). According to Investopedia, office properties “tend to be, on average, the largest and highest profile property type.”
  3. Retail Properties – Retail leases are generally long term, which makes investing in retail a fairly stable choice for buy-and-hold strategies. These investments perform best in thriving markets.
  4. Industrial Properties – Industrial real estate typically requires a smaller upfront investment due to their generally simpler designs and also boasts lower operating costs. Since many are used as warehouses or manufacturing plants, proximity to major transport routes is a great factor to look for when investing.
  5. Apartments – Since people always need a place to live, multi-family residential properties typically provide good, consistent rental income. However, you will need to consider the operating costs when choosing your investment.
  6. Others – In addition to the real estate options listed above, there are a variety of niche real estate investment opportunities, including hotels, Airbnb rental properties, wedding venues, parking lots, and other mixed-use buildings.

Ridge 7 – Durban, South Africa

Understanding Real Estate’s Long Time Horizon

Real estate is known as an excellent long-term investment, which makes it the superior choice for investors who prefer passive, buy-and-hold strategies that will help them achieve their long-term goals. Basically, if you don’t have the time—or would prefer to use someone else’s time—to make your money work for you, real estate investments are an excellent choice.

In the short term, real estate investments do generate rental income, which can be a steady stream of regular cash. But nearly all investors agree that holding real estate investments long term is the way to go.

Illovo Central – Johannesburg, South Africa

Investing in Personal vs. Private Equity Real Estate

One of the first questions to ask yourself is how involved you want to be in your real estate investments. When you invest in personal real estate, you directly purchase a real estate property and become responsible and liable for owning and operating the property––dealing with real estate agents, lawyers, accountants, banks, property managers, the IRS, and all of the regular tax and legal compliance requirements.

While solo investors can be successful, there are significant operational requirements and huge time commitments required to maximize profit. For this reason, most people prefer to partner with other savvy investors to create a pooled investment to spread their risk, leverage other people’s money, and benefit from their team’s knowledge. Partnering with other investors means significantly fewer costs up-front and a smaller initial investment.

Investing in private equity real estate is a simple, more lucrative strategy because you are combining the best of both worlds. On one hand, you’re investing in real estate. On the other hand, you’re co-investing with other sophisticated investors, reducing your risk and increasing your purchasing power. To sweeten the deal, you get your very own professional real estate investment manager who will take care of all the details from start-to-finish. All you have to do is watch your money work for you.

Incorporating Real Estate Into Your Portfolio

Now that you know more about a variety of real estate investments and the myriad opportunities they can provide, it’s time to determine which investment is right or you. Subscribe to learn more about which real estate investments will make you the most money.

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Buy-and-Hold Investing: The #1 Choice for Savvy Investors

Attempting to time the market frequently leads to underperforming portfolios and disappointed investors. Yet employing buy-and-hold investment strategies, incorporating long-term alternative investments, and carefully monitoring progress against specific life goals can lead to a wealth-generating portfolio with the potential for long-term success.

Investopedia puts it this way: “If volatility and investors’ emotions were removed completely from the investment process, it is clear that passive, long-term (20 years or more) investing without any attempts to time the market would be the superior choice.”

Image credit: Betterment.

As the best gardeners know, reliable, long-term growth takes time and careful cultivation. The same is true for a successful portfolio: investors need long-term professional management that works behind the scenes, along with a diverse blend of stocks and alternative investments such as private equity real estate. At JTOO Ventures, we plant capital into fertile, high-yield opportunities so our investors can passively monitor their growth and free themselves from the stress and anxiety of trying to time the market.

The Unbearably High Cost of Market Timing

Market timing is an investment strategy in which investors attempt to predict the market’s future performance. Usually, investors make these predictions based on speculation, past performance, or mathematical assumptions. Unfortunately, studies have shown that “past performance was not an indicator of future outcomes 96.22% of the time,” hence why most mutual funds come with fine print that reads: “past performance is not an indicator of future outcomes.”


Image credit: Wake Forest University.

Still, many investors blatantly reject well-documented research and continue to predict how the market and specific industries and funds, will perform. Using those predictions, investors then make decisions about when to be in the market and when to get out. Although market timing allows for potentially higher returns, there are a number of reasons why the practice is not recommended even for professional investors.

According to Merrill Lynch, “One of the biggest costs of market timing is being out when the market unexpectedly surges upward, potentially missing some of the best-performing moments.” Essentially, if an investor misreads the market and isn’t invested during peak months, they could incur huge losses.

In addition, even the brightest minds don’t have a great track record when it comes to analyzing and predicting market trends. Data from numerous sources, including the SPIVA U.S. Scorecard from the S&P Dow Jones Indices, shows that active managers frequently underperform. During a 15-year period, “92.2 percent of large-cap managers missed their marks, while the number was 95.4 percent for mid-caps and 93.2 percent for small-caps.” In Dalbar’s 22nd Annual Quantitative Analysis of Investor Behavior, the data “shows that when investors react, they generally make the wrong decision.”

Image credit: Gensler.

Disciplined Advisors Prefer Buy-And-Hold Investing

With the well-documented pitfalls of market timing, many sophisticated investors are now demanding buy-and-hold investment strategies. As the name suggests, this long-term approach involves buying and holding investments for a long period of time, which allows the market to move through its natural cycles without negatively impacting your portfolio.

Buy-and-hold investing is an excellent complement for goal-based investors, as it requires looking toward the future instead of being fixated on outperforming the stock market today. Hugely successful investors like Warren Buffett and Peter Lynch are often remembered for their buy-and-hold investment approaches. Their strategies focus on the long-lasting, underlying value of each investment, not its day-to-day market swings.

In a CNBC interview, Buffett discussed why buy-and-hold strategies are the most successful approach. According to the billionaire and philanthropist, “The money is made in investments by investing and by owning good companies for long periods of time.”

Of course, the buy-and-hold investment strategy still requires ongoing maintenance and professional management. Yet this long-term strategy has proven to be significantly more successful than attempting to time the market. The Dalbar study clearly finds that disciplined investors with long-term time horizons are more likely to reap the rewards that the market has to offer.

Menlyn Link – Johannesburg, South Africa

Why Long-Term Investors Choose Private Equity Real Estate

So where do buy-and-hold investors like to put their money? Actor Will Rogers puts it best: “Don’t wait to buy real estate. Buy real estate and wait.” Private equity real estate is extremely well-suited for long-term, buy-and-hold investors. Since real estate prices aren’t correlated to the cycles of stocks and bonds and are driven more by supply and demand than market speculation and timing, returns are higher compared to other alternative investments with similar expected risk.

Not only is real estate less volatile than the stock market, it’s also more predictable: many investors trade stocks speculatively, but when you invest in real estate, you are investing in a physical piece of land—a tangible building with a solid underlying value. As the world population continues to rapidly grow, so does the demand for high-quality real estate, especially in the main metropolitans of the fastest growing cities.

When exploring how the length of an investing period impacted annual returns from 1928 to 2014, Betterment clearly demonstrated: “Amongst all the edicts investors should heed, one stands out above all others: It’s time in the market that builds returns, not market timing.”

Subscribe to discover how real estate can get you valuable time in the market for your portfolio.

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