Best Way to invest 40mil USD in South Africa

[noob_saibot]

Hi All,

So I have a friend who would like to invest US$40m into property in South Africa.

Being a foreigner, he isn't too clued up with SA.

His preference is a hotel. I was thinking this is not a good option especially if he doesn't have the backing of a large international brand behind him.

Being from Durban, I was looking at other commercial property options in umhlanga, dube tradeport, and recently cato Ridge.

Also think its good to diversify the investments.

Any ideas where there would be good value for money? Doesn't have to be KZN.

I agree with Paul Hjul about the fact that you are asking the wrong questions.

Firstly, the investor knows nothing about SA (as you mentioned). This is already the biggest danger and can cost him all his investment if he "tries to hit a six" with just one hotel/game-farm/commercial building.

Secondly, why South Africa? The IMF reckons we're only going to grow by around 1.4% (or less) this year. If you've identified particular high-growth industries, then you already have possible investment options, but seeing as the investor and you aren't sure, other African countries promise better returns from a macro point of view.

Thirdly, try thinking about it in terms of "best returns on a $40 million investment". Investing in agricultural land or prime property can *always* be considered a good investment, as you won't expect to "lose" much in terms of value, but returns could be bad on them.

Sometimes a midsize-growth investment into a growing industry in a country like Tanzania/Kenya may drive better returns, which you can compound by re-investing and then exiting after 10-15 years.

 

[Paul Hjul]

Shhh don't agree with me on that point, rather tell him to listen to me about what property to buy - I can have a chat with the estate agents ...

Seriously though there is a very real need for the investor to know his range of options, to decide what sort of risk he is after. It isn't that getting some ideas from a forum of people is a bad idea but there is a lot of thought that needs to go into it and taking professional assistance is an absolute must.

My thinking on a half a billion rand is about creating a property portfolio that will deliver returns in 10 years time and while having the critical mass of putting eggs in one basket is a lot safer than going into one mega enterprise, but that isn't what a person retiring to SA - which I have a suspicion is the case - and considers the local economic windfall - so the Pigovian benefits - far more than the ROI; it is framed from my personal preferences and objectives in life which differ from person to person. On the other hand other approaches to investing will give you a really good return at one hell of a risk and some "prudent" investments could turn horribly south because they are based on misguided group think. How actively the investor participates in the investment is a consideration not mentioned at all. In SA a big name backing for a hotel is less relevant than in other markets but it will be more troublesome being an absentee owner.

Also don't listen to the IMF about South Africa, according to the IMF Zuma should have been charged and imprisoned years ago

I agree with Paul Hjul about the fact that you are asking the wrong questions.

Firstly, the investor knows nothing about SA (as you mentioned). This is already the biggest danger and can cost him all his investment if he "tries to hit a six" with just one hotel/game-farm/commercial building.

Secondly, why South Africa? The IMF reckons we're only going to grow by around 1.4% (or less) this year. If you've identified particular high-growth industries, then you already have possible investment options, but seeing as the investor and you aren't sure, other African countries promise better returns from a macro point of view.

Thirdly, try thinking about it in terms of "best returns on a $40 million investment". Investing in agricultural land or prime property can *always* be considered a good investment, as you won't expect to "lose" much in terms of value, but returns could be bad on them.

Sometimes a midsize-growth investment into a growing industry in a country like Tanzania/Kenya may drive better returns, which you can compound by re-investing and then exiting after 10-15 years.

 

[House]

South Africa is not the right country to invest this type of money into property. Especially when the country is still considering banning internationals from buying property and taking current land away from white people. Take the money to Europe and invest in property there.

 

[TEXTILE GUY]

Well we know manufacturing is a real problem ..... as is mining ....

http://www.bdlive.co.za/business/in...-continues-to-face-a-bleak-future-says-seifsa
http://www.bdlive.co.za/economy/2014/10/09/industrial-output-mining-production-fall-in-august
http://www.iol.co.za/business/news/investors-shun-sa-s-r36-trillion-in-minerals-1.1762558
http://www.iol.co.za/business/news/more-vehicle-parts-suppliers-leaving-sa-1.1760960
http://business.iafrica.com/news/964817.html

The last article deals with the perception of ''creeping expropriation''.

 

[Capdase]

South Africa is not the right country to invest this type of money into property. Especially when the country is still considering banning internationals from buying property and taking current land away from white people. Take the money to Europe and invest in property there.

Agreed. Investing in South Africa is a very risky endeavour.

 

[NeonNinja]

40 mil USD! Sheesh. That's an investment of many lifetimes!

 

[minty203]

I hope you didnt meet this friend via email.

 

[mintydroid]

Invest in Cancer. Returns will be tenfold.

 

[Re83L]

Wildlife

 

[Re83L]

Oh, and by the way: A fool and his money is soon parted... If he's "not too clued up" about SA he shouldn't be coming here.

Lastly, there are investment companies set up for the super rich that deals exactly with what this "friend" wants..

 

[dunkyd]

If this was real, he should know what to do. And it will never involve SA.

 

[Fiekus]

Lastly, there are investment companies set up for the super rich that deals exactly with what this "friend" wants..

Exactly what I was thinking...

 

[Stefanmuller]

Oh, and by the way: A fool and his money is soon parted... If he's "not too clued up" about SA he shouldn't be coming here.

Lastly, there are investment companies set up for the super rich that deals exactly with what this "friend" wants..

I agree. With that class of money I would pay a good investment firm or tax advisor to firstly get the money in the country in the most tax effective manner and then have them invest and manage it. With that kind of money you let other people with the know how do everything for you.

 

[itareanlnotani]

I wouldn't even touch South Africa with that sort of money.
The rand has lost 25% in value since last year.

Whatever return on investment you're going to get is going to be completely annihilated by the loss on currency we're seeing, and will continue to see given the governments policies and actions.

 

[FAQIR]

Hi all.

Thanks again for all the responses.

This "friend" is very real and not from the internet. lol.

He has many investments around the world so SA is just another country. Not as if he is putting all his eggs in one basket

Proper tax and risk advice will be sought when the time is right.

I was asked to do preliminary "investigations" about the opportunities that are present in the property market.

Also, developing properties to sell off as opposed to renting can also work. Recover money faster I assume.

 

[f2wohf]

If I had this money to invest in real estate in SA, I would do something close to the following:

20% housing (flats and houses around the country, mainly Gauteng, WC and Durban but also some in mid-sized cities);
20% offices and retail (mostly Gauteng and Cape Town);
20% retail (mostly Gauteng, Durban and Cape Town);
20% industrial and warehouses;
20% agricultural/game farm

 

[^^vampire^^]

Is your friends name Mr John and did he contact you via e-mail or SMS? Don't forget to get that release fee paid over to him right away so the money goes to your bank account and then you can do the investing on his behalf (that was the deal right?)

I find it impossible to believe, unless you friend won the American Lottery yesterday, that someone who has worked/invested to get $40 mill would ask you to go and find a way for him to invest his money (on a forum no less). Anyone who has done the due diligence and hard work to get that kind of cash would never want to throw their money into a complete unknown.

Everything about this doesn't add up.

 

[Hemi300c]

Friend is too late and could have bought Kyalami.
Properties would be the best bet but not businesses including hotels.

 

[Alton Turner Blackwood]

LOL, this sounds like BS/trollbait.