More pension pain on the cards for South Africans: Coronation

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Coronation expects to see industry-wide outflows later this year as the South African economy continues to struggle.

In its financial results for the six months ended 31 March 2024, the group said that the South African equity market returns remained relatively weak amid the challenging economic situation, while global markets delivered strong returns.

For the six months, the group’s total assets under management (AUM) increased by 5% to R631 billion (30 September 2023: R602 billion), while the average AUM remained relatively flat at R619 billion from a year prior.

“Net outflows for the period were in line with our expectations at 4% of average AUM. This is largely due to the weak SA savings industry, to which Coronation is significantly exposed,” said the group.

This is, however, not unique to the group, with active asset managers around the world seeing persistent net outflows.

“We expect that the domestic savings industry will continue to contract, as South Africa struggles to kickstart economic growth, formal employment remains stagnant, and households remain under pressure, exacerbated by the ongoing externalisation of both retirement and discretionary savings.”

“We also expect a near-term uptick in industry-wide outflows once the new two-pot retirement system comes into play.”

“However, we believe this reform is positive for South African savers and the local savings industry over the long term.

The two-pot system will start on 1 September 2024 and see retirement savings move into two separate pots from implementation.

The “Savings” pot will receive one-third of all retirement savings and will be accessible before retirement under certain criteria. The “Retirement” pot, on the other hand, will receive the remaining two-thirds and will only be accessible upon retirement.

Although there are expected outflows from the Savings pot, experts have previously said that the inability to access all retirement savings when changing jobs, which is currently the case, ensures better long-term savings for many.

Returning to Coronation, the group said total operating expenses, excluding the roughly R800 million tax dispute with the South African Revenue Service over the group’s offshore operations, were up 5% year-on-year.

“While we manage costs meticulously, we also need to look to the future and will continue to invest
in our businesses to ensure that we use our scale and expertise to amplify our ability to compete
globally,” said the group.

“Areas of consistent investment include client service systems, resources to strengthen both our local and global investment capabilities, optimising information and technology systems and data management, and ensuring high standards of compliance in a demanding global regulatory environment.”

The group’s fund management earnings per share (FMEPS) were 185.8 cents as of 31 March 2024 (194.7 cents excluding the impact of the tax matter) due to improved revenues and focus on expense management.

The tax matter was heard by the Constitutional Court on 13 February 2024, but judgment is yet to be handed.

With headline earnings jumping by over 3,000% to 200.5 cents per share, the group declared an interim dividend of 185 cents per share.

Financials H1 2023 H1 2024 % Change
Revenue (Rm) 1 815 1 893 4%
Fund management earnings per share -13.0% 185.8 1 529%
Basic earnings per share (cents) 6.2 200.5 3 134%
Headline earnings per share (cents) 6.2 200.5 3 134%
Interim Dividend 185.0

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