Business
Savings Under Pressure in South Africa: Coronation’s Results and Challenges
Coronation Reports Strong Growth Amid Industry Challenges
While Coronation Fund Managers has achieved a 9% rise in earnings per share and a 245% increase in profit for the year ended September 2024, the broader South African savings industry continues to grapple with significant challenges.
Despite strong performance driven by global market returns and reforms under the Government of National Unity (GNU), the company has warned of continued cash-flow negativity across the savings sector due to a weak economy and high unemployment rates.
Key Highlights of Coronation’s Financial Results
| Financial Metric | 2023 | 2024 | % Change |
|---|---|---|---|
| Revenue | R3.65 billion | R3.91 billion | +7% |
| Total Operating Expenses | R2.15 billion | R2.26 billion | +5% |
| Profit for the Year | R640 million | R2.21 billion | +245% |
| Earnings per Share (cents) | 182.9 | 630.5 | +245% |
| Headline Earnings per Share (cents) | 182.9 | 630.5 | +245% |
| Final Dividend (cents) | 165.0 | 228.0 | +38% |
| Special Dividend (cents) | – | 153.0 | – |
Performance Drivers
- Strong Asset Growth
- Assets Under Management (AUM) grew by 11% to R667 billion, bolstered by strong market returns and active asset allocation strategies.
- Global and Local Investments
- Amendments to Regulation 28 have allowed funds to allocate up to 45% of assets internationally, enabling Coronation to diversify and unlock value for clients.
- Legal Win Over SARS
- The Constitutional Court overturned a R800 million tax claim by SARS, providing financial relief and paving the way for a special dividend.
- Africa Frontiers Strategy
- Renewed interest in Coronation’s Africa Frontiers Strategy reflects growing confidence in regional opportunities.
Challenges in South Africa’s Savings Industry
- Cash-Flow Negativity
- Persistent economic weakness and high unemployment continue to limit individuals’ ability to save.
- Net outflows for Coronation moderated to 8.1% of average AUM, reflecting broader industry trends.
- Impact of the Two-Pot Retirement System
- The Two-Pot system, implemented in September 2024, has increased withdrawals, further straining savings.
- Rising Operating Costs
- Operating expenses grew by 8% year-on-year, driven by investments in client service systems, IT infrastructure, and compliance in a demanding regulatory environment.
Positive Industry Signals
Despite challenges, Coronation remains optimistic:
- The Government of National Unity has driven reforms and economic optimism.
- South Africa’s financial markets are performing well, reflecting improved investor confidence.
While Coronation has showcased resilience through strategic investments and a focus on global and regional opportunities, the savings industry in South Africa faces an uphill battle. Addressing economic weaknesses and fostering a culture of saving will be essential for long-term growth.
