Roberto CoelhoBy Roberto Coelho|November 23, 2022|10 Minutes|In Billionaire Tomorrow

Billionaire Tomorrow

"Investment wisdom from the godfather of trading"

Half a century of experience with a lifetime of knowledge on the biggest bourse in Africa. David Shapiro, the ‘godfather’ of the Johannesburg Stock Exchange in South Africa, celebrates with a cold beer like its 1972.

A crisp morning in the northern suburbs of Johannesburg; after his morning run, legendary stockbroker David Shapiro, sits down to review half a century of trading.

Shapiro is a well-known and respected stockbroker with an approachable manner, larger than life attitude and a good sense of humor that’s helped him through 50 years on Africa’s biggest market – the Johannesburg Stock Exchange (JSE).

Half a century of experience building a lifetime of knowledge.

From the glory days when the JSE was larger than the Australian stock exchange, to the current alarmingly weak macro-economic environment and the wave of delisting; Shapiro has seen it all.

This is a story of guts, passion, love, and common sense.

Growing up, his childhood home was a place where strong morals were taught by his Jewish Parents.

His father was a stockbroker, so a love for business was instilled from an early age.

This created a fierce competitor, who loved winning, but in a gentlemanly way.

“I played soccer for the University of Witwatersrand. We were in the second division. In those days there was no TV, we learned how to play in the backyard. The goal was to win and always to be a good sportsman.”

Playing on the muddy Braamfontein pitch is where Shapiro learned the importance of strategic planning and a winning mindset. In the 1970s, football was not for the weak hearted with flying tackles and broken bones an accepted part of the game. A football career cost Shapiro two broken legs.

“This is where I became a marathon runner, during my rehabilitation.”

With this never quit attitude, Shapiro was ready for the heartbreak, dog-eat-dog, world of corporate South Africa.

Undoubtedly, Shapiro’s long-lasting success is directly correlated to his physical health, allowing him the ability to experience a long and fruitful career, with the enthusiasm of a newly appointed analyst.

However, as the analysts warn, a graph can never go straight up, there are dips along the way.

With a smirk he says, “it took 50 years to learn my CA.”

I have the education and experience of many crises. What I learned is we overcome them.

David Shapiro

Fifty years of lessons, rip roaring bull markets and teeth grinding bear markets, gives Shapiro a unique perception of the current challenges.

“I have learnt so much in those 50 years, I have lived through the transformation of the market and the country.”

The journey began on Hollard Street, in 1972. On his first day, the Johannesburg Stock Exchange was run by pen-and-paper and noticeably different to the highflyer high rise l on the corner of Maude Street and Gwen Lane in Sandton.

Then the market was mainly made of individual mining stocks, actual individual mines. In 2021, after years of consolidation, all that remains are large mining houses.

Shapiro’s shares how during these early days, analyzing mines was a question of the mine’s ability to control costs and the quality of mineral mined. Unlike today, where much focus is placed on the price of the commodity.

“In the 1970s we were a very powerful economy and country. This is the world I entered into.”

But as in all economies, there are cycles.

The year1989 changed the world: the Berlin Wall came down and Communism, as was known, changed. Overnight, South Africa had new mining competitors in Russia and a new player, China.

“We didn’t plan ahead properly. We thought the Chinese demand would continue forever.”

But this was not the case, the golden ageof the early 2000s came crashing down in 2008. Together with State Capture and the election of ex-President Jacob Zuma, South Africa’s fate was sealed.

Not only were our miners left in the dust, as commodity prices crumbled, but South Africa failed to modernize in the 1990s as the rest of the world did.

“The 90s were very vibrant. It may have resulted in the .Com bubble, but we saw the future.”

Without these new age companies to lead employment and growth South Africa began to stagnate. The past 10 years were a difficult period to be a South African investor.

This is where Shapiro’s wisdom shone; his calmness and long-term mentality allowed him to overcome this difficult period.

“I have the education and experience of many crises. What I learned is we overcome them.

COVID is no different, we will overcome it.”

Shapiro is not as positive when it comes to the JSE’s prospects and the dreaded Regulation 28.

Regulation 28 is the framework for pension investing. The major area of frustration is the limit of international investing, only 30% of funds may be offshore.

“This does not make sense; the regulators do more damage to wealth investment than anyone else!”

Shapiro explains how 50% of the JSE’s market capitalization is based offshore. This includes heavyweight stocks: Prosus; Naspers; Richemont and Anglo American. It is essentially illogical to block offshore investing.

Furthermore, the JSE is experiencing a wave of delisting’s, meaning the South African investment universe is shrinking.

Thirty years ago, there were 776 listed companies now there are 330. It would be unfair to say this is the JSE’s fault. There is a global trend of delisting as private equity has become more powerful with lower interest rates.

The specific problem facing the JSE is a lack of new listings.

“Leila Fourie (CEO of the JSE) is brilliant; however, the South African economy is not growing.”

Furthermore, for SME’s who would like to list there is simply not enough liquidity to allow this to happen.

“The JSE competes with 50 000 global investments which I can make at the click of a button.”

In this world, the JSE must reinvent themselves to avoid becoming extinct.

“When I started the computer was huge and took the whole fourth floor, today anyone can invest on their smartphones.”

Shapiro is more concerned about the fate of the nation. He is a firm capitalist yet, he married his wife of 49 years, Linda, who’s family was socialist with deep roots in the struggle against Apartheid.

His mother-in-law was involved in the Rivonia Trial – where Nelson Mandela was handed a life sentence – and spent three years in prison. Herlove for the nation ran deep. It was this love that resulted in a damning death bed statement.

“Before she passed, she said, this is not what we fought for,” says Shapiro.

Her dismay shone a light on South Africa and Shapiro began to think harder about our society.

“South Africa doesn’t roll out a red carpet for investment, we hand out a rule book. This needs to change.”

Shapiro constantly speaks highly of the South African businessman and woman. Discussing how there are brilliant minds, but the rule book must be thrown away and people must be allowed to do what they do best.

Using his experience, he is actively encouraged change.

Fifty years later, Shapiro will not allow the market he serves and the country he loves to crumble.

“It begins with us, each and every day.”