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Locally, the luxury market is on the rise. South Africa is home to the largest number of millionaires on the continent. While the poor struggle to ward off the effects of inflation and unemployment, HNWI South Africans are dabbling in alternative investments.

Says Natalia Awad of the Southern Africa Luxury Association, “One only needs to look at the cultish passion for acquiring Pierneef paintings, Dylan Lewis sculptures and Kentridge pieces in the most affluent set in South Africa to see that there is a fine line between passion and portfolio – between the emotion and prestige of supporting the artists who grace the upper echelons of the Citadel Art Index and the cold discretion of investment in regular stocks.

“The exponential additions into the social calendar of art and lifestyle auctions is helping to build up knowledge about what the wealthy should invest in and where prices for certain artists are gaining momentum. The Afrasia Cape Wine Auction is being heralded as a coup bringing together the top affluent families to sell lots which are both art, experiences and wine.”

Awad says above and beyond the existing entourage of long established galleries like Everard Read, the constant development of new spaces for art in South Africa is heralding a new era of interest, acquisition and growth.

“Particularly the market is feeling buoyed by the significant investment by Jochen Zeitz into a large scale art space at the V&A Silo and the expansion of wine estate driven private galleries such as Cavalli Estate.”

The money in art

The local art space is attractive to luxury investors, but Stefan Hundt, head of the Sanlam Private Investments Art Advisory Service, warns investors to manage their expectations.

“Much is written and touted in advertising by auction houses, galleries and agents of ‘art as an investment’, implying that it can be a comparable investment to stocks and other financial instruments and provide a serious alternative to such instruments,” he says.

Hundt says the picture in the global West is very different from the local art scene. “In Europe and the United States the case for art as an alternative investment asset is bolstered by an art infrastructure growing from a solid base in museums, private and public; state ownership, funding and sponsorship; a thriving art trading business through auction houses, galleries and art fairs; individual and corporate collections; considerable commitments by the State, corporation and individuals to the good effect of philanthropy in the art,” he explains.

“This agglomeration has ensured – over a long period of time – that some art can become an asset class and prove to be a successful investment in the future. This coexists with an enormous supply of art – much of which will never be seen or mentioned again and never prove to be an investment.”

Hundt says that looking at South Africa there are very few similar building blocks in place, making South African art comparably a less reliable investment.

“The base is gradually being built and the interest in art as a possible investment alternative is gaining traction amongst discerning collectors as well as unscrupulous opportunistic traders, artists and agents.” According to Hundt SPI launched its Art Advisory service primarily to advise clients on art acquisitions – not only as an investment, but as part of a more holistic approach to the management of their wealth. “As Ouliana Vlasova points out in the WealthInsight report, collectors are not so highly focused on the number and derive a lot more benefit from their collecting activities than watching prices climb. Providing advice on art to such collectors is rarely confined to looking at charts and numbers for individual artists – rather there is a wider focus on the principals for success for an artist in South Africa and globally and matching these up with a strategy that enables the collector to grow a collection beyond the vicarious confines of the latest fad or fashion buying in the art market,” he explains.

Hundt is reluctant to predict which local artists would do well in 2014, due to the fact that there are too many variables to consider in each individual piece.

“Quality works are rare finds and these often do not lie among fashionable collectables of the present. More recently it would seem that good quality works Cecil Skotnes have changed hands at well below price expectations. Perhaps expectations where a bit too high from the seller’s point of view but for some shrewd buyers both here and in London some bargains were had. The same can be said for Preller, and early Robert Hodgins works.”

“The contemporary art scene is of course a lot more volatile and picking out artists here is much of a gamble. Undoubtedly for me a Willem Boshoff will remain one of the best buys for some time to come. Diane Victor, Wim Botha, Johann Louw and Clare Menck remain on my watch list.”

Get the 23 Janaury edition of Finweek to find out which luxury investments offer reasonable returns and exceptional beauty.

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