Art as an alternative investment

Often perceived as a realm exclusive to the ultra-wealthy, investing in art is becoming increasingly accessible, offering both a potential financial return and a rich cultural experience.

The South African Art Market’s Unique Landscape

The South African art market is experiencing significant growth, driven by both local and international interest. Renowned South African artists are fetching record-breaking prices at auction houses, and the country’s art fairs, like the Investec Cape Town Art Fair, are attracting global attention. According to the Citadel Art Price index, art can exhibit different risk and return characteristics compared to conventional investments, making it an attractive option for portfolio diversification. This is because art has a low correlation with the equity market, meaning its value can move independently of market fluctuations.

One of the most compelling aspects of the South African art market is its rich and diverse cultural heritage. Artists from various backgrounds explore themes of identity, history, and social justice, creating a vibrant tapestry of expressions. As renowned artist Esther Mahlangu once said, “Investment in South African art has given artists the freedom to create without the constant pressure of making ends meet.” This financial support empowers artists to innovate and push creative boundaries, further enriching the market.

Building a Collection: From Masters to Emerging Artists

For a new investor, the art world can seem daunting. However, a strategic approach can lead to a rewarding collection. A common misconception is that one must spend millions to start. While works by South African masters like Irma Stern, Gerard Sekoto, and J.H. Pierneef command high prices—with Irma Stern’s paintings selling for an average of R5 million—there are lucrative opportunities in the emerging artist space. Acquiring a piece by a new artist is akin to a company’s Initial Public Offering (IPO). If you see value in the work and the art world grows to appreciate it, demand will increase the price over time.

Finding that right piece could take years but produce significant investment returns. This emphasizes the importance of a long-term perspective. Art is not a quick-flip asset. Its value appreciates over time, often significantly once an artist passes away, as their body of work becomes finite. For instance, a Lisa Brice piece sold for R39,000 in 2018 and fetched R1.2 million at auction just a few years later.

A Beginner’s Guide to Smart Investing

Before making your first purchase, a crucial step is to educate yourself. This means more than just browsing galleries. Attend gallery exhibitions and museum seminars, read up on art history, and follow auction results from prominent auction houses like Strauss & Co and Aspire Art. The journey to becoming a successful art investor is built on knowledge, time, and patience.

When considering a piece, look for a few key factors:

Artist Reputation: Works by well-known artists with established careers and strong auction histories tend to hold more stable value.
Provenance and Authenticity: A clear and documented history of ownership (provenance) is critical for authenticating a piece and enhancing its value. Always seek certificates of authenticity and expert appraisals.
Condition and Medium: Art that is well-preserved and created with durable materials, such as oil on canvas, generally has broader appeal.
Enjoyment Factor: The most important rule of art investment is to buy what you love. As an art consultant once said, “Art’s best enjoyed when you’ve done your research because it gives you a greater appreciation for and understanding of what you’re looking at.”

Prominent South African Galleries and Artists to Know

Galleries to visit: The Goodman Gallery, Everard Read, and the Zeitz Museum of Contemporary Art Africa (MOCAA) are excellent places to start.
Artists to watch: Beyond the masters, look into contemporary artists like Mohau Modisakeng, Penny Siopis, Blessing Ngobeni, and Zanele Muholi. Their work is gaining international traction and represents a strong investment opportunity.

The South African art market offers a compelling blend of cultural richness and financial potential. By approaching it with a well-researched and patient mindset, investors can not only build a valuable asset portfolio but also surround themselves with pieces that bring them joy and inspiration.

The information contained in this article is of a general nature and intended for information purposes only. It is neither to be construed as financial advice nor to be regarded as a definitive analysis of any financial, legal or other issue. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult your financial planner/adviser to take into account your particular investment objectives, financial situation and individual needs.