With the opening of the Zeitz MOCAA Museum of Contemporary Art Africa and the rise of artists such as Billie Zangewa and Sam Nhlengethwa, investing in contemporary art is fast become a growing interest in South Africa.
According to Christies and Sotheby’s, from 2011 to the end of 2013, artists such as Irma Stern, Robert G Goodman, François Krige, Gerard Sekoto and Pranas Domšaitisall have set international records for their sales.
The most expensive painting ever sold was Interchange – Willem de Kooning. The 1955 canvas sold for $300 million ($4 050 360 000.00).
How do you get started?
Before you get completely lost in the idea of purchasing art, the first rule of thumb is to educate yourself. Spend time in museums and art galleries – in this way you will be able to identify current popular artists. Visit the Sotheby’s and Christies’ websites. They offer art-appreciation courses, which are typically expensive and aimed at people who want to enter the art trade as professionals. However, if you spend a great deal of time in galleries and start chatting to curators, you can start developing your own sense of art appreciation.
Where should you go?
Before you rush off to an auction, remember these auction houses are filled with experienced buyers and investors. To a gallery an investor is a buyer that is likely to return. Keep in mind the following - If a gallery sells you a painting or work of art, they should be prepared to buy it back at a later stage. If they are not, you should be wary of dealing with them.
What are the costs involved?
Costs vary but expect to pay more than just a few thousand Rand. Also be cautious – you won’t find the right piece immediately. It takes time. Also keep in mind that there will be additional costs involved like commissions and insurance. Typically, auction houses’ commissions range from 10% to 20%. This commission increases if you buy via a gallery to as much as 40% to 50%.
Don’t forget insurance
While theft of art in South Africa is minimal, it is best to insure your works of art as a specified item under your household contents insurance. If you are taking your art overseas to be part of an exhibition, you should advise your insurer and provide details of where the items are going, as well as the security measures that will be taken during transit and at the exhibition. Keep it properly framed and mounted, and have it revalued every two to three years.
If you invest in art and want to pass on a significant inheritance to your children, bear in mind that you don’t pay capital gains tax on the sale of works of art, provided that they have been used for personal use (i.e. where the assets have been used mainly for non-trade purposes). This is great news for your kids as you can then leave the works of art to your children when you die and they can sell them without having to pay CGT provided they have also held it for personal use.
The risks involved
Everything has risks and the risks of being an art investor, are basic:
- Keep it away from the fire place and sunlight – the fire place dehydrates the painting and the sunlight fades the painting and the paint will eventually dry and fall off.
- Keep it away from humidity.