Indholdsfortegnelse for 20 February 2020 i Finweek - English

hazard lights. The national road signal for “anything goes” in South Africa. Precursors of chaos. Favoured by minibus taxis, like the one that managed to unduly aggravate me recently. In a rush to get home from work, those orange flickers of frustration lit up in the middle of a traffic circle, rendering me completely immobile. A move that irked me to such an extent that when I got going again – I am embarrassed to admit–I sped over a traffic light when the bright amber was practically red. A reaction that made me a pretty crappy driver, especially for the person behind the wheel of the oncoming car that wanted to turn at that light. It’s not the first time a taxi has made me lose my patience. But losing…

“IT WILL BE A HERCULEAN TASK FOR SOUTH AFRICA’S ESKOM, BUT THE MOST IMMEDIATE ACTION THE COUNTRY CAN TAKE IS INTRODUCING MORE RENEWABLE ENERGY SOURCES IN THE NATIONAL GRID.” – German Chancellor Angela Merkel, after meeting President Cyril Ramaphosa and Eskom’s newly-appointed CEO, André de Ruyter, on her state visit to South Africa, reported Forbes. Merkel discovered that SA, Germany’s largest trading partner in Africa, uses coal-powered energy for about 90% of its electricity. Germany has emerged as the world’s first major renewable energy economy, with 46% of its energy coming from renewable resources, since Merkel took office in 2005. (Also see p.13) “It was a flagrant assault on electoral rights, our national security and our fundamental values.” – Utah senator Mitt Romney was the only Republican to break with…

the near-permanent load-shedding schedule imposed by Eskom lately on South African consumers is nothing new to South32, a Johannesburg- and Sydney-listed mining company. As the operator of two large aluminium smelting complexes in SA and Mozambique, consuming about 2 200MW, the company has been on a weekly power rationing regime for years. Now, however, the smelters could face shutdown if the National Energy Regulator of SA (Nersa) fails to ratify a proposed power agreement between the company and Eskom. If approved, this agreement will replace the previous 25-year deal signed in the 1990s when the smelters were owned by Billiton, then led by mining supremo Brian Gilbertson, and which provided for a tariff that would reduce when the aluminium price was depressed, and vice versa. For years, Eskom reflected the…

Fund manager insights: Catalyst Fund Managers’ Alpha Prescient QI Hedge Fund does not conform to constant specific long or short market exposure but is focused on individual security selection based on the manager’s view of opportunities in the market. The fund is for sophisticated investors who are looking for exceptional returns and who are willing to take on an increased specific risk to achieve such a return. Fund manager Paul Duncan says the R433.8m fund has more flexibility to attempt to generate active alpha. “The fund can be long and/or short listed real estate stocks and can utilise a number of investment tools or strategies in an attempt to hedge risk and enhance both the absolute and quality of returns,” he says. The fund exploits opportunities resulting from corporate events,…

massmart’s share price has been consolidating on the downside for six years from an all-time high at 20 800c/share (a trend formed in 2013) and entered a bear trend in January 2019 when it broke through the support trendline of its long-term bull trend. In July last year the company flagged a half-year net loss of up to R602m, coupled with margins lower than anticipated across all its divisions. This triggered an even steeper bear trend to a 13-year low at 3 825c/share. Outlook: With firm support retained at 3 825c/share, Massmart has recently breached the resistance trendline of its steeper bear trend (dashed blue trendline on graph) despite warning investors last month to brace for a net loss of between R1.29bn and R1.385bn for the year ended December 2019.…

it would be hard to imagine how the burgeoning aspirations for a better life could have been met in the post-apartheid era were it not for the ability to borrow. Had there been no debt – or access to credit, to use the version that sounds more palatable – very little transformation would have occurred in South Africa.* There would not be nearly as many black people driving decent cars; living in decent homes; and sending their children to good schools and universities. Many in the “new” middle class find themselves expected to educate several children to tertiary level even though they might barely have finished high school themselves. Often the only way to do this is on credit. An example of this situation is neatly summarised by Jonny Steinberg…

There are some items that you need to acquire where debt is the only viable option. In that case, it is wise to take calculated steps to lessen the pain of financial instability. Herewith some reasonable steps: Step 1: Know the full details of the cost of debt. Step 2: Always consider paying off the debt sooner by using any surplus cash that you may have. Step 3: Pay off your most expensive debt first. Step 4: Do not enter into a new debt agreement once you have lessened or cleared your initial debt.…

what is money? Is it a means of transacting, a store of value, or a measure of value? Is it coins and notes, bank cards, investments or gold? Money is all of this, connected into a complex financial system consisting of government treasuries, central banks and other financial institutions. Money is the most essential commodity that we use to interact with our world and manage our lives; yet many of us do not know enough about it and for most of the time we do not pay enough attention to it. As money continues to become more digital, the physical relationship that we once used to manage our finances is rapidly changing. In the past, an emptying wallet was more likely to scare and deter you from overspending than seeing…

The advisory committee is calling for articles on the theme of Disrupting the world of financial advice in the forthcoming Collective Insight. The deadline for content submission is 6 April 2020. The following topics will be considered: ■ How do we get the industry to shift to look through a holistic lens?■ Who is the master: your client or their money?■ What business model or incentive will attract the right skillsets and people into the industry as well as obtain the right commitment from the client?■ How to overcome cultural complexities:› Should we consider collective advice for families and collaborative funding solutions?› Understanding the pressures of, for example, the black tax. Does it require a different financial planning framework?■ How do we get financial education down to the youth?■ Finding…

BRAIT SA Questionable golden handshake Tucked into the Brait rights offer document released in late January, in which they outline the plan to raise over R5bn, is this little nugget: “Brait has agreed with the existing Corporate Advisors that fees payable in terms of the Advisory Agreement forthe period from 1 October 2019 to the last day of the month following the completion of the Rights Offer, together with the cost of terminating the Advisory Agreement (including retrenchments and possible office closure costs) shall be approximately [R200m].” In other words, the very people who got Brait into this massive hole – destroying some R75bn of shareholder value – will get a R200m golden handshake? They should be paying back the bonuses they received over the last decade, not being paid…

Vodacom’s early February trading update for the quarter to end-December showed group revenue up 6.6% as it added 484 000 customers in South Africa and 1.7m in international operations. SA revenue and service revenue growth rates improved to 5.9% and 4.6% respectively, supported by increased data uptake, it said. International operations continued to perform well with service revenue growth of 9%, including strong growth in data and M-Pesa revenue. Vodacom’s leading market share in SA has been relatively stable, but Richard Cheesman, senior analyst at Protea Capital Management, says MTN’s network quality has been improving and it has recently surpassed Vodacom. However, Vodacom has dominant positions in some segments and Safaricom, in which it has a 35% stake, is a good business. Peter Takaendesa, Mergence Investment Managers’ head of equities,…

1. Equipment funding offers the option to purchase or acquire the right to use equipment and generally uses the equipment as collateral. 2. Unsecured loans are granted where the loan is supported by the borrower’s creditworthiness rather than any collateral or security. Interest rates are generally high because of the higher risk. 3. Secured loans are granted on the back of some form of security or collateral against the loan. Interest rates are lower than for an unsecured loan. 4. Overdrafts are commonly offered by the banks. The lender is offered an overdraft limit and interest is charged against any monies drawn down against this limit. 5. Revolving credit is like an overdraft or credit card because it has a limit assigned to it. The key difference, according to FundingHub,…

poor computers research and productivity to social state and factors discuss to South Africa’s that work of this will be most fully be automation. With this is a growth of complements is why this is not working paper policies of this will have all this resulted to why research also because this with social states. I didn’t write the sentence above. Nor did anyone else. It was written by a computer, trained on my previous writing. This is robot-Johan. And it’s pretty awful. Let me explain. I met up with Hanjo Odendaal, a data scientist at 71Point4, a strategic research consultancy in CapeTown. I gave him the text to my first 100 finweek columns (roughly 80 000 words), and he used a long short-term memory (LSTM), an artificial recurrent neural…

april looks like it will become an important month for Anglo American as it marks out the Northern Hemisphere spring for publication of its sustainability report. This year the focus is firmly on when it will sell its remaining South African thermal coal assets. There’s also the question of how the group intends to roll out emissions controls, especially after its CEO, Mark Cutifani, was critical of BHP’s attempts to lessen its own carbon footprint last year. At the time, Cutifani said that former BHP CEO Dr Andrew Mackenzie’s pledge to embark on Scope 3 measures “didn’t quite land right”. Mackenzie’s plan at the time was to extend on-mine emissions (Scope 1) and third-party supplier emissions (Scope 2) to third-party consumer emissions. Cutifani acknowledged the good intentions, but in an…

president Cyril Ramaphosa appears confident that Germany, South Africa’s largest trading partner in Europe, will contribute to greater trade and more investment opportunities, following talks with German Chancellor Angela Merkel during her state visit to SA in February. Discussions centred on leveraging investment opportunities presented by the fourth industrial revolution, and collaboration in renewable energy and the acquisition of critical skills. In 2018 Ramaphosa launched his investment drive to attract $100bn of foreign investment over five years, securing pledges for over half that shortly thereafter. Following several years of low-level inflows, foreign direct investment (FDI) in SA made a significant recovery in 2018, generating $5.3bn compared with $2bn in 2017, according to UNCTAD’s Investment Trends Monitor released in January. FDI in 2019 almost mirrored 2018’s, with inflow a little over…

i have held Sasol* since 1994. In 2015 I wrote a column about whether I had erred in holding it – I decided I hadn’t and continued to hold it while not adding to my position. But I had erred. Their latest trading update starts with “expected to deliver a satisfactory set of operational results”. I’m not sure it was operationally okay. The delays and cost overruns on the Lake Charles chemicals project in the US and a lack of movement on the pollution spewing out of its Sasolburg plants suggest otherwise. Now sure, Lake Charles will eventually come on stream and add revenue and profits – until the next operational issue, explosion or cost adjustment will hurt profits again. Having not added to my position in many years, Sasol…

i remember my first encounter with money. It was not a good one. I was five years old and my mom had given me a shiny new half cent coin. This was the first time I had held money that was mine. Two minutes later I was walking up the road to buy my favourite sweets. I remember being happy and doing a little dance while walking to the shop. Somewhere in that dance was a stupid spinning human helicopter manoeuvre. Two seconds later my shiny new coin flew into the thick bush across the road. I remember standing on the side of the road in a state of shock and confusion. I spent the next hour or so scouring the bush for my coin. I eventually gave up and…

debt is a symptom, not a problem. It is the by-product of something else. Like losing partial vision in one eye, it’s the symptom of a greater underlying issue. It’s prudent to take a step back and get a better understanding of what debt is. How do we get ourselves into debt? Adam Smith argued that most individuals make decisions designed to maximise their personal wellbeing, based on an assumed level-headed evaluation of all the facts. Individuals choose the option that offers the greatest utility (satisfaction) with the least effort. Smith’s central belief was that human economic interaction is governed mainly by self-interest. Some individuals maximise their desire to achieve maximum personal wellbeing (self-interest) at all costs, which leads to a debt burden. On a controversial level, it was Albert…

a rule of thumb is a generalisation, and in social settings can be useful, as it gives you guidance on how to act in a situation. For example, when looking at a photo on someone else’s phone, never ever swipe lest you invade their privacy. (You may be surprised by what you see!) When it comes to money, however, a rule of thumb should not be considered gospel, but merely a guideline. Personal economics is about allocating a scare resource (your monthly income) towards needs (things that keep you alive) and wants (things that make you feel alive). While it can be tempting to abdicate responsibility and just follow a rule of thumb, the reality is that we would all be better off if we had a plan that not…

we want to welcome you to our 56th edition of Collective Insight – 17 years and still going strong – and share with you some exciting new developments. Those of you who may be new to the publication might appreciate a bit of background as to how it was started and how we hope, going forward, to enhance its impact on both the financial services industry and its clients. In 2003, a small group of investment professionals and academics, in conjunction with finweek, identified a clear gap in the market for the introduction of an investment journal that would showcase the best research currently being done on asset management and financial advice in the South African market. The objective of this publication was to bring together research papers from the…

You can join us and be part of the conversation as contributing authors in both Johannesburg and Cape Town share their insights and opinions on the topic that is published in this edition of Collective Insight. Discussions will take place on 24 February 2020 at 17:00 for 17:30 at the following venues: Johannesburg: The Auditorium, Alexander Forbes, 115 West Street, Sandton Cape Town: Flagship Boardroom, FNB Building, 5 Buitengracht Street, Portside Visit the CFA Society’s website at https://www.cfasociety.org/southafrica/Pages/Home.aspx and look under the Events page for the roundtable discussion.…

investors are simple people. We buy a share for the long term, hoping it will move higher and we’ll profit off dividends and the share price move. We also have a limited 100% downside risk (if the company we’re invested in were to go bust) and unlimited upside reward. Traders, on the other hand – while they buy and sell the same stocks as investors – have a totally different experience. They will hold for much shorter periods of time; for some it’s as little as a few minutes or hours, or it might extend to a few weeks or months. They will also use gearing – essentially borrowing money to buy more of the share they’re trading – and this juices their profits, but also their losses. But another…

MTN’s regulatory and legal issues and exposure to political risk may indicate it overplayed a hand in its rapid expansion into more than 20 countries. Its global expansion means the competition issues in South Africa affect it less than its competitors, but its global reach may also be its Achilles’ heel given the risks elsewhere. MTN recently announced it had withdrawn legal action against Nigeria’s attorney general and minister of justice and that it would deal with the tax authorities from now on, while it also announced it has committed $1.6bn to expand its operations and network in Nigeria. MTN’s big opportunity is in mobile data and mobile money in Africa, given the relatively low fixed-line and formal banking penetration in most markets, and its ability to leverage its more…

Tebogo Malope @TebogoMalope If you’ve been struggling to get hold of me, a thief in CapeTown grabbed my phone out of my hand and ran off, chased him for about 25min, kept up even. Reckon we clocked over 5km, he got me at that BoKaap hill. He then stopped and clapped for me. At least he showed some respect. The Accountant @PennyBreezyM “We are ready for the coronavirus,” says a country that was nearly wiped out by polony… Muhlez @TimnaGwabe How do you remove red wine stains guys? Please. Suave @Nombhela Add more wine. The new wine will fight the old wine and they’ll soon realise that war is counter-intuitive and will all disappear into oblivion. CEASE @itsCEASE_ Once I get a girlfriend what do I feed it? who said…

during the December holidays, I embarked on a 70km trip on a gravel road from Butterworth to Mazzepa Bay, a journey that took me past a village that was once a hotbed for skills development in the former Transkei homeland. The village, known asTeko and situated in Centani, was home to Teko Vocational School. In the 1980s the school was a point of pride for the then Transkei ruler, Kaiser Daliwonga Matanzima, who had figured out that having an army of skilled artisans was vital to luring industrial investors into the rural homeland. When I was passing the village, it struck me that the proposal put forward last year in September by basic education minister Angie Motshekga for the introduction of some form of grade 9 exit examination was nothing…

The South African mining industry has no option but to make supportive noises regarding the minister of energy and mineral resources, Gwede Mantashe’s, proposal to open the door to private capital for an “independent” energy company. After all, there’s so little meat on the bones of the proposal that it would be foolish to dismiss it outright. The overriding sense, however, is that the mining sector would prefer the department of mineral resources and energy to focus on the low-hanging fruit: Namely, make it possible to produce independent power on a scale that’s planned by, say, Vedanta Resources. Deshnee Naidoo, CEO of Vedanta’s Zinc International division, told finweek earlier in February that her company would “put its hand up” for the development of a hybrid model of energy generation that…

Toyota South Africa Motors (TSAM) announced a further R4.28bn in investment in SA’s economy recently in addition to the more than R12bn it already invested over the past decade. This latest investment will generate approximately 1 500 new jobs and an additional R2.85bn annually towards SA’s economy, Andrew Kirby, CEO of TSAM, said at the State of the Motor Industry event in Kyalami in late January. The lion’s share – R2.43bn – is for an all-new passenger model which will replace the Corolla (not Corolla Quest) production line, due to end in 2020. Production of the new vehicle includes a Toyota Hybrid Synergy Drive variant. Other pockets of investment include R450m to increase local content of the Hiace Ses’fikile. “We did that to try and protect the pricing for local…

mediclinic International last year challenged the Competition Tribunal’s prohibition of its proposed acquisition of Matlosana Medical Health Services (MMHS) at the Competition Appeal Court. Because the group has been struggling over the years to succeed in its offshore ventures, Mediclinic is now looking at expanding its footprint in South Africa, and particularly in North West. Its plans to acquire MMHS, which owns two hospitals in Klerksdorp and a stake in a third, were blocked by the Competition Commission in 2017. This was done on fears that the acquisition would substantially reduce competition in Klerksdorp and the surrounding areas, enabling the private hospital group to unilaterally raise prices. In early February Mediclinic announced its victory. The acquisition includes two multidisciplinary hospitals – Wilmed Park has 185 beds and Sunningdale has 62…

last year I wrote about the oddity of negative-yielding debt, whereby somebody lending money would not receive any return on their investment. Instead, they would get back less than they’d loaned out, effectively paying the borrower to lend them the money. I commented then that this was wildly crazy and that I would dig deeper to write a follow-up column. Well, the good news is here’s the follow up. The bad news is that it is no less crazy, and I still have no real idea how it ends, but I have some thoughts. More good news is that at the end of 2019 negative-yielding debt had dropped to about $11tr, down from a high of $17tr in mid-2019, according to Bloomberg research. So, it is unwinding, but there is…

Money down the toilet Two years after I bought my first cellphone, I dropped it in the toilet. Bad luck, right? Interestingly, this isn’t an uncommon occurrence; research suggests that a fair amount of cellphone owners use their phone in the toilet and dropping phones into the toilet bowl appears to happen with great regularity. But I thought I would be just fine. Why? Because I had cellphone insurance, of course. Surely, this sort of occurrence was covered. What could go wrong? It hadn’t occurred to me to read the fine print – the print that explained that I wouldn’t be covered unless my South African service provider’s SIM card was in the phone. And here I was, in an American toilet with a temporary American SIM card in my…

■ Do you spend more money on your friends than you can afford?■ Do you borrow things from friends and not return them?■ Do you sometimes “forget” to pay off personal loans from friends?■ Do you often go out to dinner simply because you don’t feel like cooking?■ Whenever you’re about to spend money on anything, do you ask yourself if the purchase is a need or a want?■ Do you actively keep your partner in the dark about the household debt situation?■ Do you have a credit card that is maxed out or near its limit?■ Are you being turned down for a loan and/or credit card application?■ Are you regularly using balance transfers between your accounts and refinancing to stay afloat?■ Are you ignoring and avoiding calls from…

money, and beliefs about money, are deeply engrained in each one of us, shaping part of our personalities. Beliefs about money are fashioned from very early on in our lives through our experience, socioeconomic circumstances and education, to name but a few. Personal views on money range from frugality, as expressed by Benjamin Franklin’s “a penny saved is a penny earned”, to living the grand life, as expressed by Oscar Wilde: “Anyone who lives within their means suffers from a lack of imagination.” It is important that we know where we are on this continuum between frugality and free spending and how that impacts our relationship with money. However, while we have different views on money, there are some key concepts that can assist us in better understanding and protecting…

■ Contributing authors can determine whether any of the suggested angles under each topic would be of interest to address – or they can elect to introduce their own angle on the specific topic. There is no restriction.■ Contributors should avoid using their contributions as marketing pieces, opinion pieces or investment recommendation pieces.■ An advisory committee selects which contributed articles to include in Collective Insight. Selection is on merit and suitability only, and is completely unrelated to any advertising that may appear in the publication.■ Please send any proposed contributions addressed to Anne Cabot-Alletzhauser at cabota@aforbes.co.za…

i have made reference to the phrase “swimming upstream” before, and mentioned how it always reminds me of the joke about the man who was travelling on the N1 highway when he got a phone call from his panicked wife. She had heard on the radio that on the same highway, a vehicle was travelling in the wrong direction, causing havoc with oncoming traffic. Frustrated, the man answered his wife that it wasn’t just one vehicle travelling in the wrong direction, but all of them! When we look at South African listed property shares, one-way traffic definitely comes to mind, and not in an investor-friendly way. Investors had to watch this sector decline by 27% since the beginning of 2018 (between 31 December 2017 and 4 February 2020). Some of…

investing in equity markets has become a perilous journey for most local investors, with a wide divergence in performances in 2019 resulting in some having gained, but others having lost out measurably. An investment in resources in 2019, or exposure to a MSCI World Index ETF fund, would have been beneficial. Naspers* also delivered a decent return of 18%, as the company continues to ride on the coattails of resurgent worldwide tech stocks. And Capitec and Clicks remain growth stars. But not all funds have exposure to these shares. Any investment in SA Inc. over the period would have been negative for an average investor. The FTSE/JSE All Share Index ended the year 8% higher. An investment in Old Mutual’s Gold Fund would have yielded 68%. Platinum shares would have…

Telkom, which has announced it is shedding 3 000 jobs in its fixed-line business, grew revenue by 4.7% in the six months to September 2019, driven by strong growth in its mobile business, where service revenue grew by 56.6% and market share gains were made. Capex of R4.2bn was focused on mobile and fibre. Earnings before interest, tax, depreciation and amortisation, however, declined partly due to costs incurred growing the mobile business. Mergence Investment Managers expects the Telkom share price “to be supported by a relatively attractive valuation underpin as well as the proposed further restructuring”, according to Peter Takaendesa, Mergence’s head of equities. He says the share price is trading close to a 50% discount to book value compared with a premium of over 40% in mid-2019 when it…

the South African economy is bearing down on companies, and particularly small- and medium-sized enterprises (SMEs), with liquidations on the rise. The latest figures from Stats SA show an increase of 10.7% in the number of liquidations in 2019 compared with 2018. Company liquidations increased by 11% and closed corporations by 10.3% over the same period. A major stumbling block for SMEs remains non-payment for services and goods, specifically from government. Kumaran Padayachee, CEO of Spartan, says the situation is getting worse. This obviously affects cash flow and when an SME lands a major contract or project or needs to expand the business, access to capital becomes critical. Bridging finance offers a solution, but it can be expensive. Padayachee says the cost of bridging finance generally correlates with the risk…