Indholdsfortegnelse for 05 March 2020 i Finweek - English

many kids born in the late 1980s will probably have had to endure some form of entrepreneurship day during their primary school career. It usually involved a parent staying up for all hours of the night to bake fudge, make package the products so that their child could sell them home with the day’s takings. became clear I wasn’t blessed with an entrepreneurial crafts or the like, and at school the next day, only for the kid to go On these days, it spirit, but there were those kids that just had it. Not only could they sell ice to Eskimos, they’d invent something superior to ice and hustle without needing to rope in a parent, other than for logistical support – say, helping them get their stock to and…

Sasol’s troubles at its Lake Charles chemicals project in Louisiana in the US have burdened the company’s share price, which sunk to its lowest level in almost 15 years on the day it released its financial results for the six months ending 31 December. Revenue declined 3.6% to R99.1bn and profits slumped 71.6% to R4.5bn. Outlook: Sasol’s share price found firm support above 34 655c/share (dated back to 2015), which it eventually breached in August 2019 and confirmed a bearish head-and-shoulders pattern (refer to red arrows on graph). The share price attempted to recover in the form of a bull channel after holding at 23 390c/share in August 2019. After failing to retest key support (which is now the resistance) at 34 655c/share, the share capitulated again. On the charts:…

TRUWORTHS Retailers are for the brave Truworths’ results for the first six months to 26 December 2019 were basically flat, with sales up 1.3%, headline earnings per share (HEPS) 0.6% higher and the dividend unchanged. However, considering the consumer environment, these are decent enough numbers from a solid operation and with a historic price-to-earnings ratio (P/E) of 8.5, a dividend yield of 7.5% and the share price almost 50% lower over the last three years, it may pose an opportunity. Make no mistake that buying SA retail shares right now is for the brave. As always, however, if it works, the brave do very well. Yes, we’ve seen local retail stocks being slaughtered, but I would remind readers that Massmart, while down over 40% in the last year, is almost…

With three-quarters of the 100 biggest shares on the JSE, as measured by market cap, lying belowtheir200-dayexponential moving averages (EMAs), there can be no doubt that the bourse is experiencing a tough time. It’s mainly certain large commodity shares – with the platinum groups and some gold shares in the forefront – that are still making the general index look reasonable. The extent of the pain being experienced is evident from the fact that stalwarts such as Tiger Brands, Sasol, Sappi, Redefine, Hyprop and Woolworths are lying far below their 200-day EMAs. Commentators point out that there are many bargains to be had in the market, but that buyers are showing a lack of interest, especially because of the flood of negative news about the economy, Eskom’s power outages, future…

in a large semi-circular room with a high ceiling, several people sit separately at long, curved desks gazing at rows of computers blinking intricate patterns of numbers, graphs and tables. A display of screens of different sizes covers the entire wall in front of them, with a huge map of South Africa taking pride of place in the centre. It looks a bit like a dealing room, but it’s too quiet and too spacious. It is similar to an air traffic control tower because of the constant vigilance required by its occupants and the enormous pressure on them when unexpected things happen. This is the control centre for Eskom’s system operator (SO), the division which monitors and manages the country’s power system, in a grid covering an area roughly the…

relatively little credible data is available about small, micro and medium enterprises (SMMEs) in South Africa, and the available stats look dismal. A 2018 study by the Small Business Institute (SBI) showed that the number of micro firms in SA increased from 169 986 in 2011 to 176 333 in 2016, whereas the number of small firms increased from 63 864 to 68 494 and medium firms from 15 257 to 17 397. SMMEs, in effect, are not growing fast enough to meet the National Development Plan (NDP) targets, which envisioned that the segment would contribute up to 80% of GDP growth and generate 90% of an estimated 11m new jobs by 2030. “The segment would have to grow at a rate of at least 20% a year to achieve…

■ Be proactive and have a clear sales target plan.■ Manage your overheads through budgets and forecasts.■ Don’t react to an increase in sales, be proactive and rather plan for it.■ Know the risks that come with growth – what are the unique vulnerabilities of your business?■ Manage the gap between the growth rates of costs, revenue and profit.■ Don’t allow the sales growth rate to sabotage service delivery and learn to say “no” when necessary.■ Outsource functions where possible while you allow your systems to fully ramp up.…

A traditional first step for a new venture to lure funding is to compile a business plan. “A business plan is critical, but even more important are the contents of the business plan,” says Bongiwe Gangeni, deputy chief executive of retail and business banking at Absa. A complete business plan will include a CV of the business owners and key personnel in order to give the bank an understanding of their capabilities, she says. The plan also needs to set out a full description of the business, for example what it will sell; who the target market is; what the competitors look like; what the new business’ competitive advantage will be; what the cash flow will look like and whether there is any research data that supports the new business,…

Bob Kostic @causticbob Scientists warn that once computers become intelligent, they will surpass mankind and render us obsolete, in a Terminator-type situation. Fortunately, thanks to the internet, once computers become as intelligent as us, they’ll just spend all day watching cat videos on YouTube. Don Feelzerian @DonFeelzerian Why does traffic look like this at 2pm, where are you guys going? Tom Eaton @TomEatonSA I see there’s been a major outbreak of Stockholm Syndrome at OR Tambo International. Elizabeth Windsor @Queen_UK Boris Johnson on the phone. Says IKEA has delivered his new cabinet but there appears to be a wheel missing. Suntosh Pillay @suntoshpillay South Africans only burn down universities, not bottle stores or taverns. We prefer our degrees burnt and our beers cold. Zamandlovu Ndlovu @Ms_ZamaNdlovu Who goes to Chicken…

i’ve always been an early riser. It’s 04:36 as I write this, but then, I was also in bed quite early, getting my usual six to seven hours of sleep. This isn’t uncommon for South Africans. According to Sleep Cycle, an app that tracks sleep patterns, we’re the first to go to sleep every night – at 22:46 on average. But we’re also early risers – at 06:08 – second after Guatemalans. (Apparently the Dutch have the best sleep quality, Iranians the worst, while Greeks, Italians and Spaniards snore the most!) While these numbers suggest the average South African gets about seven hours of sleep nightly, the sample is, of course, unlikely to be representative. Yet, even seven hours is at the lower end of what’s required. Most studies agree…

keep an eye on Neal Froneman, CEO of Sibanye-Stillwater, because despite a pledge to reinstate the dividend during the firm’s current financial year, he also believes the firm has the kind of access to capital markets to bring about a new chapter of merger and acquisition growth. Asked how he intends to achieve the balance, Froneman told finweek: “We’ve never had the ability to access the debt markets before like we do today. We’ve got a credit rating we’ve never had before and better access to the bond markets.” What’s uppermost in his mind is adding battery or “high-tech metals” to the gold and platinum group metal (PGM) portfolio that’s currently generating cash flow hand over fist. According to a recent report by Goldman Sachs, cash flow on spot prices…

I always want to hold single-commodity stocks when both the commodity and the stockare booming and we’re seeing that in spades here. Gold is at decade highs, while palladium continues to hold above $2 000/oz, and rhodium just flies. Sibanye-Stillwater’s* financial results for the six months ended 31 December2019 were excellent and debt has been slashed. Couple these two factors with a wage deal that should mean no work stoppages, and you can expect a lot more profit. Furthermore, the company has stated that it will pay a dividend for the year ending in June and that the dividend will not be removed to fund deals. This is all great, but the price has flown since I got in at under 4 000c/share – just ahead of the trading update…

in their book, The Enigma of Reason, Hugo Mercier and Dan Sperber write: “Two major features of the production of reasons: it is biased – people overwhelmingly find reasons that support their previous beliefs; and it is lazy – people do not carefully scrutinize their own reasons. Combined, these two traits spell disaster for the lone reasoner. As she reasons, she finds more and more arguments for her views, most of them judged to be good enough. These reasons increase her confidence and lead her to extreme positions.” In short, it basically means that our ability to argue is limited to our own beliefs. Mercier and Sperber were referring to beliefs such as the belief that a bull becomes infuriated by the colour red, or that ostriches bury their heads…

in December inflation clocked in at 4.5% – right on the number that Reserve Bank governor Lesetja Kganyago keeps referring to. How does inflation work? If prices increase, it is either because of increasing demand or decreasing supply. More money chases fewer products and pushes prices higher. Policy can fix this by increasing interest rates. This reduces the economy’s money supply as consumers pay more to service their debt. The inverse of inflation is falling prices (deflation). This may be due to lower demand or an oversupply of goods and services. Here, the lowering of interest rates puts money back into the pockets of individuals. They have more spending power, which slows or stops falling prices and deflation. We’re seeing record low interest rates worldwide, yet inflation remains low. Following…

measures to cut dangerous levels of air pollution will get little attention in Eskom’s drive to catch up on long overdue maintenance, as the cash-strapped utility grapples with more than R450bn of debt and operational issues that have made it impossible for the utility to meet the economy’s needs. But Eskom itself has admitted that people are dying from emissions of particulate matter, sulphur dioxide and nitrogen dioxide, at its coal-fired plants, and estimated late in 2018 that these caused about 330 deaths a year, with an annual health cost from mortalities of R17.6bn. Independent studies indicate that the number of deaths is much higher. Robyn Hugo, an attorney at the Centre for Environmental Rights in SA, says that most of Eskom’s plants do not comply with South Africa’s own…

Q&A it’s one thing to come up with an idea, but to start an entrepreneurial journey is a process that needs to be considered from a variety of angles. And not everyone who has an idea turns it into a business success. In fact, according to the statistics, 96% of small businesses fail, founder and CEO of business incubator Raizcorp, Allon Raiz, told finweek. “By the way, the 96% failure rate is not a South African phenomenon. It’s a global one and mostly because the [entrepreneur’s] approach to [starting] it is unmeasured,” he explains. So, how then should an aspiring entrepreneur approach a potential venture? For Raiz, the important questions should focus on the human being. Are they really entrepreneurial? “Ask yourself if you are prepared for the sacrifice that…

■ A business that is not growing must first contend with understanding what in the business design is holding back natural organic growth.■ Factors that retard natural growth usually fall into two parts: the “front stage”, or what the customer experiences, and the “back stage”, what the company does to deliver value to the customer.■ Look at current markets and decide if they are profitable; consider the cost base and whether it is optimal to position the company for growth.■ Examine production capability and capacity, and look at marketing activities, especially the product-service mix.…

Cash flow is the most important consideration – possibly after sales – that a new businessperson should keep in mind. Without cash, it will be difficult to pay suppliers and the staff that are needed to keep the venture going forward and generating sales. “All the activities in a business revolve around cash flow,” says Deenash Pillay, head of small enterprises at Standard Bank. “Reviewing your key financial data regularly and keeping track of money going out and coming in, is the best thing you can do for your business to maintain control of your cash flow and finances.” He advises new business entrants to avoid common pitfalls like going into an excess position on their business current account, by planning and making certain they have funds to maintain stock…

1. Who is the CEO of local fintech company Yoco? 2. Jeff Bezos, a US internet entrepreneur, is best known for founding which multinational technology company? ■ Google■ Amazon■ Microsoft 3. What is the name of chef Sasha Simpson’s café and restaurant located at Workshop 17’s co-working spaces in Rosebank, Johannesburg? 4. True or False? Dr Theo Mothoa-Frendo, profiled by finweek in 2019 (bit.ly/AfricanDermal), is the founder of African Dermal Science. 5. What does SMME stand for? 6. True or False? South Africa has a ministry of small business and development. 7. True or False? South African company, The Duchess, profiled by finweek this year (bit.ly/TheDuchessGin), produced the world’s first non-alcoholic gin and tonic. 8. Discovery Limited was founded in 1992 by: ■ Laurie Dippenaar■ Jannie Mouton■ Adrian Gore 9.…

a text message from a family member moments before I started writing this column gave me a glimmer of hope that maybe the rot in our municipalities will begin to be addressed. Apparently the Hawks (the police’s Directorate for Priority Crime Investigation) is swooping down on the Kai !Garib municipality’s head office in Keimoes in the Northern Cape to make arrests for tender fraud. Earlier in February, the Hawks also arrested Buti Piet Molupi, the municipal manager of the Nala municipality (Bothaville) in the Free State for alleged irregularities surrounding the appointment of a security company, according to news reports. These are welcome actions by the police as many citizens living under the burden of inefficient and self-serving municipal councils are suffering a lack of basic service delivery, including the…

While wine has been canned since the 1930s, this form of packaging never really took off because of the inferior quality of canned wine in comparison to bottled. The category has, however, enjoyed a revival since 2014, thanks to the development of new technologies to improve canned wine quality in combination with millennials’ eagerness to experiment with new products. In the US particularly, the category has grown by double digits each year for the past five years, topping R1.2bn in 2019, according to Nielsen. Arnold Vlok and Ruan Viljoen knew it would only be a matter of time before the trend blew over to South Africa, so the friends registered Uncanny in 2018 and started working on making their own canned wine brand. “Our goal was to create the first…

cash generation has been so good in the mining industry over the past two years that analysts are asking whether the companies earning the cash ought to return more of it to shareholders; the money belongs to its investors, after all. For mining companies, however, the “should we, shouldn’t we” dividend question is a dilemma. Often, company boards sanction payouts as a fixed proportion of earnings. Bowing to shareholder pressure requires a special dividend, or a payout policy adjustment. Such bold decisions may border on the irresponsible if the money can be used better internally by replenishing resources, for instance. “It’s a balance, that’s what we’re striving for,” said Stephen Pearce, chief financial officer of Anglo American, when asked about the firm’s payout at the annual financial results presentation in…

Nepi Rockcastle is a commercial property investor and developer which owns malls in nine countries in central Eastern Europe and is one of the largest listed property stocks on the JSE, with a market cap of close to R71bn. Last year Nepi embarked on a process of disposing of its Romanian office portfolio with the aim of bumping up its distribution growth to 6.5% for the year ended in December. The group had previously targeted a 6% growth in distribution per share. Nepi reported results for the year ended in December 2019 that showed that the group had achieved its target, despite the competitive market. Its loan-to-value ratio was comfortably below 35% and was well within the 60% unsecured debt covenant. How to trade it: Nepi has been trading in…

a company going broke or into business rescue is something we’re seeing more with listed shares. As investors we naturally want to avoid holding shares of companies that hit business rescue because shareholders can expect very little from it, if anything. The cause of bankruptcy is not just debt, but extends to the liquidity and solvency of a business. A company like Tongaat Hulett is technically bankrupt with its negative net asset value of around R4bn. Simply put: Tongaat’s liabilities exceed its assets by R4bn. But the business rescue practitioners are unlikely to be summoned, whereas other companies in a similar position could find themselves faced with a business rescue process. What sets Tongaat Hulett apart is its ability to trade itself out of trouble. There are a few simple…

the Urban Outfitters brand is aimed at young adults, and it has a product range that includes women’s and men’s clothing, shoes, beauty and wellness products, accoutrements, active wear and outfits, household articles, as well as music, especially vinyl records and cassettes. Many of the goods are designed and manufactured through several private labels by the company’s wholesale department. The goods are available in countries such as the US, Sweden, the UK, Spain, Denmark, France, Germany, Ireland, Belgium, Canada, Italy, the Netherlands, Israel, and the United Arab Emirates. Believe it or not, but the company was established in 1970 as a project for an entrepreneurial class at the University of Pennsylvania. From there, the company grew and was later renamed Urban Outfitters. This once again shows where a “cursory project”…

load-shedding will remain a permanent feature of the South African landscape for at least 18 months as Eskom tackles the debilitating results of more than a decade of neglect and deferred maintenance, which has left its fleet of coal-fired plants increasingly prone to unexpected breakdowns. Plans which are being finalised by the utility suggest that around 25 000MW of power can be reliably provided during that period – well below the current demand of about 29 000MW, which normally rises to above 30 000MW in the winter. Eskom’s chief operating officer, Jan Oberholzer, said in an interview with finweek that he believed this would be the likely outcome of increasing planned maintenance to above 6 000MW per day from below 5 000MW previously, in order to take units offline for…

finance minister Tito Mboweni has abandoned any attempt to hang on to South Africa’s last investment-grade credit rating, with a budget that bluntly acknowledged debt will not stabilise over the next few years and unexpectedly eased the tax burden on individuals in a desperate attempt to resuscitate the flagging economy. The decision not to raise taxes to help curb ballooning public sector debt and to narrow widening budget deficits — as had been expected — is likely to prompt Moody’s Investors Service to downgrade its investment-grade credit rating for SA, triggering large capital outflows which will raise borrowing costs in the country. S&P and Fitch, the other rating agencies which have already slapped “junk” status on SA’s sovereign debt, are also likely to downgrade their ratings again. Treasury has clearly…

many a new venture – from starting an electrical business to selling flowers or cutting hair – has to undertake the fine balancing act of allocating cash. This may range from paying suppliers, remunerating employees or coughing up for bank interest. Add to that the necessity to take out insurance on valuable assets and the potential loss of income – especially in a one-person enterprise – and it may seem daunting to a new business entrant. Employing people, in addition, may also be overwhelming (see box on p.45). Starting up and getting cash to roll out your new business will most likely not be supported by the traditional banks. “Banks are less enthusiastic about funding new, unproven concepts and ventures or speculative transactions – unless there are compelling reasons that…

Starting fresh to sell a product or service is exhilarating. Employing staff to support these sales and other administrative functions might not be. However, this need not be the case. “Knowing which sector (if any) the business falls under is an important first step,” says Nicolene Schoeman-Louw, managing director at SchoemanLaw Inc. “Engaging employees with written contracts go a long way to clarify expectations on both sides.” The recording of acceptable behaviour standards in human resource policies are also vital, she says. In addition, registration with the department of labour and ensuring that their compliance measures – such as correctly displaying notices, implementing first aid kits and payment of workmen’s compensation – are met, is important, according to her. Any new business entrant must bear in mind that labour law…