Indholdsfortegnelse for 19 March 2020 i Finweek - English

Somewhere amid Russia and Saudi Arabia’s oil war, the tumbling of markets and the proliferation of coronavirus hysteria, International Women’s Day was celebrated. At a time when our reality doesn’t read unlike the plot of a dystopian novel, I found it difficult to be inspired by this day. Given the gender-based violence crisis we are facing in this country, it’s clear that South Africa still has urgent work to do towards achieving gender parity. On paper, we’re doing well. According to the World Economic Forum’s Gender Gap Report 2020, SA ranks 17th out of 153 countries on the Gender Gap Index. Categorised by the region of sub-Saharan Africa, we come in third behind Rwanda and Namibia respectively. Globally, Rwanda is ranked ninth. The report, which has been running since 2006,…

“YES, PLEASE, JUDGE ZONDO, GIVE US AN INTERIM REPORT.” – Adv. Shamila Batohi, national director of public prosecutions at the National Prosecuting Authority, said she knows the pressure is high to prosecute for corruption and state capture. She spoke at Daily Maverick’s ‘The Gathering’ conference in March. “The last thing we need is when the commission is finished to dump this massive data. It really worries us,” she said. The publication said that the Special Investigating Unit’s probes of municipal malfeasance reported 18 finalised cases, 21 are before court and 25 are still under investigation. “We saw a risk to the outlook for the economy and chose to act.” – Jerome Powell, US Federal Reserve chairman, said that considering the coronavirus’ evolving risks to economic activity, the Federal Open Market…

the suspension of refining of platinum group metals (PGMs) at Anglo American Platinum’s (Amplats’) Waterval facilities in Rustenburg following an explosion of the plant – and the subsequent technical problems with its backup unit – means different things to different companies. For Amplats, the disruption means it will produce 900 000 ounces less PGMs in 2020 – roughly comprising of about 600 000 ounces in platinum and 300 000 ounces less palladium. That will result in a hit to pre-tax earnings of $1.1bn, according to a report by RMB Morgan Stanley in the wake of Amplats’ announcement in early March. The group, controlled by Anglo American, is adequately financed to cope with the working capital build-up brought about by not being able to sell refined platinum, which will be most…

I expect a tough market for the rest of 2020 thanks to the coronavirus (Covid-19) and as I write this ahead of the open on the morning of Monday 9 March, the global markets look set for a 5% lower opening as oil gets crushed (see p.13). For those looking for some safety in these wild markets, a solid preference share offers decent yields at relatively low risk. The yield on Grindrod’s preference share is 11% and linked to the prime interest rate. Thus, as the Reserve Bank cuts rates – as I expect it will do – the yield will drop but will remain well ahead of inflation and likely also well ahead of equity returns for the next year. This preference share pays an interest equal to 80%…

when in Baltimore some 20 years ago I recall then leading US mutual fund expert Jeffrey Laderman warning that a great danger for many is that they choose their funds almost as if they are ‘wonder drugs’. “You give your doctor a call and say, ‘How about writing me some prescriptions for the two or three that you think are the best’. Sounds absurd, doesn’t it? Too many choose their investments the same way. They hear about a hot-performing fund with a novel investment twist and jump in.” What is needed instead, he said, is to first examine your financial goals and decide what exactly you are trying to achieve through your investments. Only then can you make a sensible choice from the multitude of investment opportunities. There are around…

after not expecting much good news in 2019, the political and economic events that played out during the year were, if anything, worse than expected. It’s not surprising that negative sentiment is pervasive and influencing the way investors think and feel, but it may not be helpful. So, we thought it would be worth taking a step back and look at what really matters if your aim is to build wealth. Stay focused on the long term In an environment beset with fears about Covid-19 and where the JSE performed below expectations in three of the last five years, resulting in a lot of pressure in the system, it becomes easy to forget that investment outcomes and real wealth creation play out over multiple decades. There is a real prize…

in a force majeure event, such as the present coronavirus epidemic spreading worldwide, blind selling or buying in the market becomes the norm. But under more normal circumstances, when to buy and when to sell equities are important considerations based on calculated assessments. There is a saying that a share can climb much higher than hoped. Or linger at the bottom far longer than feared. A selling spree represents a correction, with buying opportunities. Some shares are usually overvalued. But many are also undervalued. Local property and retail shares could have been considered overvalued before the present dip. But now they almost certainly are in undervalued territory. Platinum and gold shares have risen to overvalued levels, delivering growth of 200% over the past year in some respects, benefitting from higher…

for the eighth time in only 22 years the US Federal Reserve cut rates outside its usual meeting schedule, cutting the benchmark interest rate by 0.5 percentage points on 3 March, but US equity markets still dropped by almost 3% afterwards. Why the cut? The Covid-19 (or coronavirus), with Fed chairman Jerome Powell saying: “The risks to the US outlook have changed materially” and “the virus and measures taken to contain it will surely weigh on economic activity, both here and abroad, for some time”. Covid-19 is a human issue, with a projected mortality rate of around 2%. By 8 March, confirmed cases of infected people stood at 105 586 and the death toll at 3 584, according to the World Health Organization. This means the mortality rate is around…

The outbreak of the coronavirus in China will probably be the biggest pull on the local tourism industry this year. By 11 March, SA’s health authorities confirmed that 13 people tested positive for the virus. Seven of them were part of a tour group which returned to KwaZulu-Natal from Italy at the beginning of March. “2020 is going to be tough,” says Tshifhiwa Tshivhengwa, CEO of the Tourism Business Council of SA. He mentions that the biggest problem is that China is a “big market” for overseas tourists. Some 93 171 Chinese tourists arrived in SA during 2019, according to Stats SA data. This was 3.9% fewer than the previous year, the data shows. In the meantime, companies such as City Lodge Hotels are gearing up vigilance for the virus…

the global impact of the coronavirus (Covid-19) has quashed the chances of a recovery in South Africa’s economy this year, as Chinese demand for the country’s exports weakens, the supply of key imports is disrupted, and both leisure and business travel take a severe knock worldwide. Economists have slashed their growth estimates for 2020, and Moody’s Investors Service cut its forecast for SA to 0.4% from 0.7% – just a notch above last year’s feeble increase of 0.2%, which was the lowest since the global financial crisis a decade ago. The disruption to global markets, coupled with a plunge in oil prices, have already knocked the rand to its weakest level in five years, and could herald the start of a recession in several countries – including the US, where…

the fact that the Investec Cape Town Art Fair (ICTAF) is the biggest art market on the African continent, larger than those in Johannesburg, Lagos and Marrakesh, contributed considerably to the recent conclusion reached by a Cape Town art consultant: Cape Town is Africa’s art capital. It’s not only the Cape beaches, scenic beauty and wines that attract tourists, but also art. “It’s something that the ICTAF team does across the world,” says Laura Vincenti, director of the Cape art fair. “We act as unofficial ambassadors for the city.” This year the ICTAF attracted an astonishing 22 000 visitors – many of them from foreign shores – to the Cape Town International Convention Centre, where this art fair was held for the 18th time from 13 to 16 February. This…

human behaviour is difficult to predict – and even more difficult to control. We might think we know what to do to dissuade bad behaviour, but our good intentions could easily have the opposite effect, encouraging even worse behaviour. That’s why economists and other social scientists have for long insisted that we test theories of human behaviour against real-world evidence. There are several ways to do this. The most obvious is in a laboratory setting where all things are the same and the only difference between the treatment group and the control group is the thing you wish to test. But many policies simply can’t be tested in a lab. Apart from policies that affect large groups (an interest rate hike or tax decrease), there are also individual behaviours we’d…

the South African stock and bond market, together with the rand, showed their fragility as panic about the coronavirus, or Covid-19, gripped investors across the globe. By 10 March the FTSE/JSE All Share Index slumped by almost 11.8% since the beginning of the year, whereas the rand slid by more than 11.7%. Over the weekend of 6 to 9 March, the currency fell from R15.67 to as low as R16.97 – its weakest level in almost five years – before retracing to R16.24 as the markets opened on Monday 9 March. The rand’s slump followed a net sell off of R3.6bn in locally-listed stocks by foreign sellers on Friday 6 March, data from the JSE shows. Foreigners sold net R2.4bn in bonds on the same Friday, a spokesperson for the…

Aspen Pharmacare is a South African-based supplier and manufacturer of branded and generic pharmaceutical products, including infant nutritional and consumer healthcare products. The nearly 170-year-old drug maker, with a presence in about 56 countries, announced that its normalised headline earnings per share from continuing operations rose to 707c/share in the six months through 31 December compared with the restated 702.4c/share in the comparable period a year earlier, according to its financial statements for the period. Over the past year Aspen has been disposing of non-core assets in order to reduce its debt, which it has managed to cut from R53.5bn in December 2018 to R38.9bn by the end of June 2019. Early in March the drug maker announced that it received R4.6bn in February from the sale of its Japanese…

berkshire Hathaway’s annual letter from Warren Buffett is available online and worth a read for its many gems. The first one for me was a mention of a book I’d never heard of: Common Stocks as Long Term Investments by Edgar Lawrence Smith. It was published in 1924 and is still available. For Buffett the key thesis is the power of retained earnings. A company makes a profit and the board gets to decide what to do with that profit. Most often a portion is paid to shareholders as a dividend. Depending on several factors, the dividend could be a small portion of the profit or a significant portion thereof. The portion which is kept back by the company is then ‘retained earnings’. These are used to continue growing the…

Ieon Kok spoke to Efficient Group economist, Dawie Roodt, who has been outspoken on the 2020 Budget. The interview was based on Roodt’s presentation to the Free Market Foundation in Johannesburg. What’s your overall assessment of SA’s public finances following February’s Budget? The country has entered a fiscal debt spiral and only an extraordinary attempt, or luck, will get us out of it. This, of course, is largely due to pitiful public management; it’s getting worse and will inevitably evoke greater pain. We’re almost certainly headed for further rating agency downgrades. Very little in the public sector works well. What are the major problems? A president loathe to deal with the deteriorating situation; government leaders who are out of their depth and at odds with the country’s best interests; the…

despair and frustration undoubtedly dominate the domestic investment milieu at present but an interesting exception to this is Sasfin’s chief investment officer, Philip Bradford, who has shown an incredible ability to find good investment opportunities in difficult times. This is well-demonstrated in his award-winning funds, especially the R3.8bn Sasfin BCI Flexible Income Fund, which has returned an annualised 11% in the past three years. “I’m very aware of the difficult economic environment around us, but we have been able to identify great low-risk investments that are ignored or shunned by the rest of the market,” he explains. “We know from history that normally the best time to buy securities is when the outlook is poor, and the worst time is when the outlook is good. However, I believe it is…

SASOL A gut kick Sasol’s interim results through 31 December were worse than expected, even as management called it “satisfactory”. That’s a gut kick to shareholders; some sense as to the destruction of the share price wouldn’t be amiss. Debt is higher than the market cap, so dividends were skipped and won’t be back soon. More pain was the downgrade of their debt by Moody’s (S&P kept its rating unchanged). In the immediate it’s moot, but as debt rolls over they’ll potentially pay higher costs. OPEC’s attempt in early March to get Russia to cut production failed, so Saudi Arabia (via oil company Saudi Aramco) started an oil war with Russia, selling oil at up to $10 under the market price. On 9 March oil fell 30% and Sasol lost…

the number of foreign tourist arrivals in South Africa declined by 2.2% to 2.612m in 2019 compared with the 2.672m in 2018, according to data from Stats SA. Total arrivals, which include those from the rest of the continent, slumped 2.3% to 10.2m in 2019 compared with 10.4m the previous year, the data shows. “We were hoping for a recovery,” says Tshifhiwa Tshivhengwa, CEO of the Tourism Business Council of SA. Couple the current global outbreak of the coronavirus with last year’s lacklustre arrivals, and “this is unknown territory”, he says (see sidebar on p.37). The part of the industry – which can be split into accommodation, rental cars and airlines – that’s listed on the JSE, struggled to deliver decent returns to investors (see graph 1 on p.36). And…

South Africans travelling locally and abroad comprise a sizeable market for local tourism players to tap into. As the outlook for the industry becomes increasingly hazy in 2020, one solution may be convincing those locals who love to travel abroad to switch to local vacations. “South Africans spend R80bn going overseas,” says Tshifhiwa Tshivhengwa, CEO of the Tourism Business Council of SA. “We need local travel to sustain the local industry,” adding that he wonders what would have happened if half the money flowing out of SA could have stayed in the country to support the industry. The subdued economic climate – with SA sinking into a recession during the final quarter of last year – coupled with almost 30% of the labour force out of jobs, weighs on locals…

the South African government is finding itself between a fiscal Scylla and an economic Charybdis, where state debt is burgeoning, and the economy is stalling. In order to try and plug holes in its fiscus, and those of public enterprises such as Eskom, Transnet and a sleuth of others, National Treasury is now turning to South Africans’ retirement money. Treasury plans to reintroduce a notorious and widely contended asset management policy of prescribed assets which was abandoned in the late 1980s. Prescribed assets in SA were first introduced in 1956 through the Pension Funds Act, when retirement funds were required to invest more than half of their assets into government and state-owned enterprises’ (SOE’s) bonds. Prescribing where assets should be invested was a way of compelling fund managers to invest…

south Africa’s second wave of the wedding season is now in full swing. The number of marriages tends to peak for a second time after December, either in March or April, depending on the month of the Easter holiday for that particular year, reported Stats SA in its last survey on marriages and divorces in 2016. Although it may be the least romantic process, choosing the type of matrimonial property system – which provides for the creation or absence of a marital estate or union – is of importance in avoiding hiccups down the road (for those opting for cohabitation agreements). “For most brides and grooms, discussions and negotiations regarding the finances, assets and adverse future scenarios are a serious mood killer. In the sort of environment that we encounter…

your Hinterland is there,” reads the inscription under a statue of the arch-colonialist Cecil John Rhodes, still – despite the ferocious Rhodes Must Fall agitation – standing, with his left arm raised, facing north, in the Company Gardens in Cape Town. It’s a touch ironic but that could almost be President Cyril Ramaphosa standing there. And saying that. He is the champion of the African Union (AU)-Nepad North-South Road, Rail and Related Infrastructure Corridor which aims to connect the “Cape to Cairo”. That was also the great dream of Rhodes. Ramaphosa’s reverie is, of course, to flood the hinterland with South African exports, not with conquering redcoats, though some rival countries on the continent are bound mischievously to conflate the two. His instrument is the African Continental Free Trade Area…

admittedly there are some things women can’t do as well as their male counterparts in the mining industry, such as handling heavy machinery, for instance. Then again, women are better than men at arriving at work on time; and they don’t break the large articulated trucks they operate either, unlike men. That’s according to Deshnee Naidoo, CEO of Vedanta Zinc International and a Minerals Council South Africa board member who’s driving the organisation’s White Paper aimed at advancing the role of women in the industry. There’s a raft of information that shows involving women in the mining business is not just the mark of a just, modern society, but a good business strategy. Fortune 500 companies with at least three female directors have a return on equity in excess of…

capitec’s share price has surged more than 320% over the past five years. The lender said on 9 March that it expects its headline earnings per share for the year ended 29 February to be between 18% and 21% higher than the comparable period a year earlier. The bank said it plans to release its financial results on or around 14 April. Outlook: Capitec has been encountering major resistance at its all-time high at 149 500c/share and retaining key support at 132 500c/share since December 2019. With investor sentiment currently subdued, will the lender’s forecast results avert a potential topping-out bearish formation? On the charts: Capitec is forming falling highs and during the final week of February it breached key support at 132 500c/share when the entire market plummeted over…

as I was writing this, we were just entering the month of March, following a February filled with so much negativity that I’m sure we would all just like to forget it as soon as possible. They say that it is always the darkest before the dawn, and although this may not be the answer that investors are looking for, it is the best advice in terms of what not necessarily to do right now. Sometimes it is better to listen to that worried little voice in your head warning you not to follow the herd. Make no mistake, I’m not saying that the worst is over. What I’m suggesting is that you should look at the past and how history can help you to think twice before you sell…

prudential has always seen corporate credit as a core asset class within the fixed-income investment universe, since it can add value to ourclients’ portfolios through the extra yield (or spread) it offers – but only where appropriate for the risk involved. We take pride in our robust credit research process, which we have followed for nearly 20 years. We have been active in the local credit market from its inception in the early 2000s, successfully navigating the 2008 global financial crisis and other difficult periods, to today. There’s currently a debate over whether South African floating-rate corporate credit (in the form of floating-rate notes or FRNs) has become too expensive, particularly for higher-quality issuers. This would mean that the yield these assets now offer is insufficient for the risk involved.…

after a record-long bull run in US equity markets, global economic growth is expected to slow significantly in 2020. An increasing number of black swan events, rising geopolitical tensions and trade uncertainty continue to find prevalence in the global marketplace. With the future scope of uncertainty unlikely to abate anytime soon, the need to allocate a larger portion of an investment portfolio into safe-haven assets appears more necessary at present. Gold Gold can offer investors a store of wealth or type of insurance against an inclement economic climate. The current economic climate continues to carry an increased amount of uncertainty, with the growth outlook having deteriorated significantly this year and geopolitical tensions waiting to re-emerge. Coronavirus and economic growth As the US-China trade war found some resolve at the beginning…

Q: How has City Lodge experienced the decline in offshore tourists (ex-Africa) arriving in South Africa during 2019? Did it impact room occupancy, and if so, by how much? A: We did not see a decline in offshore tourists in 2019, in fact, we saw an increase. Our tourist area is predominantly the Cape and with the negative effect of Day Zero (the extreme water restrictions imposed in Cape Town and other towns in the Western Cape two years ago) behind us, together with the positive impact of the Barmy Army, our Cape Town and Port Elizabeth hotels benefitted. The bulk of our portfolio – two-thirds – is situated inland, traditionally non-tourist areas. Q: What is the proportion of room occupancy by offshore tourists at City Lodge? A: Roughly 30%…

The government plans to bolster tourism to South Africa through the following measures: ▸ Emphasis will be placed on increasing the total number of tourists entering the country and the average amount of money spent by each tourist. ▸ The ease of doing business, and the availability of appropriate levels of tourism infrastructure – particularly transport, tourism offerings and products, and accommodation – will play an important role in attracting different types of tourists. ▸ Foreign business tourists arriving by air generate the most significant multipliers. ▸ SA will be positioned as the business and shopping centre for the region. SA can do more to develop the region as an international tourist destination by emphasising the broader biodiversity, cultural diversity, scenic beauty and range of tourism products, and making it…

Rather than dictating to pension funds what assets they should invest in, Alexander Forbes proposes attractive developmental investment opportunities – with no prescription required. “Alexander Forbes is opposed to any regulation, including prescription, that could lead to sub-optimal investment outcomes for investors,” says Janina Slawski, principal investment consultant at Alexander Forbes Investments. On a scale from bad to great, she says prescribed investment into specified developmental assets could be a promising compromise that is “not so bad”. David Moore, head of alternative investments at Alexander Forbes, suggests that investors be required to invest into new, specified developmental assets. For example, “investing in bonds issued by Entity X whose mandate it is to seek investment into developmental opportunities”. Investing in appropriate developmental assets would ignite social and economic development and job…

Naval @naval Michael Bloomberg proved that it’s cheaper to buy a President than it is to buy the Presidency. Olwethu Sipuka @osipuka #Coronavirus is here. Let’s not forget to pay @AVBOBSA. Man Mkwanazi @ImanMkwanazi I’m not mad at corruption, it happens all over the world. I’m mad at people stealing 80% and using 20% for the country – I wouldn’t even notice you were stealing if the basics were in order. My goodness. Daily Mirror @DailyMirror Princess Charlotte already speaks two languages at just two-years-old. Nokuthula Mavuso @NoxNonozi Her age mates in Orlando East, Soweto, are on four. James Breakwell, Exploding Unicorn @XplodingUnicorn 4-year-old: *writes out the alphabet* Me: You’re missing a few letters. 4-YO: I got rid of the dumb ones. Simon Grindrod @SimonPGrindrod I have no idea why…