Indholdsfortegnelse for 9/10/2020 i Finweek - English

Working to a regular bi-weekly print deadline tends to turn life and the way you measure time into weekly increments. When one deadline passes, it’s back to planning the next, each time another week getting marked off, and the process starts again. its 24th week of working from in the middle of a print deadline and needing to how to meet it entirely remotely. Luckily, given the nature of the print As I write this, the finweek team enters home, having entered the lockdown figure out production process, during which, no matter how much you plan, something unexpected will inevitably occur, our very small team has become very adept at navigating crises. As a former colleague of ours always used to say: “It’s the finweek way.” So, we’ve adjusted to…

“PAYING CUSTOMERS WILL BE SADDLED WITH HOPELESSLY INSOLVENT MUNICIPALITIES THAT HAVE NO PROSPECT … OF PAYING THEIR OUTSTANDING DEBTTO ESKOM.” − Acting judge Anthony Millar ruled against Eskom’s electricity supply cuts to the Lekwa (Mpumalanga) and Ngwa the (Free State) local municipalities due to non-payment, in the South Gauteng High Court. Moneyweb reported that the utility has in the last few months limited electricity supply to these two and many other municipalities in various provinces as a strategy – after losing several court battles about the disconnections. Millar said Eskom should try to resolve disputes with municipalities before taking action that brings about huge human suffering. “ACCUSED NUMBER ONE.” − President Cyril Ramaphosa said the ANC needs to face the reality that its leaders stand accused of corruption and that…

there was a ripple of disquiet among analysts when Patrice Motsepe, executive chairman of African Rainbow Minerals (ARM), defended his company’s dividend final pay-out of R7/share (total dividend of R12/share for the 2020 financial year) in favour of keeping capital aside for growth; mainly projects. RMB Morgan Stanley deemed the pay-out “modest”, especially as ARM has R3bn in cash. But Motsepe said ARM was looking afresh at new copper investments, and other project investment talks were buzzing along. Motsepe also alluded to the potential in Harmony Gold, the firm’s 13.8% investment, saying that the company had an important copper and gold prospect in the politically-fraught and far-flung Pacific nation of Papua New Guinea (PNG). The fact is, though, ARM doesn’t have the best track record when it comes to projects.…

the National Education, Health and Allied Workers’ Union (Nehawu) called for a national strike on 3 September (the day after this issue of finweek went to print) by its 240 000 members. They’re demanding that government withdraw its pay freeze on government employees and supply enough personal protective equipment (PPE) to members on the frontline of the pandemic. “(W)orkers are extremely angry at the poor pace of transformation and government’s inability to improve the lives of public servants, including freezing their wage increase by reneging to the implementation of Resolution 1 of 2018 while watching the elite benefitting from the proceeds of corruption through PPE tenders and supply of otherCovid-19 essentials,” Nehawu declared when they announced the planned strike. The Public Servants’ Association (PSA) and its 240 000 members justify…

When Massmart warned that its earnings may drop by as much as 50% in the first five months of its 2019 fiscal year, the retailer’s majority shareholder, Walmart, sent one of its own, Mitchell Slape, as CEO to help stem the decline. Massmart has 423 stores trading under the Game, Builders Warehouse, Jumbo, Cambridge Food, Makro and DionWired brands across 13 sub-Saharan countries. Slape embarked on a turnaround plan aimed at cutting costs and boosting profit and margins. Massmart’s sales in the 19 weeks to May 2020 fell 11.9%, hit by a five-week lockdown that prevented the company from selling most of its general merchandise, home improvement and liquor products. Though the company must cut 1 800 jobs from its struggling Game stores – which have been dragging the group’s…

We’re back into earnings season on the JSE, with June mid-year and year-end results starting to be published. As such, we’re seeing the real impact of the hard government-imposed lockdown, which started in late March, on companies. This gives investors a first true indication of how businesses performed during lockdown, and perhaps a glimpse into how they’ll recover. But first, there are two important points. Year-end results will only have one quarter of lockdown included, while mid-year will cover a period that stretched over half the lockdown time. It is also very important that while we’re now in level-2 lockdown as a country, things remain risky and we could move back into stricter lockdowns – as we’ve seen happen in many other countries the world over who came out of…

in this edition of Fund Focus there is a strong bias towards offshore investing and, indeed, there are many good reasons to seek exposure there. It helps people reduce their exposure to a single currency or market, and provides diversification in terms of sovereign risk, ensuring that you are not exposed to political risk in just one country. South Africa comprises less than 1% of the world’s investible assets and it makes sense to gain exposure to at least some of the other 99%. One of the best local performers has been the Old Mutual Global Equity Fund, which generated an annualised 21.2% in the ten years to June 2020, 13.5% in five years, and 21.1% in one year. It’s managed out of London by Ian Heslop, Amadeo Alentorn and…

the local asset management industry has experienced a growing number of emigrations and retirements recently and clients are understandably concerned about who will be managing their hard-earned savings in future. In my opinion, the war for talent will likely accelerate in the years ahead and thus the ability to attract and retain talented investment professionals will be a real competitive advantage. Ninety One is in a fortunate position, being a globally-integrated business, which provides its staff with global career development opportunities without the need to emigrate where that emigration is based purely on a lack of local career development opportunities. Clyde Rossouw, who co-heads our Quality capability, is resident in Cape Town, yet manages a market-leading global equity fund, the Ninety One Global Franchise Fund. Similarly, Charlie Dutton successfully manages…

in the March edition of Fund Focus I argued the case for long-term exposure to to-prated global equity funds – and sticking with that standpoint. If anything, I believe, you’re probably even better positioned now to invest in them, as suggested in the macro metrics of the accompanying table. Says Russel Investments global head of investment strategy Andrew Pease: “We’re not so certain that investors have it wrong. For sure, markets seem to be priced for an optimistic outcome if no meaningful second waves of infections re-occuras lockdowns are lifted. But record levels of fiscal stimulus, sustained low interest rates and ongoing low inflation create a supportive environment for risk-asset outperformance.” While we saw the fastest 30% drawdown in market history of global equities in the first quarter of this…

as traders or investors, we are essentially managing risk and, typically, we focus on the risk of losing money. But risk in the markets is about far more than just losing money. I have written before that one of the great things about investing is that your downside risk is capped at 100%, as an investment can only go to zero. But the reward is unlimited, as a share’s price can rise to absolutely dizzying heights. If we keep this in mind, investing becomes much easier – even if there are a few dud shares along the way. One of the great things about investing is that your downside risk is capped at 100%, as an investment can only go to zero. However, there is a lot more to investing…

We all consume way too much sugar than is good for us. I’ve tried hard to reduce my own sugar intake over the last two years, and, I thought, quite successfully, until a friend recently pointed out the sugar content of Mrs Ball’s chutney and All Gold tomato sauce – staples in the Fourie household. He won’t be invited for dinner again. But the consequences of our overindulgence is no joke. Excess sugar consumption is linked to a range of diet-related diseases, such as diabetes, cancer and heart disease. In South Africa, these issues are of particular concern. The 2016 South African Demographic and Health Survey finds that 68% of women, 31% of men and 13% of children are overweight or obese. The National Income Dynamic Survey exposes the large…

There’s some serious head-scratching underway in ARM’s finance division. The company is in the final throes of an internal forensic investigation into why a receivable item of a not negligible R230m can’t be accounted for. Apparently, the matter has been on the company’s books for seven years. A change-over in auditor has resulted in a qualification on the firm’s balance sheet that, if not solved internally over the next two to three weeks, will require an external forensic investigation. ARM told analysts it would be “very surprised” if the matter amounted to fraud, but that can’t currently be discounted. Most likely, it relates to the interdependent and somewhat complicated web of loans between it and Glencore, its joint-venture partner in the coal division. The worst likely outcome is that ARM…

Shoprite, Africa’s largest grocer, remained composed when the Covid-19 fears triggered a global sell-off in March. Instead it retained firm support at 9 500c/share. Shoprite said at the end of August that its second-half sales rose 9.4% in the last three months of the fiscal year through the end of June. The strict lockdown period boosted Shoprite’s sales, as its Checkers Sixty60 digital application expanded to 87 stores. Liquor sales, however, dropped 29.5%. Outlook: Despite its previous challenges of currency devaluation, Shoprite’s centralised supply chain provides the grocer with an operational edge, and its trading brands are very well-positioned to compete in different target markets across income groups – giving the grocer an even greater competitive edge. On the charts: Support retained at 9 500c/share has triggered upside through the…

the saying goes that time flies when you’re having fun. I always thought that this was true, until 2020 came along. We have just entered the last month of the third quarter and the time to start thinking about 2021 is steadily approaching. Considering this, I would like to adjust this saying by changing it to, “Time flies when you’re having fun, unless you’re locked down, because then it flies even faster.” With everything that’s happened in 2020, I thought it appropriate to discuss three topics that investors could consider with 2021 in mind. Let’s recap 2020 so far. The MSCI All Country World Index (ACWI) was off to a good start in 2020, and by Valentine’s Day the index was trading positive by 3% (in US-dollar terms) for 2020.…

the recent spate of interest rate cuts may leave fixed-income investors concerned about future returns. However, historically, income funds have continued to deliver inflation-beating and returns higher than cash – even after rate cuts. We are optimistic about the outlook for fixed income over the medium term, but the opportunities are not evenly distributed. Now, more than ever, investors should be selective. Typically, income funds perform close to cash in rising interest rate cycles, and significantly outperform cash in a falling interest rate environment. This outperformance was evident in the previous rate-cutting cycles of the early 2000s, after the Global Financial Crisis (GFC) and currently, following the cumulative three percentage points cut in rates. A reminder of fixed-income basics Fixed-income returns comprise yield (income) and capital returns (driven by changes…

imagine you are at a cocktail party in May 2012. The conversation turns to the stock market, and your friend mentions that she bought Facebook at its initial public offering (IPO) that month. You tell everyone that you just invested in a trucking business. While your friend instantly becomes the life of the party, you spend the rest of the evening staring into your drink. Your friend made a good call — Facebook’s share price has risen almost sevenfold since the IPO. But your investment in XPO Logistics was also pretty exciting. Its share price performance was even with Facebook’s as recently as this January, and both companies delivered similarly strong revenue per share growth through the end of 2019. Since then, the pandemic has been considerably more painful for…

Positive factors Underlying reasons for investing in top global equity funds in the near future: • More fiscal stimuli appear to be on the way in the US (the fiscal thrust is the most significant since World War II).• Europe’s exposure to financials and cyclically-sensitive sectors such as industrials, materials and energy, gives it potential to outperform when economic activity picks up and yield curves steepen.• The UK has been hard-hit by the Covid-19 crisis, and although the OECD has forecast an 11.5% decline in GDP this year, it expects it to rebound by 9% next year.• China seems well-positioned for a modest economic rebound this year, and a strong one next year, as stimulus kicks in and the global economy recovers.• The baton of growth is markedly passing on…

renewed record highs on the Nasdaq and S&P 500 have raised the spectre of a market bubble floundering on the reality of adverse economic conditions. US markets appear out of sync with the economic realities of a still highly active global pandemic, weak company earnings and subdued economic data – with even the US Federal Reserve (Fed) warning that more uncertainty lies ahead. All market losses have been recovered since March, and the Nasdaq has surged more than 25% since January. Billionaire investor George Soros has been one of those warning of a bubble that could deflate soon, as with the dotcom bubble in 2000. Asset managers caution that the US economic recovery might not be the desired V-shape as anticipated, but rather be in the form of a K-shaped…

The fiscal woes of South Africa’s government – whose debt is not rated as investment grade due to international investors’ fear of its ability to repay it – just got deeper with the alcohol ban. The value of tax and excises losses is estimated to be equivalent to R25.1bn as the money would have flowed through the whole value chain – from farmer to producer to the end consumer. “The first and second bans will result in about R19.4bn reduction in tax revenue (excluding excise tax), and about R5.7bn reduction in excise tax,” Kurt Moore, CEO of the SA Liquor Brand Owners Assocation, says.…

South Africa remains vulnerable to the threat posed by data breaches and has been found to have the highest probability of experiencing it. The recent hack of credit data firm Experian SA, in which the personal information of as many as 24m South Africans and almost 800 000 businesses was exposed, illustrates our vulnerability. It is against this background that many South Africans have eagerly awaited the implementation of the remaining provisions of the Protection of Personal Information Act (POPIA), says Nadine Mather, associate director at law firm Bowmans. The act came into effect on 1 July and businesses have been granted a grace period of12 months (until 1 July 2021) to ensure they amend their systems, procedures and policies to become fully compliant. This may sound like sufficient time,…

Waterstones Piccadilly @WaterstonesPicc A customer has just bought a 2021 calendar. Sir, we admire your optimism. Songezo Zibi @SongezoZibi “Dead East London man wins PPE tender”. True story. JUSTICE 4 BELLY @findingmalo So, I found out recently that babies cry when other babies cry because they’re developing empathy and don’t like seeing other babies distressed. Up to now I just thought they were jobless and had nothing better to do than to cry in unison. Mark @TheCatWhisprer DATING: Can’t wait to see you again. MARRIAGE: Part of your knee was on my side of the bed again last night. Paul Theron @paul_vestact We are urged to buy local, now that the lockdown-ruined economy is struggling back to its feet. I’m doing my part, buying 100% of my electricity from Eskom.…

When I heard that the ANC was calling for the establishment of a deposit-taking state bank to compete with established commercial lenders, I wondered to myself who in their right mind will entrust their hard-earned savings with this bank, given high levels of corruption and mismanagement of state-owned enterprises (SOEs) at the hands of ANC cadres. The alleged involvement of the ANC in the looting and demise of VBS Bank has eroded public confidence in the ruling party, whose leaders are now facing a public backlash for raking in millions of rand from corrupt government tenders for personal protective equipment in the fight against Covid-19. Besides the fact that I don’t trust the ANC-led government to operate a bank ethically and competently, I have two critical questions regarding this proposed…

james Paterson and Benji Meltzer started Aerobotics in 2014 after identifying on-farm challenges that could be solved with aerial imagery and machine learning. The duo needed aerial and satellite imagery to identify crop threats, but there were no suitable drones available at the time that matched their needs. While many would have considered this an obvious setback, the two leveraged their academic backgrounds to build their own. Both had studied mechatronics engineering at the University of Cape Town. Paterson also completed a Masters in aeronautics and astronautics at MIT and Meltzeran MSc in neurotechnology at Imperial College London. In 2014, remote sensing was in its infancy globally and still a novel concept in South Africa, with only a few farmers in the Western Cape having access to a government satellite…

Shares in Sibanye-Stillwater have been charting a course north for most of the year, the Covid-19 equity shock in March notwithstanding. However, it could do better, according to the firm’s CEO, Neal Froneman. He told finweek in an interview following the firm’s results presentation in August that his company lagged rivals such as AngloGold Ashanti as well as – surprisingly – Impala Platinum and Anglo American Platinum. You would think investors rate Sibanye-Stillwater’s platinum shares as highly as other comparable South African counters; but no, argues Froneman. Indebtedness and, until recently, a vacancy of shareholder pay-out, have been factors in relative underperformance. Yet Froneman insists the firm’s SA exposure is part of the risk mix, as it were, even as the firm tackled debt. The recent resumption of an interim…

PSG has unbundled its stake in Capitec* to unlock value, but also to make for a slimmer group in which the other businesses they own have an influence on the profits. Before the unbundling, the Capitec stake was at times worth more than all of PSG, leaving a negative valuation for the rest of the group. The company published a sum-of-the-parts (SOTP) valuation, which showed a value of R76.39 the day after unbundling the Capitec shares. Yet, PSG traded over 40% lower than its SOTP. Holding companies generally have a discount to their SOTP, but a range of 15% to 20% is more realistic, meaning that PSG should have a share price of around R60. Aside from the discount, the group owns some good businesses – both listed and unlisted.…

in our interactions with fund portfolio managers and analysts this past quarter, the preferred leaning in fund categories was strongly towards offshore portfolios. It came as no surprise. Yes, South Africa has huge societal, political and economic distresses. But on the flipside, mutual funds throughout the world continue to grow explosively, and not least encompassing impressive global-orientated funds. SA, meanwhile, constitutes less than 1% of global market capitalisation. The number of recognised mutual funds worldwide increased from 83 000 in 2009 to 123 000 last year, with their biggest domiciles being the US, UK, Germany and Australia. Well over 50% of households in the US are currently invested in them, double the figure of 30 years ago. The big attractions of these vehicles, of course, are portfolio diversification and professional…

little is generally known about the Sasfin BCI Global Equity Feeder Fund, but one of its greatest attributes is that its underlying offshore fund is managed by Bruce Ackerman, one of the global asset management industry’s most experienced and successful operatives. Son of Ackermans stores patriarch Gus Ackerman and brother of Pick n Pay founder Raymond, Bruce was born in Cape Town in 1944, graduated with economics and MBA degrees at UCT in the late-1960s, and then headed to the UK where he managed some of the country’s biggest and most successful funds. This included 24 years with Lloyds Bank’s institutional investment arm in London as a fund manager, also fulfilling the roles of its chief investment officer and joint managing director from the early1980s until his return to SA…

a number of our clients have recently approached us with a common predicament. They want to invest offshore for all the right strategic reasons, but they don’t want to take on too much risk. The result is that they simply don’t know where to allocate their capital in the current environment. And it is because they are faced with the following conundrum: Record-high stocks and record-low yields On the one side of the coin, return expectations on global income assets, such as cash and bonds, are uncomfortably low – a result of record-low interest rates implemented mostly by developed market central banks in reaction to the Covid-19 crisis. These record-low interest rates are making investments in these asset classes unappealing, with the US10-yearTreasury offering a perfect case study. At the…

DOW JONES INDEX The ins and outs I have written before that the Dow Jones is the world’s oddest index as it uses simple price movement (just the cents, not percentage) of its 30 constituent stocks every day to determine the index level. It also does not have a regular review process. Now it is shaking up its holdings due to the share split Apple is doing. This will reduce Apple’s share price by four times while increasing the number of shares by four times. This will reduce the tech component in the index due to a lower Apple share price. ExxonMobil, which has been in the Dow Jones since 1992, is exiting along with Pfizer and Raytheon Technologies. New entrants include Salesforce.com, Amgen and Honeywell International. This came into…

there are few things that you can be certain of when it comes to the stock market. One of these being that growth in profits, especially if coupled with dividends, acts like a magnet to boost share prices to new heights. This was recently proven by the latest profit figures of companies such as Sibanye-Stillwater, Impala Platinum and Northam Platinum. These three shares increased by 145%, 82% and 97% respectively over the past 12 months. Sibanye-Stillwater’s exceptional increase was given a boost by its decision to reintroduce dividends. Royal Bafokeng Platinum, currently at the top of the table of strongest shares, has improved by 74% over12 months. Among gold shares, DRD Gold is way ahead with 264%. That the positive trend for platinum and gold shares is likely to continue…

South Africa’s large brewing industry, the 12th-largest in the world according to the Beer Association of SA (Basa), sketched a bleak picture of the sector in a release in mid-August. The association counts SA Breweries (SAB), Heineken and the Craft Brewers Association among its members. “Many businesses in the beer industry have still not recovered from the first nine-week ban in place from 27 March to 31 May, including 8 000 licensed taverns and 30% of craft breweries that were bankrupted,” Basa CEO Patricia Pillay said in its statement. “The second ban, that came into effect on 13 July, forced an additional 15% (of) craft breweries and thousands more taverns to shut down permanently. This is a tragedy of epic proportions, especially since 54% of taverns are owned by women…

Section 69 of the POPI act outlaws direct marketing by means of any form of electronic communication unless the data subject has given their consent. The electronic communication includes emails, SMSs and automatic calling machines (robot calls). A subject can only be approached once to obtain such a consent. Once such consent is refused, it is refused forever. In terms of existing customers, their contact details must have been obtained in the context of the sale of a product or a service. The direct marketing by electronic communication can only relate to the supplier’s own similar products or services, and the customer must be given the right to opt-out at the time that the information was collected and each time such a communication is sent. SOURCE: https://www.popiact-compliance.co.za/popia-information/13-direct-marketing…