Indholdsfortegnelse for 12/17/2020 i Finweek - English

as the finweek team put together the December 2019 issue a year ago, I distinctly remember how our markets expert, Maarten Mittner cautioned that we should “expect the unexpected” in 2020. Little did we know just how bizarre and devastating 2020 would in fact turn out to be. Now, as we all look forward to putting the year behind us, there is also the nagging reality that the arrival of 2021 is not going to miraculously bring relief with it. The consequences – economic, social and political – of the events that took place over the last 12 months will continue to echo into the new year. It is with this in mind that we compiled this issue of finweek. The theme “So, what now?” attempts to explore these consequences…

The new decade literally kicked off with a bang in January 2020, after US President Donald Trump ordered an airstrike that killed Iran’s major general Qasem Soleimani and almost triggered World War III. Little did the world know that it would end up fighting a war after all, albeit a different and viral one. As one of the craziest years ever (finally) draws to a close, we take a look at some of the most defining events that shaped 2020. “OK. WHAT SHOULD WE DO ON SAA?” – Finance minister Tito Mboweni posted a question on what the state should do with South African Airways on Twitter in November 2020, which was regarded as “disgraceful, reckless, and selfish” of him by the National Union of Metalworkers of South Africa, because…

the key feature of a long-term portfolio is which assets you hold in it. But there are other considerations that you must also stay on top of. Firstly, how do you split the portfolio between passively and actively managed assets? I always advocate that at least 50% of a portfolio is held in exchange-traded funds (ETFs) as the core of the portfolio. This removes the risk that you buy horrid stocks. The 50% allocation is a minimum and it can be higher, far higher if one is new to investment, or just want to take on some market risk. I always advocate that at least 50% of a portfolio is held in exchange-traded funds (ETFs) as the core of the portfolio. The second question revolves around the allocation of offshore…

2020 will undoubtedly go down in history as the year of the Covid-19 pandemic. It is therefore with great enthusiasm that I look ahead to what I hope will be a much better 2021. In this issue, I recap the performance of a few asset classes during 2020 and discuss what we might expect of them in 2021. Local shares What a year it’s been for shares. Following the FTSE/JSE All Share Index’s (JSE) performance for the five-year period ending 31 December 2019, during which it couldn’t even yield returns of 6% per year, all hopes were set on 2020 to be the year of recovery. But global markets saw one of the biggest crashes since 2008 when Covid-19 was declared a pandemic. By 19 March 2020, the JSE was…

call it the seesaw year. Or a stop-and-go year. Or the year of the two dips. Or the year of the miraculous recovery. Whatever the choice of words, 2020 will be remembered as a year of exceptional volatility as the global pandemic wreaked havoc on global markets. The trend was for markets to rise on the possibility of greater fiscal stimulus emanating from cash-strapped governments, or the likely development of a successful vaccine. And dipping on any bad news or adverse company results. Traditional companies were the hardest hit. Big tech companies proved to be the exception. FAANG stocks (Facebook, Apple, Amazon, Netflix and Google’s parent Alphabet) all had a sterling year, shrugging off the adverse macro economic environment as an almost insignificant factor. On average they now comprise about…

Businesses that were quick to diversify and move to industries and products or services that were in demand during this period will be in a better position as we venture into 2021, according to Dr Jabulile Msimango-Galawe, senior lecturer at the Wits Business School. Going into 2021, four areas where South African SMMEs can take action to mitigate challenges of the crisis, according to McKinsey, are to leverage technology to reach new customers or provide a distinctive value proposition; develop clearer market access strategies; drive efficiency and sales; and develop team skills and capabilities and empower leadership. “It is tough out there,” says Professor Owen Skae, director of the Rhodes Business School. “I would say don’t compromise on customer service. Just keep focusing on doing the best you can. Keep…

the wine industry was already in financial dire straits when the Covid-19 ban of alcohol sales started, with the number of producers declining from 4 360 to 2 778 and the number of wine cellars declining from 581 to 533 between 2005 to 2019, according to South African Wine Industry Information and Systems. Charl du Plessis, CEO of Orange River Cellars, says that 2018 and 2019 brought a welcome respite, especially following the three-year drought that started around 2016, but in most cases the recuperation was not enough to get producers and cellars solidly back on their feet. The ban of alcohol sales has exacerbated the situation, with cellars now struggling to work away this season’s wine before the new harvest arrives. “The ban that was supposed to result in…

car ownership for South Africans often is as much a status symbol as it is about getting from A to B. But Covid-19 has had a profound impact on their car choices. For many, who have either lost their jobs or had to endure salary cuts, it has been a race to sell their expensive vehicles and downgrade to a cheaper model. For others, it’s been a case of downsizing from a two-car household to a one-car household. Financial sustainability and uncertainty have dented new car sales and choice. And as households look to protect finances, the shift to used cars has accelerated. Rocketing used-car searches During the initial stages of lockdown, searches for cars under R50 000 increased by nearly 300%. Now there’s an increase in searches for cars…

social media has changed politics. It is now much easier for leaders to talk directly to their followers. In the US, Barack Obama was one of the first presidents to use social media to bolster support. Donald Trump tweets almost daily to his more than 88m followers. Twitter and other social media do not only benefit political incumbents. A recent study forthcoming in Management Science calculates the additional campaign contributions that politicians, who run for the US Congress, received after they began using Twitter. The authors estimate that “the differential effect of opening a Twitter account in regions with high versus low levels of Twitter penetration, amounts to an increase of 0.7% to 2% in donations for all politicians and 1% to 3.1% for new politicians, who were never elected…

the outlook for some of the JSE’s largest mining shares by value in 2021 may have more to do with as yet unnamed management, rather than the incumbents. That’s because a permanent change of management is imminent for two of the bourse’s largest gold companies – AngloGold Ashanti and Gold Fields. Glencore, the Swiss-based mining and mineral-marketing behemoth, announced a new CEO during the first week of December. A fourth company, Rio Tinto, is still waiting on the appointment of a new CEO. The question of who might best fit the corporate mould in these companies also poses questions with equal relevance for the industry at large, especially as the ‘shocks’ of 2020 become part of investment consciousness in 2021. Here’s finweek’s take on what to expect for the mining…

SASOL Sasol has burnt its pockets in its colossal chemical investment in Louisiana in the US, dubbed the Lake Charles chemicals project. A series of delays and cost overruns have been the biggest contributor to Sasol’s financial woes in recent years. Once the project is complete, it will significantly strengthen Sasol’s position in the global chemicals market. The plant is expected to bring a core profit of as much as $200m next year, ramping it up to $1bn from 2022. The Lake Charles chemicals project plant is expected to bring a core profit of as much as $200m next year, ramping it up to $1bn from 2022. On the charts: Sasol’s share price is still trading in its long-term bear trend. But after retaining support at 2 075c/share, it’s recovering…

EXCHANGE-TRADED FUNDS Surge in offshore as ETFs come of age Exchange-traded funds (ETFs) remain the cornerstone of most investors’ portfolios – and 2020 saw the offering of offshore ETFs growing. Several new ones, including global bonds, China and two environmental, social and governance (ESG) ETFs came to the market. The key point here is the ease of investing in offshore ETFs, and specifically offshore technology ETFs, which enabled local investors to benefit from the surge in technological stocks. These tech-ladened ETFs saw returns of around 50% for the year, while vanilla global and US-focused ETFs returned around 20% for the year. This beat the local top-40-focused ETFs, which only managed a much more modest single-digit return. This is not bad considering the pandemic, but well behind the global ETFs. (Suffice…

Naspers Limited (Registration number: 1925/001431/06) (Naspers or the group) JSE share code: NPN ISIN: ZAE000015889 LSE code: NPSN ISIN: US6315122092 www.naspers.com COMMENTARY September 2020 marked the first anniversary of the listing of Prosus on the Euronext Amsterdam stock exchange. This created Europe’s largest consumer internet company and a new investment opportunity on the global technology stage, improving the group’s access to international internet investors. A year on, ownership of Prosus continues to expand and diversify. The group’s recent inclusion in Europe’s leading index, the Euro Stoxx 50, is expected to attract additional European investor interest over time. Given the wide geographical span of our operations and significant mergers and acquisitions (M&A) activity in ecommerce, reported earnings are materially impacted by foreign exchange movements and the effects of acquisitions and disposals.…

in 2020, the agricultural sector’s export figures gave welcoming support to the country’s balance of payments. In addition, South Africa’s agricultural value chain has played a crucial role in stimulating economic growth and social stability in the country, according to the CEO of Agbiz, Dr John Purchase. Agriculture’s GDP should increase by 10% (year-on-year) in 2020. According to the Bureau for Food and Agricultural Policy (BFAP) the expected growth could even be as high as 13%. This resilient recovery does, however, come off a lower base. In 2019, the agricultural sector contracted in four consecutive quarters, owing to various animal diseases that broke out in the preceding couple of years and serious drought conditions that have since been alleviated in most regions. In the midst of the devastation caused by…

Professor Owen Skae, director of the Rhodes Business School, says there is a “fantastic variety” of executive education courses available. “It provides a great opportunity to rethink, reboot and decide if you want to take the bigger step of plunging into an MBA. Specifically, in relation to SMME owners, they often get pulled into considering the operational aspects of the business (purely due to circumstances of the day-to-day running of it) at the expense of the strategic focus areas.” The opportunity of taking yourself away (metaphorically speaking) from that environment can have profound implications for what you learn and take back, Skae says. “I have numerous examples, but one that sticks with me is to two doctors who attended a ‘Finance for Non-Financial Mangers’ course. It inspired them to start…

Wine R70 to R90: Roodeberg, Alvi’s Drift  R50 to R70: Kleine Zalze Chenin Blanc or Hedgehog Below R50: Tangled Tree, Delush Brandy If you're looking for something different from Distell or KWV’s old faithfuls, try these: R800 to R1 200: Tokara XO Potstill Brandy R400 to R800: Boschendal 10 YO Potstilled Brandy or the Bread + Butter XO Below R400: Die Mas Pot Still Brandy, Joseph Barry VS or Van Loveren Five’s Reserve Whisky R800 and above: Boplaas Single Grain 8 YO Whisky (Tawny Cask Finish) R400 to R800: Three Ships 10 YO Single Malt Whisky Below R400: Bain’s Cape Mountain Whisky Rum SA Rum Awards winners, R300 to R500: De Vry Distillery Die Warm Rasta Rum (The Best Rum, Best Column and Potstill, as well as Most Exceptional overall),…

Pros • The single-biggest advantage of buying a used car will always be value for money. One can get a used car for less, with more features. • A new car depreciates the minute it is driven off the dealer floor. It continues to do this year after year and, after three years, it could have lost up to 60% of its initial value. With a new car, consumers often can’t get out of the deal because of the sharp depreciation for the first three years, which often doesn’t keep up with the decrease in the amount owed. With a used car, much of the depreciation would have already been experienced and the finance amount could keep closer pace with the value of the vehicle over time. Cons • It’s…

just as I thought broad-based black economic empowerment (B-BBEE) policy had been relegated to the backseat of public discourse, it has stormed back into the front seat. Between 2010 and 2019, the policy went into a lull due to a significant reduction in the number of major B-BBEE equity transactions that were concluded, resulting in news and information about the policy virtually disappearing from mainstream media. During its heydays, B-BBEE dominated news headlines and many of its beneficiaries, mostly politically connected people, became famous overnight – thanks to the policy helping them to strike riches within a short space of time. However, the dearth of headline-grabbing B-BBEE deals, where black investors bought shares in JSE-listed companies, did not mean that self-enrichment by the politically connected elite came to an end.…

the Covid-19 recovery will be digital, reads the title of McKinsey& Company’s insights paper on how the pandemic has led to changes in customer behaviour and preferred interactions. Recent data shows that we have vaulted five years forward in consumer and business digital adoption in a matter of a few months, according to McKinsey. Data from Standard Bank shows that since March 2020 (the beginning of the national lockdown in South Africa), there was an 84% increase in the value of online spend at supermarkets and grocery stores year-on-year, while spending at online general merchandise stores increased by 458%. These numbers indicate that SA consumers looked to new and safer ways to shop. The bank attests to witnessing this dramatic shift in behaviour around payments during the lockdown period. Businesses…

the JSE is on its way to closing the year at a much healthier level than it started at. This indicates that market players are anticipating a recovery of most of the bigger shares in 2021. Some 61% of the top 100 issuers on the JSE, as measured by market cap, are currently lying above their 200-day exponential moving averages (EMAs). In January, only 43% were higher, and the weaker bear trend was in evidence every month until November when there was a recovery, with 51% of them above their EMAs. How woeful March was when lockdown struck the country is evident from the fact that only 4% were strong enough to lie above their EMAs. According to brokers, there were agile market players who benefitted from the collapse by…

the battered global economy is expected to begin its long journey to recovery from the impact of Covid-19 next year, provided that ambitious plans to roll out effective vaccines to billions of people stay on track, reducing the threat of renewed restrictions on activity and alleviating fears of infection. It already looks like the anticipated bounce in 2021 will be weaker than initially envisaged, following second waves of infections – more severe than the first – which are sweeping across leading economies, like the US, Europe, the UK and Japan. There are concerns that a second wave is imminent in SA, given a surge in infections in the Eastern and Western Cape at the time of going to print. China has the most promising outlook – it is the only…

running a small-, medium- or micro-enterprise (SMME) in South Africa has been an extreme sport for a few years now. Local SMMEs have been contending with a myriad of hurdles. Operating in a sluggish economy, lack of funding, crime, little or debilitating infrastructure, over-regulation in the form of bureaucratic burdens, labour market rigidities and the scarcity of skills are some of the factors that limit innovation, among many other things. When SA-born Tesla and SpaceX founder Elon Musk shot up to being the world’s second-richest person on the Bloomberg Billionaires Index – with a net worth of around R2tr at the time of publication – the reactionary sentiment from locals on social media was disheartening. Many were of the mind that there is no way he could have achieved this…

serial entrepreneur and lecturer of business strategy at the University of Cape Town, Rowan Spazzoli, has always been aware of how difficult it was for SMMEs to secure financing. He felt driven to do something about this after reading the results of a survey by Phaphama Social Enterprise Development Initiative on the impact of the Covid-19 lockdown on SMMEs. Of the 233 entrepreneurs who participated in the survey released in April, 95% said they could no longer afford to pay their employees; 50% didn’t think their business would survive the lockdown; and 93% didn’t have any other income sources. While various helplines were available, 86% indicated they didn’t know where to access emergency funding. The funding application process was also identified as being too complex and time consuming. Spazzoli explains…

at the end of 2019, websites and e-catalogues were simply useful additions to art auctions where the real thing could be scrutinised, evaluated, admired, desired and eventually auctioned off. Direct contact was non-negotiable and when the hammer came down on a bid for a significant or expensive work, it was greeted by applause from the audience. When the hammer and the applause were drowned out by the pandemic, the “additional accessories” came to the fore and the digital domain became the lifeblood of the secondary art market within a matter of a few months. Three well-known auction houses, Strauss & Co and Aspire Art Auctions, with head offices in Johannesburg, and the London-based Bonhams, all established digital domains years ago and systematically invested more into this, and when the lockdown…

■ Focus on the electric vehicle market ■ Pivot from ride sharing to personal mobility ■ Generation Z’s new-found enthusiasm for learning to drive and owning a car ■ Virtual test drives, like Digi Cars’ Livestore ■ Dealership rightsizing and increasing use of digital channels ■ Next generation Nissan Navara, soon to be produced on home soil. Two more bakkies, the Mazda BT-50 and GWM P Series also launch. Other new introductions include the Nissan Magnite, an all-new compact SUV and a luxury medium-sized sports sedan, the new Lexus IS. ■ BMW’s electric SUV, the iX, going into production in the second half of 2021…