Indholdsfortegnelse for 2/18/2021 i Finweek - English

We are facing a huge problem in the South African economy. I would even venture to say that it might be a bit bigger than the problem the finance minister has with trying to balance the state’s books. The problem is that there are hopelessly too few formal small and medium-sized enterprises in South Africa. Now, don’t get me wrong: Informal sector businesses focused on owner survival are crucial to combating poverty. But formal small and medium-sized enterprises, precisely because of their nature, have a far greater chance of achieving growth and financial success due to, among other things, access to finance, insurance and geographical reach (thanks to the availability of transport). And it is in fact the growth potential of formal small and medium-sized enterprises that is so critical…

— African Bank announced that its CEO, Basani Maluleke, will leave in April to pursue “other career opportunities”, the day before the presentation of the annual results, which caught the market by surprise. Business Day reported it established that Maluleke’s resignation was the direct consequence of her “difficult” working relationship with the bank’s chairman, former Liberty Group CEO Thabo Dloti. Maluleke was quoted as saying she was disappointed not to have been able to see through the turnaround of the organisation, while Dloti was reportedly quick to point out that the transformation of the bank since it came out of curatorship five years ago couldn’t be ascribed to the leadership process of just one person.…

i have written before on the topic of an investor acting like an owner. I want to revisit it because it’s important, especially as many of South Africa’s listed stocks remain under pandemic pressure and because the lockdown has in some ways made it easier. Think for a moment if you owned a couple of pizza restaurants. You own them but don’t manage them – management is left to a team of pizza experts. This is pretty much how it works when we buy listed stocks on the stock exchange. As the owner of these pizza restaurants, you wouldn’t just sit back and wait for the annual results and dividend payments, surely? At a minimum, you’d be an active investor occasionally visiting one of the restaurants and maybe even doing…

g iven the precarious state of the South African economy, government has no option but to implement structural reforms and reduce its expenditure. The time for talking is over. When South Korea ended up at the International Monetary Fund (IMF) in the late 1990’s, their leadership took stock of the situation and abandoned policies and ideologies that clearly had not worked. Just 25 years later, their economy is competitive and their population flourishing. SA is at a similar tipping point. It needs to liberate itself from its ideological strait-jacket and abandon policies that have brought the country to this point. Cut public sector wages Ostensibly a low-hanging fruit, although a complex issue, the public sector wage bill needs to be reduced as a matter of urgency, something that National Treasury…

when you ask financial services executives about their firms’ responses to the Covid-19 pandemic, they tend to wax lyrical about their lightning-fast transition to work from home. They trumpet their ability to provide customers with seamless transactional capabilities and uninterrupted access to their digital platforms during the worst that government lockdown could throw at them. Their confidence in the innovative technologies that underpin the fourth industrial revolution (4IR) may be warranted; but it hides a sinister reality that few executives have cottoned onto. The rapid transition to digital everything is entrenching the suboptimal customer experience that many financial services customers were exposed to before the pandemic, because new solutions depend heavily on legacy customer support infrastructure and resources. Innovations such as APIs, AI-powered chat bots and digital platforms tend to…

t he world was taught some harsh lessons in 2020. Lockdowns forced people to adapt to new technologies to do meetings, have parties and work with colleagues. At the same time, we were all reminded of the importance of human connections to our wellbeing. The world might be a better place after the pandemic has passed. Many have a new focus on the environment, family life and how we structure our working days. Surprise Millions of people were jolted by lockdown into a review of how they spend money. This will be beneficial for savings rates and asset accumulation in future. I may be naïve, but I believe many of us will be more considered in the way we manage our finances and present ourselves to the world. Sustained hardship…

w henever we think of telecommunications companies, we tend to think of the large network carriers like Vodacom and MTN; or in the US, AT&T and Verizon. Seldomly do we think of the underlying infrastructure that supports those carriers. Surely these large mobile network providers own and operate the infrastructure they use. Right? Wrong. Well, mostly wrong. Our focus in this issue is US-based and New York-listed American Tower (with share code NYSE: AMT), which owns and operates around 175 000 cell phone towers around the world. Let’s start with surveying the landscape and building an understanding of what we’re investing in. Voice and data from your mobile device make its way to other devices via networked telecommunications equipment installed on cell phone towers (cell towers). A cell tower, in…

Information is power. In the 1340s, a dozen or so Florentine firms bandied together to start a postal service, called the Scarsella dei Mercanti Fiorentini, the purpose of which was to run regular correspondence between the firms and their agents in Barcelona, Paris, Cologne, and Bruges. It was a simple idea with a powerful effect: it suddenly made communication more reliable, allowing merchants to ascertain prices of goods in distant markets at frequent intervals. With it came other innovations, like invoices, bills of lading and shipping manifests. It is largely these innovations that allowed these Florentine merchants to be much more successful than their competitors. And it was not long before they were copied by others: the Venetians and the Genoese. This and many other stories are told by Steven…

– US President Joe Biden told CBS that former president Donald Trump should not have access to intelligence briefings (a privilege afforded to former presidents) due to his “erratic behaviour unrelated to the insurrection”. Biden questioned what impact Trump has, “other than the fact that he might slip and say something”. David Priess, a former CIA officer who briefed the late president George HW Bush years after he left office, told The Wall Street Journal that the briefings occur for two reasons. If current presidents want to reach out to a predecessor, it makes those conversations more worthwhile. Secondly, former presidents sometimes travel overseas in semi-official roles.…

m ining company results announcements in February from Glencore, Anglo American and BHP, as well as the JSE’s precious metal companies such as Sibanye-Stillwater, Impala Platinum (Implats), and Gold Fields will generate fulsome headlines, and genuine enthusiasm among investors. “A nice, hefty dividend paid in the near-term could provide a bit of a buffer against a fall in commodity prices should we see a correction following the recent rally,” said RMB Morgan Stanley in January. Take Kumba Iron Ore, for instance. Having built up sufficient cash reserves, the 70% Anglo American-owned firm is expected to pay out all of the free cash generated in the second half of its financial year. This will flow into Exxaro Resources, which pays out its 20% stake in Kumba’s subsidiary company, Sishen Iron Ore.…

SATRIX RESI 10 ETF BUY SELL HOLD By Simon Brown A strong theme going forward Over the last few months, I have written repeatedly about commodity prices and the mining companies all doing very well as global demand is increasing. This increase is driven in large part by infrastructure spending as a response to the Covid-19 pandemic. Locally, South African miners are in a good position with solid balance sheets, truly little debt and no major projects that are sucking cash and management time. In fact, the balance sheets are so strong that we should start seeing some record dividend payments from miners. Commodity prices should hold for the next year or three with some still having potential for further upside. The easy win here for investors is the Satrix…

DISTELL Stronger after the pandemic I’ve liked Distell as one leisure-styled stock to come out of the pandemic even stronger, in part due to their size but also new management focusing on their brands and reducing debt. That said, the update for the six months ending December, released on 3 February, surprised me. After losing 41 days of sales due to alcohol bans during the reporting period, local revenue was flat with local volumes down only 1.4%. The rest of the continent and export sales both saw a 20% jump in revenue growth. The ratio of debt to earnings before interest, tax, depreciation and amortisation improved from 3.1 times in June 2020 to 1.2 times at end-December. Headline earnings per share (HEPS) is expected to be between 8.6% to 13.6%…

Investment strategies differ, and this is why an investor or fund manager will identify various strategies and then determine how each one can be applied to specific market conditions. This is where ESG (environmental, social and governance) investments caught my eye. ESG is an investment class that falls under the banner of “sustainable investments”. Briefly, ESG is an investment strategy that evaluates a company’s corporate actions with the aim of determining the company’s future financial performance. It includes aspects such as ethical and corporate governance issues, the management of a company’s carbon footprint on the environment, and making sure that there are systems in place to ensure a sense of responsibility. There are certain ESG issues that can be incorporated into such an investment strategy. Why an ESG investment strategy?…

Clearly, we need better answers from insurers as to how they help their policyholders in crises such as these – even now, nearly a year later. f inancial planning practitioners are used to the situation where we need to help clients adjust course because of some unforeseen life event. If we run into challenges, this would typically come in the form of resistance from product providers. This is when the “terms and conditions” would come out. With Covid-19, though, it was different for both advisers and product providers alike. The sheer scale of requests for some sort of adjustment to plans was unlike anything we’ve witnessed or experienced before. However, it was made easier by the fact that most providers were abandoning established ways of doing business and looking to…

b usinesses in today’s climate have been forced to find innovative ways to transact; many have had to adapt their entire operating models. Some even had to merge with other industries to remain buoyant in the wake of volatility that the pandemic has unleashed. Companies offering digital e-commerce solutions have been much better positioned to adapt to the new business demands. Smaller companies with smaller budgets often just don’t have the money to invest in this infrastructure and feel the impact the most. Simple financial transactions that previously required physical contact, such as buying electricity or groceries, settling debts or applying for loans, are now seen as difficult due to restricted access required by social distancing. Financial services providers now must ensure that they can identify and solve problems in…

for most taxpayers, the month of February is a time to reconsider their tax-deductible provisions for retirement. This usually entails contemplating one’s investment objectives and comparing them with the performance of your current investments. As many of us provide for our retirement (and some discretionary savings) through collective investment schemes (unit trusts), an analysis of the performance of these savings vehicles suffices from time to time. Broadly, but not exclusively, there are three categories of unit trusts which allows, within the confines of the Pension Funds Act, for those saving for retirement to park their nest eggs. On the riskier side there are the multi-asset, high-equity funds which one can refer to as balancedtype funds. They’re usually not shy to utilise fully their allowed 75% allocation to shares (or equities).…

Type of business A franchised business is perceived to be a safer bet than a similar non-franchised operation. This is due to its success formula, franchise manuals and the franchisor’s continuing support and advice. Commercial banks look favourably at funding these types of businesses and hence a bigger pool of buyers is created, driving the perceived value upwards. Asset base A business with a low asset base (service-oriented businesses) does not achieve similar value as a business with a sizeable asset register (such a manufacturing), even if they deliver the same profits. The main reason being that commercial banks will finance assets, but not goodwill Manager Businesses managed and run by competent managers tend to dictate a stronger selling price in the market. This is because it opens the buying…

Sister André, a lesson in perseverance Look, physically treading water is something that would move any spectator to a quick response, silent anxiety or fearless assistance of the person in danger. In the more figurative sense of the term, a case of treading water usually leaves one speechless – the kind of speechless that comes from helplessness. This is not what you want to see among your rulers in the midst of a deadly pandemic. But there’s no doubt that the government is now treading water with its vaccines (those that work and those that don’t). But one woman who did not tread water (figuratively) throughout her life is the French nun Sister André. At 117, she is the oldest person in Europe and survived Covid-19, without knowing she had…

every year ahead of the budget speech, finance minister Tito Mboweni asks members of the public to share with him tips about how to allocate the budget to stimulate economic growth and alleviate poverty. Mboweni, who is scheduled to table his budget in Parliament later this month, needs to look no further than the recently published 2020 review report of the National Development Plan (NDP) for inspiration rather than his publicity stunt, which creates an impression that ordinary citizens’ views are taken to heart by the ruling elite. The 75-page review contains several tips for Mboweni on how to utilise the budget to meet his objectives. The review, conducted by the National Planning Commission (NPC), is an honest take on the number of failures by South Africa to implement the…

— Chris Cilliers, CEO and co-principal for Lew Geffen Sotheby’s International Realty in the Cape Winelands, said they are still seeing an international interest in commercial wine farms, guesthouses and some residential property. Whilst the interest is still there (especially from Swiss and Belgian buyers), he told Fin24 that it’s notably slower. He said many people in Europe are unhappy with their governments’ response to the pandemic and are looking to settle elsewhere, echoed by competing agencies. Seeff said it clinched over R178m in sales to foreign buyers over the past four months alone, while RE/MAX Living said it made just shy of 40 sales to foreigners, from March 2020 to January 2021.…

BARLOWORLD Testing a significant bullish level Following the slump in tourism and other travel through the Covid-19 pandemic, Barloworld decided to consolidate its car and fleet businesses under a single leadership. Since new car sales declined sharply, and with real growth in vehicles slowing significantly despite the low inflation and interest rates, the group had to review its automotive and logistics division. Its share price started to trade upwards after an announcement in December 2020 that the company was in talks with MMI Durban South Motors to sell its motor retail business. On the charts: Barloworld’s share price plummeted in January 2020 after confirming a head-and-shoulders bearish pattern below 10 300c/share (blue squares in the graph). It teetered on its major support trendline (black bold trendline) for eight months but…

in a world that changes daily and with all the technological advancements this brings, you can learn something new every day. February is known as “RA season” – the month during which you pay extra attention to your retirement annuities (RAs), and more recently, also your taxfree investment plans. Many investors believe there is nothing new to learn from these investments, but with a specific focus on RAs, I was quite surprised to learn recently that there are a number of details about this product that investors and people in general are not so familiar with. There is a handful of them, but I would like to touch on a few that I regularly encounter. Tax benefits The tax benefits attached to an RA are among its most well-known characteristics,…

t en years ago, Edward Kieswetter handed me an opportunity that would change the course of my work in finance. I used to argue that he gave me the best job in the financial services industry. Now I believe it’s a job that everyone in our industry should be required to experience at some point in their careers. Edward had just been recruited from Sars to lead Alexander Forbes out of a “difficult patch” and into a new era of “dedication to client service”. At Sars, he had been deputy commissioner, and as such, had been intimately involved in transforming Sars into a global leader in tax revenue collection. At Alexander Forbes, what he wanted was a research institute that would focus on just how effective the financial services industry…

trust is conceivably the most sought-after currency traded between a client and an investment manager. But it is a somewhat nebulous concept because it is so difficult to evidence or quantify. However, trust is real, and without it, clients will be reluctant to hand over their hard-earned money for safekeeping and are unlikely to remain invested with you through all the vagaries of the financial markets. The pandemic has introduced a host of new risks and challenges, putting further pressure on this prized currency. This article summarises our endeavours and beliefs regarding best practice when it comes to building and maintaining client trust through the Covid-19 pandemic. The widely-recognised cornerstones of earning client trust are competence, reliability, integrity and communication. For investment managers, these coalesce into generating the performance clients…

i nterconnected” is one of the words that came to my mind over the past year. Despite the constraints that geographic borders, political affiliations or our choice of football teams may impose, human society becomes more interconnected and integrated each passing day. The last time that the world was caught in the grip of profound societal change, as we are today, was during World War II. Everyone wanted, in fact, needed, the world to go back to normal; but like then the changes already run deep. Global leaders remain preoccupied with two dominant challenges: how do we combat the medical crisis and how do we balance the economy against saving people’s lives. There are significant resources and many smart minds committed to finding these answers, yet as they make these…

the economic swamp in which many companies find themselves has highlighted the need for a credible valuation that reflects the true worth of a business. Up-to-date valuations are crucial when the owner or management want to sell the business, but equally important for regulatory compliance, good governance, applying for loans or renewing insurance policies. Johann de Lange, valuation expert and co-founder of Worth. Business, says it is rather risky to attempt an “in-house” valuation if there is not sufficient knowledge of the methodology and underlying assumptions which are needed to get a credible valuation. Nicholas Mothilal, director of The Business Counter, recommends that especially small and medium-sized business owners do a high-level (desktop) valuation on an annual basis. “Desktop valuations are relatively inexpensive and should be incorporated into the signing…