Indholdsfortegnelse for 9/24/2021 i Finweek - English

finweek contributor Andile Ntingi writes convincingly on the development of South Africa’s townships in his opinion piece this week. I wish to add that the development of townships is an imperative neglected by government ever since1994 – through the Mandela, Mbeki, Zuma and current Ramaphosa administrations. Ntingi aims to provide a link between the riots and looting we saw in parts of KwaZulu-Natal and Gauteng during July and the scourge of income inequality in SA. I wish to take this link further. In criminology the concept of “deprivation” is used to explain behaviour among youngsters where they, among others, observe the rampant wealth of one part of society while they themselves do not own the same stuff. It has been an issue among the peoples of the world ever since societies…

“THE BALL IS IN JUSTICE MINISTER RONALD LAMOLA’S COURT.” – Mbhazima Shilowa, former premier of Gauteng, wrote that the onus to release the record ofdecisions about former president Jacob Zuma’s medical parole without delay and the extent to which processes were followed, lies with justice minister Ronald Lamola, in a News24 column. The department announced that national correctional services commissioner Arthur Fraser had granted Zuma medical parole. Fraseropenly admitted to overruling the parole board, which did not recommend the release on medical grounds. DA leaderJohn Steenhuisen has since filed an application to review and set aside Fraser’s “patently unlawful” decision. “If something were to steal my sleep … it would be foreign flows.” – Dr Leila Fourie, CEO of the JSE, said the rate at which capital is leaving South Africa…

Ford’s vision for its Silverton assembly plant and the Tshwane Automotive Special Economic Zone (TASEZ) is rapidly being transformed into reality. The first phase of Ford’s $1.05bn investment to modernise and grow the Silverton plant to increase production of the next-generation Ford Ranger bakkie has already been completed. A seven-week shutdown facilitated the installation of upgrades to the Ranger assembly line and introduced advanced technologies and systems, bringing manufacturing operations in line with Ford’s plants in the rest of the world. The plant can now produce 200 000 vehicles annually, making the plant one of the biggest Ranger-producing plants globally. The addition of a third shift enables Ford SA to produce up to 720 vehicles daily, thus one Ranger every two minutes. Around 1 200 new jobs have been created…

vodacom provides a rangeof services, including mobile voice, messaging, data and converged services. Vodacom currently dominates the mobile market in SA. It also has operations inTanzania, the DRC, Mozambique and Lesotho. Through Vodacom Business Africa (VBA), the company offers business-managed services to enterprises in over 40 countries. Their mobile financial services, M-Pesa and M-Pawa, provide money transfer, savings and credit services. Share price history Vodacom’s share price reached an all-time high at 18 700c/share in 2017 afterwinning the fight against MTN on being the “first and best 4G network”, ruled by the Advertising Standards Authority. When voice and SMS revenues started to decline, Vodacom expanded into financial services and saw an opportunity in Kenya where it acquired 34.94% of Safaricom for R34.6m. Today Safaricom is East Africa’s biggest company by…

SHOPRITE Stellar results Shoprite published its financial results for the 53 weeks ending 4 July on 7 September and they were outstanding. Revenue increased 8.1%, headline earnings per share (HEPS) came in 20.3% higher and the dividend was up 42%. This as the rest of Africa returned to a profit, adding R307m after only generating R2m in 2020 and a loss for the 2019 financial year. Their trading margin was 6.1%, which is the best I can find for any large food retailer in the world, with most very happy to hit a 3% trading margin. A note here: I usually use operating margin, which includes exchange rate gains or losses and profit on lease changes or cancellations. It excludes “items of a capital nature”, which are impairments, and hyperinflation…

i guess one of the bigger questions in the marketplace at this stage is around inflation and whether it is in fact transitory. We can expand on this by including the questions of what the impact is going to be if the US Federal Reserve eventually starts tapering or stops the monetary stimulus that they’ve been doing since the onset of the Covid-19 pandemic. I believe that if we can answer these two questions, at least within some reasonable measure of accuracy, we should be able to position our portfolios to benefit from the coming change. The first thing to look at is the inflation debate. Particularly US inflation, as the US economy is in large part a driver of international markets. One of the first things we are looking…

JSE CEO Leila Fourie says recent Bloomberg analysis shows SA equities are trading at a 27% discount to emerging market peers and a 50% discount to global peers. “This suggests a great opportunity to invest in quality stocks in the SA market.” She adds that though certain sectors were hit hard by lockdown restrictions and uncertainty caused by Covid-19, some of the worst-affected counters have staged impressive recoveries. “The FINI15, our headline financial sector index, is up 22% in the year-to-date, well ahead of the Resources 10 (up 9.47% year-to-date) and Industrials 25 (6.46% higher year-to-date).” Galileo Capital’s Warren Ingram says anecdotal evidence of economic reform show positive changes are under way. “A lot of what business has been saying for the last 15 years is now being heard. Infrastructure…

the role of a chief investment officer primarily involves understanding, managing, and monitoring a firm’s portfolio of assets and setting the investment strategies for growth, among others. During the global pandemic, the biggest such event since the Great Depression, which hit the global economy and public markets hard, Adriaan Pask, PSG Wealth’s CIO, stuck to diversification as one of the key investment strategies to weatherthe storms and continued to recommend the use of multi-asset portfolios to withstand the volatile market climate. “People talk about diversification so often that it is almost taken as a cliché of a topic,” says Pask, but in the current environment, “it is super important, because what we expect to see is a lot more volatility.” Regulatory crackdowns standing out Apart from some of the huge…

Although South Africa has not seen looting and damage to property on the scale of the July insurrection, it is known for its violent strikes, says Patrick Deale, labour lawyer at Deale Attorneys. “We have all experienced a strike by municipal workers who trash the city with rubbish, or workers marching in the streets, going on a rampage and looting from vendors on the streets." In 2013, union members embarked on an unprotected strike that lasted for two weeks. The company, In2Food, secured an urgent interdict from the Labour Court against the Food and Allied Workers Union (FAWU) and certain employees. However, the strike continued with numerous acts of violence. The company suffered damages of R16m. The union was fined R500 000. The Labour Court has been taking a stronger…

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South Africa’s fast-food industry is a textbook example of a competitive industry. No franchise dominates the market: while KFC is the biggest, there are at least 20 other brands with at least 30 stores. Think of Steers, Debonairs, Wimpy, Nando’s, McDonalds, Fishaways, and King Pie, to name just a few. And there are always new entrants. In 2018, the celebrated owner and chef of Overture, Bertus Basson, opened De Vrije Burger, a burger and chips fast-food joint, in Stellenbosch. I asked him what he learned about fast food that he did not know before. “Firstly, fast food in many respects is an easier business model to manage than serious sit-down restaurants. Because our fast-food model is more linear, it was easier to equip our team to be specialists in their…

transformation, the resolution of inefficiencies and the stimulation of growth and expansion now form the broad narrative and focus of agricultural policy. It has already found traction in the new master plans of several agricultural industries, among others the poultry industry, which has for years been trying to free itself from the stranglehold of trade disruptions and international dumping. Before the minister of trade, industry and competition, Ebrahim Patel, signed off on the poultry industry’s recovery plan in November 2019, South Africa was struggling to meet the growing demand for poultry owing to the above-mentioned problems. The expansion of the poultry industry led to the whole grain value chain being further stimulated, according to Izaak Breitenbach, general manager of the SA Poultry Association’s (Sapa’s) Broiler Producers Organisation. The number of…

Bidvest is a large conglomerate and recent results forthe year ending June saw headline earnings per share (HEPS) at 1 183c and a dividend of 600c. This put the share on a price-to-earnings ratio (P/E) of 15 times and a dividend yield of 3.2% as the companyexperienced a strong second-half recoveryfrom Covid-19 restrictions. Bidvest’s balance sheet is strong with capacity to fund some deals if they find attractive opportunities, most likely bolt-on ones that strengthen existing operations. Bidvest’s business is predominantly focused on SA, with 83% of revenue and earnings before interest, tax, depreciation, and amortisation generated locally. The latter seems to scare off many investors, who see Bidvest as reflecting the SA economy. But there is money to be made locally and Bidvest can use its scale and pricing…

the latest signals from the US Federal Reserve have reassured equity markets that the central bankwill not act rashly with its tapering objectives. Disappointing US job creation numbers has resulted in further caution, while the Delta variant of the coronavirus could cause further disruption over the Northern winter. The Fed’s message was that monthly bond purchases may be reduced at year-end, but it will be gradual and must not be seen as indicative of any imminent hiking of interest rates. Large tech companies’ stocks surged on the development, presenting another blow to short-sellers, who hoped that a tighter monetary policy would pull back equity shares, mostly Big Tech, from their present highs. Apple reached new heights, increasing its market cap to $2.6tr, while Microsoft, Amazon andTesla all gained ground on…

We’ve seen a bunch of new exchange-traded products (ETPs) listed over the past year and we now have 85 exchange-traded funds (ETFs) and about as many exchange-traded notes (ETNs) on the JSE. In this issue, what I want to touch on is the process of how to decide whether that new shiny ETP is worth adding to a portfolio. The first question is whether it is a carbon copy of an existing ETP which you own? If it is, then it’s worth checking some details such as the total expense ratio (TER) and whether the ETP is maybe a total return product. A cheaperTER is always attractive and buying the newer and cheaper one is a simple decision – do it. Total return means that the ETP will reinvest the…

While the JSE can hardly be blamed for South Africa’s structural problems, it is not powerless in improving its prospects. Warren Ingram of Galileo Capital believes some of the JSE’s woes are of its own making.“The chickens are coming home to roost from many years ago. When we moved from physical share certificates to electronic share certificates, as investors we were promised that Strate as the exchange’s principal central securities depository and central collateral platform would make it cheaper to buy, hold and sell shares. In fact, the opposite happened and the exchange is not more efficient.” He says legacy operating systems create one significant problem, but there are further structural issues.“It seems ridiculous but JSE-listed companies don’t know who all their shareholders are. At most exchanges, if you want…

in the aftermath of the widespread looting of shops and businesses that took place across many parts of Gauteng and KwaZulu-Natal in July, there has been a flurry of insightful debates about the importance of developing low-income and unemployment-afflicted townships. For over a week in July, South Africans were glued to theirTV screens, watching thousands of people ransacking and pillaging shopping malls and small businesses in an orgy of violent unrest the country has not seen since the early 1990s. After the dust had settled, more than 300 people had lost their lives while R50bn worth of damage had been unleashed on property and infrastructure in what President Cyril Ramaphosa described as a “failed insurrection”. During the pandemonium, thousands of township-based shops and businesses took a huge financial knock, compelling…

What’s different this time, however, is that the debate occupied airtime during the group’s full-year results announcement. important changes may be afoot at African Rainbow Minerals (ARM), which appears to be weighing up existential questions over structure and strategy. Typically, investment companies tend to attract a discount to net asset value because they have only partial exposure to cash flows or no management control. Pallinghurst Resources suffered this problem along with Mvelaphanda Resources before it. The specific issue with ARM is whether its platinum group metals (PGMs) business, ARMPlatinum, could be separately listed – a discussion the company has had for the past seven years, according to the group’s executive chairman Patrice Motsepe, who spoke on the topic at the firm’s year-end results announcement in early September. What’s different this…

Sometimes it’s the smallest things that have the biggest impact. Semiconductors, also referred to as microchips, are tiny parts, but for the automotive industry the worldwide chip shortage is having a major impact on the production of new cars. Semiconductors, of which there are many in today’s modern vehicles, manage a plethora of functions, among them computer engine management and driver assistance systems. Demand for microchips surged as computer equipment requirements increased with the shift to remote working and e-commerce. But few factories produce microchips, the bulk of them in the Asia-Pacific region. Covid-19 shutdowns, which have impacted microchip production, have served to compound the shortage problem. Malaysia, which supplies semiconductors for the global motor industry, has been hard hit by the third wave of Covid-19. Neale Hill, managing director…

According to Izaak Breitenbach, general manager of the SA Poultry Association’s (Sapa’s) Broiler Producers Organisation, the acceptance of the master plan has led to the following positive developments: Commitments of investments to the value of R1.14bn have already been made and by 2023 this should grow to R1.5bn. The annual production capacity increased from 117m broilers in 2019 to 123m in 2020 and 135m this year. The weekly slaughtering capacity was increased from 19.5m broilers in 2019 to 20.5m and 22.5m in 2020 and this year respectively. Currently, there are 98 black-owned broiler businesses compared to 70 in 2019. Black farmers are now farming with 26m chickens. In 2020, the industry created 980 new jobs and 1 298 have been created thus far this year. It’s estimated that the industry’s…

In 2001, Naspers* made a good investment in Chinese internet giantTencent for $32m – becoming the largest shareholderwith a 31% stake. This was Naspers’ most successful investment and appears to be the main driver of its share price. But this investment is again suffering the wrath ofChina’s tech regulator, who warned firms against blocking links to rival services, reiterating Beijing’s orderforonline giants to pull down walls around their platforms. Priorto that, Beijing prosecutors initiated a lawsuit against aTencent subsidiary, saying the “youth code” on the popularWeChat app does not comply with laws on protecting minors. ThoughTencent announced new curbs on minors’ access to its video game Honor of Kings, it seems China is nevertheless preparing a substantial fine as part of its antitrust clampdown. Naspers is catching the raw end…

on several occasions in the past I have referred to the fact that no one can determine what will happen tomorrow with absolute certainty. Some readers may disagree with me. If it’s Friday today, then I can tell you with absolute certainty that I will braai tomorrow. That’s a sure thing. But the truth is that I’m planning to braai tomorrow and based on what I do most Saturdays, there is a high probability that I will in fact braai. If I should ever be so lucky, one person that I would love to invite over for a braai would be well-known investorWarren Buffett. On more than one occasion Buffett has mentioned that one of the most important pillars his investment decisions rest on is probability. In his own words:…

consumer price inflation fell to 4.6% in July from 4.9% in June after a high of 5.2% in May, according to Stats SA. This is well within the Monetary Policy Committee’s inflation target range of between 3% and 6% per year, and only fractionally above its preference of a midpoint of the range at 4.5% per year. The Reserve Bank tries to control South Africa’s inflation rate by setting interest rates to achieve its target range. The idea behind this is that interest rates are the price of money and the more expensive money is (based on higher interest rates), the less money will be chasing goods and services. When demand – expressed as the amount of money available – falls relative to supply, prices will rise slower or decline.…

Sick and tired This issue’s isiZulu word is uyagula. Uyagula is he/she/it is sick. With a slightly different inflection on “u”, it is “you are sick”. The word is made up of two words – uya (you/he/she/it - are/is) and gula (sick). Uya can also be you/he/she/it – is/are going to a destination. Let’s just focus on uyagula as “he is sick”. And yes, this column is about Zuma. No, the one you are thinking of. No, not that one either. This treatise is about my man, Edward. His dear father has been released on medical parole because we are told uyagula; then Edward tells an interviewer his father is well and fit. Uyagula uEdward. How are you going to just throw your father under the bus like that? I…