Innholdsfortegnelse for 4/2/2020 i Finweek - English

by the time you read this note, South Africa will be in lockdown. While President Cyril Ramaphosa’s address on the evening of 23 March was anticipated, waking up to that reality was surreal. Having watched over a 100 countries battle this pandemic, becoming one of them is a humbling equaliser. While I was writing this, Al Jazeera reported that more than 18 000 people globally had died from Covid-19; more than 420 000 infections had been confirmed in at least 170 countries and territories. Nearly 109 000 people had recovered. This virus doesn’t discriminate. Dismissing it and stigmatising it is at the peril of nations – despite what some world leaders will tell their citizens. The only way to combat it is by working together. Luckily we have a president…

“OUR FUNDAMENTAL TASK ATTHIS MOMENT IS TO CONTAIN THE SPREAD OF THE DISEASE.” – President Cyril Ramaphosa announced the South African government’s imposition of a nationwide lockdown for21 days from midnight on 26 March to try to contain theCovid-19 outbreak in the country. The lockdown forces most businesses to close, aside from essential services in safety and security, food and distribution, telecommunications and electricity. At the time of his address on 23 March, the country’s health ministry had reported 402 confirmed cases. Ramaphosa said the aim of the lockdown was to slow the spread of Covid-19 in SA and ease the pressure on the healthcare system and he urged South Africans to stay at home during this time. “This, we hope, will relieve cash flow constraints currently caused by the…

health and pharmacy retail chain Clicks is weathering the market turmoil as its products fly off the shelves. The stock gained more than 32% over the past 12 months and is down by only 3.8% since the start of the year. The company is expected to release its interim results on or around 23 April. Current outlook: Clicks consolidated in the form of a triangle for one year after testing a high at 22 220c/share. It then breached the upper slope of the triangle in May last year and exceeded the target of the pattern breakout at 26 250c/share – the share price peaked at 27 115c/share before plateauing. Outlook: As most analysts attest, Clicks is a good defensive stock – proving it particularly now with the Covid-19 global market…

DISCOVERY Price hit by health concerns, CEO’s put options The Discovery* share price has been under severe pressure, falling by almost twice the extent of the overall market collapse. The one reason is investor concerns about their exposure to medical aid and Vitality. Worries about the medical aid unit are to be expected amid the coronavirus pandemic. Concerns about Vitality relate to expectations that people will stay at home, exercising less and maybe cancelling their subscriptions. But there is another important issue at play here. Discovery CEO Adrian Gore entered a zero-cost collar back in October 2016. This involved a two-legged transaction with the one leg being a series of put options on the Discovery share price. The strike price on these put options is 8 316c and 9 396c…

Job losses could amount to 500 000, with small- and medium-sized companies hardest hit. south Africa’s economy will contract severely this year as the impact of drastic global measures to contain the spread of Covid-19 tips the entire world into a recession and raises the risk of a depression, which is a severe economic downturn that lasts for several years. The decision to put the entire country into a three-week lockdown from 26 March was taken to prevent a humanitarian disaster well beyond the scope of SA’s health sector, which is ill-equipped to cope if the disease spreads into poor, densely populated areas where people are the most vulnerable. Lockdowns had already been imposed in all of SA’s main trade partners – the US, Europe, and the UK – following…

hedge funds have historically weathered storms – such as the current coronavirus-induced one ripping through the sails of financial markets across the planet – better than traditional unit trusts. An anomaly in South Africa’s financial regulatory system, however, is hampering traditional unit trusts from protecting their positions against serious losses amid downswings in asset prices through buying into hedge funds. What makes the situation ever more odd, is that retirement funds are allowed to invest into hedge funds – up to a maximum of 5% in a single fund or a maximum aggregate allocation of 10% into the asset class – and retail investors can put their money into these funds directly. This doesn’t make sense. “A traditional, long-only unit trust is not allowed to invest in a hedge fund,”…

more people are finding themselves outside the permanent labour force and are conducting their work removed from the traditional employer-employee relationship. The employment landscape increasingly includes freelancers, independent contractors, personal service providers and part-timers, bringing with it a whole range of complex tax rules that can make life quite difficult if not applied correctly. Essentially, employers should deduct employees’ tax (PAYE) when remuneration is paid to employees. However, where a person trades ‘independently’, their earnings are not regarded as remuneration and should not be subject to PAYE. Elle-Sarah Rossato, head of dispute resolution and tax controversy at PwC, says the concept of independent trade is complex and can easily be misunderstood. “The basic principle is that in order to qualify as being independent, the person must be independent of both…

there is little doubt that the world is headed towards a corona-induced recession. We are rich because we live interdependent lives, specialising in the things we do best and trading away our surpluses. When that trade is prohibited – when we cannot buy the things we do not produce ourselves – we return to the independent but impoverished worlds our ancestors inhabited. Just how much poorer we will be after the crisis is difficult to estimate. There are many factors at play. Premature deaths reduce the size of the labour force, and illness lowers productivity. Resources that could have been used productively will now flow to treatment and control measures. Attempts to reduce the spread of the disease, like travel bans and self-isolation, can further disrupt economic activity. Some industries…

I am being asked dozens of times a day if this or that stock is a buy. Most often it is about Sasol, but it is pretty much across the board as investors (new and old) fear missing out on the bargain of a lifetime. Truthfully, there are a lot of quality stocks at great prices (Sasol is NOT one of them). But, equally truthfully, prices could still go markedly lower and some will not survive or, at least, won’t survive without a discounted capital raise. So, personally, I am not buying any stocks at this point. The bargains will be around for a while still and I’m happy to maybe pay a little more while decreasing the risk. What I am buying is broad-based diverse exchange-traded funds (ETFs). I…

some of the greatest success stories all have one thing in common, and that is that hardship isn’t used as an excuse, but as motivation – the motivation to focus not so much on current circumstances, but rather on the opportunities that tomorrow may bring. Famous sports stars like Muhammad Ali (boxing), Niki Lauda (Formula 1) and Tiger Woods (golf) would not be as famous as they are if they didn’t rather focus on a brand-new day during times of hardship. Woods is a shining example. Since winning the US Open in 2008, he regularly featured in news stories, and not for good reasons. By 2014, his back was so badly injured that his chances of playing golf again became smaller by the day. But Woods said, “The greatest thing…

bad news is an investor’s best friend. – Warren Buffett Amid a deluge of bad news hitting the JSE and other markets almost daily, there is one important aspect that should not be overlooked: Experienced value investors are currently buying shares they regard as bargains. According to the well-known Dow Theory, there are three long-term phases in a stock exchange’s cycle between the bull and the bear. The first phase of a bull market starts when prices begin to increase gradually after the bear has restored value. Uncertainty is the watchword. After a period of sideways or gradual upward movement during which the so-called informed capital acquires bargains, the second phase is ushered in: optimism increases and prices firm. Good value is to be had, but real bargains – as…

In a bid to contain the economic and employment fallout of the government’s 21-day lockdown of South Africa, President Cyril Ramaphosa offered several interventions to try to cushion the blow, especially for small businesses. After announcing the lockdown on 23 March, Ramaphosa said the government had set up a solidarity fund to support measures to fight the pandemic and support small businesses. Johann Rupert and Nicky Oppenheimer had both donated R1bn apiece to support all small businesses in SA. “Small businesses were reassured to hear that they are receiving special attention in discussions about protecting our economy,” Bernard Swanepoel, director of the Small Business Institute (SBI), said in a statement. “Since 98.5% of all firms in SA are small or medium, we face an unprecedented emergency with their very livelihoods,…

Short selling is the practice where an investor borrows shares from a shareholder with the promise to return them at a future date. After borrowing the shares, the investor immediately sells them on and banks the proceeds. The shareholder who loaned out the shares gets paid a cash interest rate for the duration of the share loan. The investor then waits out the market in the hope that the share’s price will drop. If it happens, the investor buys the shares, which are now cheaper, and returns them to the shareholder. The difference in price, minus the cash interest paid, is the investor’s profit. Naked short selling is the selling of a security without being in possession of the security or ensuring that it can be borrowed, according to a…

It seems hard to absorb what only four weeks ago looked like a passing phenomenon is now threatening to derail whole economies and put the world into recession. Thus, the coronavirus makes most Western societies nostalgic for the careless, halcyon airs of February. For Anglo American, a society in lockdown is a consumer base not buying luxury goods in either platinum or diamond jewellery. It’s a hammer blow for De Beers, the 85%-owned Anglo miner and marketer which has just come off a 50% decline in 2019 of $558m. UK bank Barclays, however, offers words of hope. It says China has convincingly “beaten” the virus while its economy is recovering – a process that will be boosted by a stimulus package and aided by the low oil price. China represents…

1. True or false? Pharmaceutical manufacturer Adcock Ingram reached a deal to buy Plush Professional Leather Care. 2. On 16 March, Ninety One began trading on the Johannesburg and London bourses. What was the newly-listed company previously known as? 3. In mid-March, the minister of sport, arts and culture criticised the organisers of the Comrades Marathon for not cancelling the event amid the coronavirus pandemic. The said minister is: ■ Fikile Mbalula■ Dr Aaron Motsoaledi■ Nathi Mthethwa 4. True or false? The South African Reserve Bank Act prohibits foreigners from owning shares in the central bank. 5. Name the CEO of Anglo American. 6. True or false? The Airports Company SA appointed Siphamandla Mthethwa as the new chief executive officer with effect from 1 May 2020. 7. SA food producer…

“Too often we see businesses neglect their tax obligations, mainly as a result of ignorance regarding the requirements. This adversely impacts the business.” Most independent contractors or freelancers are provisional taxpayers. This means compliance with strict timelines and getting the estimates for the second provisional payment right. Getting it wrong will result in penalties and interest. VAT registration is compulsory when the R1m turnover threshold is exceeded. Claudia Gravenorst, senior tax manager at Deloitte, says it may be beneficial for companies and individuals who are acquiring goods and services from other VAT vendors in order to claim their input tax back. “However, there is an onerous administrative burden of filing VAT returns, issuing invoices and ensuring claims are made in the correct VAT period.”…

after getting caught up in bureaucratic delays since the departure of South Africa’s inaugural chief procurement officer (CPO), Kenneth Brown, from National Treasury in December 2016, the eagerly awaited Public Procurement Bill finally kicked on. The first draft of the 75-page bill was released by Treasury for public comment on 19 February and the deadline for input submissions has been set for 31 May. The legislation has been in the works since Brown was appointed in 2013 by former finance minister Pravin Gordhan to establish the Office of the Chief Procurement Officer (OCPO) to reform and modernise government’s procurement and supplychain management (SCM) systems and policies to eliminate tender-related corruption and simplify tendering processes. But efforts to close loopholes and clean up state procurement got stuck when Brown, his boss…

dave Ungerer, the founder of SimplePay, got the idea of starting an online payroll solution after seeing the system which the company he used to work for had to grapple with. “I felt terribly sorry for the payroll officer and realised I could make a meaningful difference to especially small businesses by developing a smarter, more efficient system,” he says. To think things through, he went on a three-month break to Buenos Aires, but, after only two weeks, started working full-time on the envisioned payroll system, which he launched in November 2007. The project was completely self-funded. “Where most of my colleagues bought fancy cars and enjoyed the high life, I saved the money I made as a software developer to start my own business,” Ungerer says. Early days He…

Even without the onset of the Covid-19 lockdown, Master Drilling CEO, Danie Pretorius, says the sun is slowly going down on the firm’s SA business in favour of new opportunities in developed economies, as well as in other parts of Africa and in South America. Master Drilling, listed on the JSE, provides specialised drilling and logistics management to mining and exploration companies. Its headquarters are in Fochville, just down the road from Potchefstroom. It is a uniquely South African company with few prospects here. “We have had a run in the SA space owing to platinum group metals and if not for Covid-19, we might have had another couple of years of good runs. A capital commitment from Northam Platinum gave us a lot of runway in this space,” said…

Technology shares that have very little exposure to China are potentially good stock picks in the current “stay-at-home” era. Datatec has said that demand for its remote access computing, security and collaboration networking solutions has increased over the past few weeks. In a business update on 20 March, the company CEO, Jens Montanana, said that there was “solid” financial performance in all its divisions for the year through February. Datatec’s South African operations account for just 2% of its total business. The group’s main divisions are Westcon International, Logicalis and Analysys Mason. The turnaround in its problem child Westcon unit has substantially improved profitability over the financial year. Datatec’s balance sheet remains strong and is expected to report a reduction in net debt at the end of the financial year,…

warren Buffett often talks about the immense benefit of Berkshire Hathaway having permanent capital. He also mentioned it in his February letter to shareholders and he’s right that it makes a real difference to an investor if they have permanent capital. Let’s start with the inverse – what is non-permanent capital? It is money that investors give to managers to invest on their behalf. This will mainly consist of unit trust and hedge fund managers. The manager has the right to allocate that money within the fund’s mandate, but that right lasts as long as the investor agrees to leave the money with them, and the investor can, with as little as a day’s notice, get their money back. The net result for the manager is twofold. Firstly, they become…

the Covid-19 global crisis is worsening and will continue to get worse for a while as countries scramble. As I have written before, the impact is going to be significant as consumers are not out there spending, either out of caution or, in many parts of the world, because governments have banned people from going out. This is going to be felt across pretty much every aspect of the economy and South Africa is in no way going to be spared. At the time of writing this column, markets were down between 25% and 35% in 2020 while Brent crude oil is off over 60%. I have seen several collapses of this scale before. But never this fast. Company earnings will be under pressure across the board and those with…

the Covid-19 pandemic has granted climate activist Greta Thunberg one of her biggest wishes – the global airline industry has nosedived and is unlikely to ever fully recover. Travel bans have brought many airlines to the brink of bankruptcy, and even when the crisis subsides, both business and leisure travellers will think twice about flying, particularly overseas. This is only one example of the disruption that drastic measures to fight the disease have unleashed on the economic and social framework of the world as we know it. It will take at least 18 months before an effective vaccine against the virus is rolled out, and during that period many of the behaviour changes foisted on businesses and individuals will stick. The most pervasive shift will be the result of social…

asking investment managers which stocks may pose value as the coronavirus rips through world markets and forces economies around the globe to their knees, may sound premature. But specks of light are starting to emerge amid the darkness of one of the world’s largest sell-offs in generations. “There is a caveat,” warns Stephán Engelbrecht, fund manager at Anchor Capital. “If this virus continues after Easter weekend, there will be a real impact through job losses, insolvencies and economic contraction.” The best outcome for the economy and markets in general is for the spread of the virus to be flattened out over a longer term – or, in other words, to slow the spread of contamination and avoid a large, once-off hit, he told finweek. Amid this gloom, and global markets…

Tier 1 Retail hedge funds: Any investor may invest in this fund. Qualified investor hedge funds: Only those investors who can invest R1m or more in a fund, and they themselves or their financial service providers have demonstrable knowledge of “financial and business matters”. Tier 2 South African portfolios: At least 60% of assets invested in SA. Worldwide portfolios: No investment limits are set, and assets can be held in SA and/or the rest of the world. Global portfolios: At least 80% of assets are held outside of SA with no limits on regional exposure. Regional portfolios: Invests assets in a specific country (for example the UK) or region (for example East Asia). Tier 3 Long-short equity hedge funds: Most of their returns are generated from (long or short) positions…

throughout the world, textile manufacturing has become driven by the bottom line, most especially in South Africa. This means inferior yarn quality, less pay for workers and compromised working conditions have been the norm. Mungo, an eco-friendly maker of high-quality cotton and linen homeware, has been defying the status quo and endeavouring to help shape and uphold the standards of sustainable production in a non-industrial environment. Dax Holding, the managing director (MD) of Mungo, spoke to finweek about how the company goes about achieving ethical trading and having sustainability practices at the core of its business strategy. Q&A: How did you become the MD of Mungo? My father started the business around 2000. You could say that my experience comes from working in the business over the years. I have…

SOLE PROPRIETOR As a sole trader you can claim all business expenses. However, when working from home there are some specific requirements that must be met when deducting expenses, warns TaxTim’s Nicci Courtney-Clarke. This includes having a portion of the house set aside for the exclusive and regular use of the trading activities. The structure of a sole proprietor is generally simple to set up and to administer and, depending on the earnings, there may be a lower tax burden, she says. The downside is that the owner carries the full risk of failure and if they die, the business dies with them. PRIVATE COMPANY The life of the business is perpetual, and shareholders only have limited liability. They are generally not responsible for the liabilities of the company. However,…

Sara Wallace Goodman @ThatSaraGoodman I guess we’re about to find out which meetings could’ve been emails after all… Aisha Baker @bakedonline A woman older than me just called me aunty at the Woolies queue. I nearly took my crocs off and jumped her. Tom Dante @Trader_Dante If your kids ask you one day: “Where were you during the great crash of 2020”, just make sure you don’t have to say: “I was demo trading it”. Colleen Doran @ColleenDoran I have been washing my hands so much my skin is like paper. And yet they still smell like smoked salmon from that bagel I ate. There is a science here I do not understand. Charlotte Clymer @cmclymer 2020 TIME Person of the Year: Grocery Store Employee. Lize Hartley @lizetheunicorn Are we…