Innholdsfortegnelse for 8/27/2020 i Finweek - English

good news is hard to come by these days. Even as we finally enter lockdown level 2, celebrating is premature. While it of course provides a lifeline to many businesses that were hanging by a thread, it’s too late for scores of others. And then there is the fact that Covid-19 isn’t going anywhere soon, which means we will remain subject to the possibility of reinstated restrictions. Not to mention the reality that lives will continue to be lost. Over and above the uncertainty of how long the world will remain exposed to this virus – for South Africans, the past five months of the unsynchronous approach by government in combatting the pandemic has left us despondent. Furthermore, once we do finally emerge on the “other side”, the economic hardship…

Shares in the JSE’s Orion Minerals have nearly doubled in value since the start of August, which is timeous as the firm is thought to be in the final stages of equity financing the Prieska copper-zinc project. This followed the grant of a mining permit over the remainder of Orion’s Northern Cape property which Errol Smart, CEO of the company, says has been delivered in double-quick time and is a reminder that when minded, South Africa’s mining regulatory environment can be a force for good, not frustration. “My biggest fear, the one thing that kept me awake at night, was that it would take six to nine months to get the permit,” he told finweek in an interview. Now is the time to be financing and building mines in SA…

south Africa’s attractiveness as a foreign investment destination is declining even as the country, as part of the Africa Continental Free Trade Agreement (AfCFTA), offers physical access to markets in the rest of Africa. Not to mention supplying manufactured goods into the European and US markets. As the most industrialised nation on the continent, even as manufacturing is buckling under poor government decisions and amid a global health pandemic, SA should be a lucrative market for mergers and acquisitions from abroad. That is, however, not the case. The value of mergers and acquisitions more than halved in the first six months of 2020 compared with the same period a year ago – from $8.2bn to $3.3bn, according to Statista data supplied by Andrew Bahlmann, managing director of Deal Leaders Africa.…

Sasol’s financial results for the year ended 30 June saw the company writing off assets worth R111.6bn, resulting in a loss of R91.3bn compared with a profit of R6.1bn a year earlier. The much-awaited performance of the company’s $12.8bn Lake Charles Chemicals Project came through in the second half of the financial year. LakeCharles delivered a R100m contribution to earnings before interest, tax, depreciation and amortisation (ebitda) in the second half of the book year, compared with a loss of R1.1bn in the first six months, according to a statement announcing Sasol’s financial statements. “The virus spurred a sudden drop in commodity prices, while also suppressing product demand and causing general economic decline. Additionally, we suffered credit rating downgrades as a result of the volatile macro environment,” Sasol CEO Fleetwood…

the phrase “Robinhooders” or “Robbing Traders” has become the latest swear word in financial markets as the traders this term refers to get accused of pushing any stock, even bankrupt Hertz, up hundreds of percent as they all jump into the stock. The slur implies that no skill is involved, and everybody is losing their money. But this is neither fair nor accurate. The name comes from the hugely popular US trading app that came to market in March 2015, offering zero-commission trading. These days zero-commission trading is more widespread, with the large Charles Schwab, E*Trade and Fidelity Investments all offering it since late last year. But back in 2015, the idea was radical, and traders and investors flocked to the Robinhood* app, which reported 13m accounts at the end…

anchoring bias is when we fixate on a single piece of information to make an assessment. That is why, during a price negotiation, you should always be the first to suggest a number, because all further negotiations will anchor around the number you proposed, which you would have skewed in your favour. The price should be low if you’re buying and high if you’re selling. For investors, anchoring bias can negatively influence their judgement. In this column, I want to focus on share prices and something I call ‘price bias’. We have more than 100 shares on the JSE trading more than 30% below their 12-month highs, with several of them down by 80% from these highs. An investor may look at this and decide that it means a share…

According to SFA Oxford, hydrogen-powered batteries benefit from a chemical process called electrolysis, which uses electricity to split water into hydrogen and oxygen. The hydrogen can then be stored and used to power a fuel cell, a stationary fuel-cell system, or for power-to-other applications such as power-to-heat or power-to-liquid fuels. The only by-products of the chemical reaction are electricity, heat and water so hydrogen electrolysis can play an important part in improving local air quality and helping to avert global warming. Importantly, electrolysis is the enabling technology that will ultimately supply power to fuel-cell electric vehicles (FCEVs), but will probably first serve as an energy source before finding an end-use in heavy-duty vehicles, and before it’s popular among passenger vehicles. Said SFA Oxford: “For FCEVs to become credible, they must…

The traditional exchange-traded fund (ETF) serves as an investment vehicle that provides investors with direct access to a basket of securities, such as shares and bonds, that are traded on the stock exchange – with the convenience of trading them in a single security, namely the ETF that tracks an index. In 2014, FirstRand created, listed and issued a Krugerrand instrument called the Krugerrand Custodial Certificate (KCC), which reportedly became the first gold coin-backed and physically-redeemable instrument in South Africa. Investing in Krugerrands appeals to investors who wish to make a direct investment in gold, hedge their portfolios against the US dollar or to further diversify their portfolio. However, this type of investment in gold is physical in nature and as a result, comes with the hassle to store, secure…

▸ The poultry industry provides 50 000 direct jobs and 130 000 in the whole value chain. ▸ Its annual turnover amounts to R48bn. ▸ Even before the outbreak of Covid-19, imports amounted to about 50 000 tonnes a month against Astral Foods’ (SA’s largest poultry producer) production of some 33 000t a month. ▸ Astral produces 5m broilers a week, compared with the US’ largest producer’s 45m tonnes a week. ▸ SA’s monthly production amounts to 135 000 tonnes compared with the US’ 300 000 tonnes a month. ▸ SA is the fifth-largest importer of US poultry and the third-largest importer of poultry from Brazil (a country with low feed costs that has been benefitting for many years from agricultural production). ▸ About 47% of SA’s small-scale poultry producers…

Credit life insurance assists customers to reduce their debt burden when unexpected health- or income-related events occur. Examples of typical events that may be covered through credit life insurance policies include death, disability, critical illness and retrenchment. Such insurance provides relief, provided that the right policy is in place, says Steven Barker, head of lending for personal and business banking at Standard Bank. “It is important that customers understand their policies and terms, and the protection provided on their policy, to help them make the right decisions in these difficult times.” In the event of death, permanent disability or contracting a critical illness, the outstanding debt is usually fully settled by the policy. In the event of temporary disability, retrenchment or loss of income, the policy can pay up to…

Michael Jordaan @MichaelJordaan I have a banking joke but it’s not attracting any interest. Monica Scott @chantelmakuwa The Gautrain bus will take you around the whole world before you reach your destination. Flick @Frediculous The amount of moneythey’re saying some colleges will lose if they don’t have a football season is showing that they’re not even really colleges. They’re just football programmes that teach classes as a side hustle. Mind of a Dad @TheMindOfADad If every ou’re wondering if you and your spouse are on the same page, fold a large blanket together. You’ll find out quickly. Yaaseen Barnes @Ya_a_seen_Him We’re all going through a very tough time, but no one speaks about the real struggle of putting in a password with a TV remote. Jade Jackson @IAMJADEJACKSON “Once Covid…

no industry has been left untouched by Covid-19. Religious and spiritual services are no exception. Churches across South Africa closed during hard lockdown; many remain closed, with services moving online. The Hajj pilgrimage that began on 28 July had only 1 000 pilgrims, down from 2.5m in 2019. Public celebrations of Jewish Passover have been cancelled. Buddhists around the world observed Vesak Day virtually. The financial implications of such a supply shock are becoming all too clear. Donations have fallen and many churches have been forced to delay or scrap their outreach programmes. Some ministries have had to let go of staff. Places that depend on pilgrimages have been particularly badly hurt. The Santiago de Compostela Cathedral has been renovated at great expense in anticipation of the surge of Camino…

in 2015, the absence of credit solutions for spaza shop owners led to bankers Siya Ntutela and Mdu Thabethe deciding to fill this gap by starting their own financial services company, Zande Africa. “The name of the company was derived from a Nguni word that means ‘to multiply’, in reference to our objective to unlock the spaza shop economy, which boasts an annual revenue of over R40bn,” says Ntutela. Their subsequent analysis uncovered that supply issues were an even greater challenge than cash constraints. “Spaza shop owners, at least once a week, have to either close shop or employ someone to run the shop while they are away buying merchandise. To address this challenge, we added supply and logistics solutions to our product offering,” says Ntutela. Unlocking a market Getting…

sibanye-Stillwater, the gold and platinum producer, said in a trading statement earlier this month that it didn’t expect a high risk of further operational disruption because of Covid-19. The statement confirms a growing expectation that SA’s mining sector might be over the worst of the Covid-19 pandemic, the extent of which was retrospectively demonstrated in recent Stats SA data that showed mining production for June had fallen about 28% year-on-year. According to Henk Langenhoven, chief economist at Minerals Council South Africa, the sector is “bouncing back” as measured by the volume and value of exports. Export volumes were, in fact, 28% higher in June than at the same time last year, while the value of export sales, which had fallen to a four-year low in the five weeks following the…

exxaro, which is one of the largest coal suppliers to Eskom’s power stations, reported an 18% jump in revenue on 13 August as coal volumes reached a record high in the six months through 30 June. Coal volumes sold increased 3% locally and 39% internationally, the miner reported. Exxaro’s headline earnings per share (HEPS) declined by 24%, mainly driven by R470m less equity-accounted earnings from its stake in Sishen Iron Ore Company. Exxaro declared an interim dividend of R6.43 per share, down R2.21 from the comparable period a year ago. Outlook: Exxaro has abandoned its bear trend by trading through the resistance trendline (grey bold trendline). It’s also forming an inverted head-and-shoulders formation, which is a bullish reversal pattern. On the charts: Exxaro is forming the final shoulder of the…

CONSOLIDATED INFRASTRUCTURE GROUP It can go as low as zero Consolidated Infrastructure Group’s share price is down to 24c. This stock traded above 3 500c in October 2015 and serves as a reminder that the answer to the question “how low can it go?” is always zero. NASPERS Tech war drags on JSE US President Donald Trump issued an executive order banning monetary transactions with TikTok and WeChat, but stayed the order until 20 September. Investors were initially confused whether the order related to Tencent or WeChat, but it was later clarified that it was just related to the mobile app. There are a couple of million WeChat users in the US, mostly consisting of Chinese nationals. So, it’s not directly a big deal for WeChat, which has over1bn active…

interesting times lead to interesting stock picks, and the one we have gone for in this issue is a casino stock – Las Vegas Sands (LVS). It trades on the NewYork Stock Exchange and owns some of the most iconic gambling properties in the world. These properties are in Las Vegas (which, ironically, only accounts fora small percentage of the company’s total earnings), Singapore and Macau. LVS is a play on the Chinese demand for gambling, which is generally high. With Las Vegas accounting for less than 10% of LVS’s earnings, it means that the bulk of the generated profit originates in Asia. LVS is considered the “Ferrari” of the casino businesses because it not only has the best-looking hotels in the industry (who hasn’t noticed the Marina Bay Sands…

given the low interest rate environment in South Africa, are there benefits to utilising a carry trade strategy? Although such a strategy is less applicable than in the past, it continues to exist and cannot be discounted. Essentially, a carry trade is a trading strategy whereby an investor borrows money at a low interest rate to buy an investment that provides a higher rate of return, in order to generate a larger risk-adjusted profit. It is typically based on borrowing in a low interest rate currency and converting and investing the borrowed amount into another currency. The reason that carry trades occur is due to the fact that over time global capital flows seek out higher interest rates, providing support in the form of foreign capital flows into markets with…

the dramatic acceleration in digitisation triggered by Covid-19 lockdowns and social distancing will make millions of job losses across the world permanent, unless the global workforce rapidly acquires the skills needed to tackle new technologies. Technology giant Microsoft has warned that the transition is essential to drive recovery from the worst global recession in at least eight decades, which may leave a quarter of a billion people unemployed this year. The pandemic has shone a “harsh light” on what was already a widening global skills gap, it says. “Crises have a way of accelerating trends already in motion, and the Covid-19 pandemic has proven no exception. Our data shows that two years’ worth of digital transformation have been concentrated into the past two months,” it said on 30 June. The…

the year was 2016 and the Summer Olympic Games had just drawn to a close in Rio de Janeiro. Veldskoen co-founders Nic Dreyer and Ross Zondagh were disappointed by the South African team’s apparel and thought that it “really should have been more representative of how amazing South Africa is”, explains Dreyer. Velskoen shoes – an ankle-length subset of the chukka boot made of soft but strong rawhide – came up, but the duo felt the traditional footwear could do with some colour. So, Dreyer had a friend photoshop colourful soles and laces onto a pair and they “immediately knew we were on to something”. Dreyer and Zondagh registered Veldskoen Shoes (Pty) Ltd, crammed into a 3x3m office in Woodstock, CapeTown, and ran with the fresh redesign. Another co-founder, Nic…

“OF COURSE, THERE COULD ALWAYS BE CENTRAL BANKERS WHO… COULD OVERLOOK THEIR RESPONSIBILITIES IN TERMS OF THE CONSTITUTION, BUT THIS ONE IS NOT ABOUTTO.” —Lesetja Kganyago, governor of the South African Reserve Bank, defended the central bank’s response to the coronavirus-led economic downturn in SA in the face of growing calls from politicians and trade unionists to deepen its rate cuts and buy up more government bonds. He told the Financial Times that the policy rate, now at its lowest in nearly half a century, was also now negative in real terms against where inflation is expected to be in the next year, showing the bank’s “substantial” response. “People are giving me too much credit that I do not deserve. I do not run government.” —Minister of cooperative governance and…

south African mining has recently suggested there are grounds for hope that the government will respond positively to reform proposals placed before it by Business Leadership SA’s B4SA. Roger Baxter, CEO of Minerals Council SA, which contributed the mining sector slides to B4SA’s presentation to government, said visible signs of policy improvement could be seen within six months. A proposal, for instance, to incentivise exploration investment via tax benefits attached to so-called flow-through shares, could be met with a favourable response before October, he said. Unfortunately, the government ‘policy’ doesn’t appear to be either homogenous or synchronous. While National Treasury may view flow-through shares positively, it tabled the Draft Taxation Laws Amendment Bill in July that may frustrate junior mining. Addressing the tax treatment of allowable mining capital expenditure where…

for the most part, industrial property (factories, logistics warehouses and distribution centres) has been the poor relation in the local property investment landscape. Even South Africa’s listed property and real estate investment trusts (Reit) sector has largely fixed its attention on retail and office assets. According to Bridge Fund Managers, on 31 July 2020 only 18.3% of the FTSE/JSE Listed Property Index (SAPY) comprised exposure to the industrial sector. Of that, 6.6% being traditional industrial (primarily manufacturing) and 11.7% logistics (warehouse storage and movement of goods). The FTSE/JSE REIT SA Index figure is somewhat higher at 23.5%, split between 5.7% traditional and 17.8% logistics. Ironically, given lower exposure to the asset class, industrial property is cheaper to own and operate compared to other asset classes. “A lot of the costs…

The government has announced level 2 of lockdown to curtail the spread of the coronavirus. Among other things, alcohol sales and its onsite consumption are once again allowed. It should be a huge benefit to Distell. Its trading update for the year ending June showed headline earnings per share (HEPS) will be between 45% and 65% lower as it lost over two months of trading income with a relatively fixed-cost base. Sales will bounce back quickly, although those sales which were lost will remain so. Consumption should return to normal levels after an initial surge of buying as restrictions are lifted. The weaker rand will also help profits from export sales into Europe. In the financial year ending June 2021 Distell should be able to easily repeat the HEPS of…

there is no doubt that people are different, and a perfect example of this is when it comes to using a road map or assembling a piece of furniture. Where there’s more than one person involved, there will usually be at least one looking at the map or the set of instructions, and at least one who chooses to figure it out for themselves without help or input from others. Many investors use this latter approach when it comes to their personal investments – they choose not to follow any guidelines, often simply because it appears to be too complicated. But there are in fact simple guidelines that investors can follow, especially when compiling their own investment portfolios. STEP 1: Speculators are not investors According to historical data (which is…

in finweek editions gone by, we’ve looked at some key concepts with regard to technical analysis and how those concepts can be useful in making short-term trading decisions. Topics we’ve covered include trends and moving averages, risk management, longer-term price patterns and a few more. It has been a while since we last shared some educational insights, so to get us back on track, we’re going to look at something quite simple in this issue. Basically, we are going to be looking at just one easy short-term pattern that can be extremely helpful when spotted and traded correctly. It is part of a family of Japanese candlestick patterns, which is a method of plotting price data in an easily legible graphic format using four price points: open, high, low and…

in the interest of South Africa, local poultry producers are making a major contribution to food security, early childhood development and the creation of sorely needed job opportunities. The local poultry industry slaughters just under20m broilers a week. But even before the outbreak of Covid-19, the figures showed that the growth in local production cannot keep pace with the growing consumer demand. According to analyses, this lag in growth can be attributed to the dumping of surplus production on the local market by the US, Brazil and certain EU countries. World production The US currently exports 40% of its production, says Izaak Breitenbach, general manager of the SA Poultry Association’s (Sapa’s) broiler organisation. Before the advent of the trade war between the US and China, the latter imported a lot…

before Covid-19, the South African consumer credit market was already struggling with challenging economic conditions. The total value of credit granted to consumers was up 1.66% to R145.38bn for the quarter ended December 2019, according to the National Credit Regulator’s quarterly consumer credit market report. Credit bureau Trans Union said the demand for credit continued well into the first quarter of 2020 and began to accelerate as both consumers and lenders started to experience the impacts ofCovid-19 (towards the end of the first quarter). Figures from the bureau’s first-quarter consumer insights report showed flat or negative growth across all product categories, except for bank personal loans, which grew by 10.6% year-on-year. Outstanding balances continued to grow across all major consumer lending categories, with non-bank personal loans growing by17.2% year-on-year. Though…