Innholdsfortegnelse for 7/09/2021 i Finweek - English

in this week’s cover story, finweek journalist, Timothy Rangongo, takes a closer look at the cannabis market. Why, you may rightly ask, did we decide on an article on cannabis? The answer is simple: It could mean enormous benefits for the South African economy. According to KPMG, the global market for CBD (a chemical component in cannabis) is worth about $8.2bn. Should SA, with its highly suitable climate, be able to supply this market, it could lead to considerable economic benefits and poverty alleviation. Large areas in the former homelands, especially in the Eastern Cape and KwaZulu-Natal, are ripe for the cultivation of cannabis. Owing to the high value of the product – it sells for about $4 700/kg (R65 800) – small-scale farmers could also benefit substantially from this.…

the European diversified minerals and metals sector, represented on the JSE by the likes of Anglo American, Glencore and BHP, will generate the best cash flow of the last ten years, analysts say. “By year-end, we estimate that our ten Big Miners may have surplus capital to the tune of $100bn, approximately 15% of the group total market capitalisation,” said the Bank of America in a recent report. “By year-end, we estimate that our ten Big Miners may have surplus capital to the tune of $100bn, approximately 15% of the group total market capitalisation.” This cash generation is largely owing to the performance of iron ore and copper for the likes, and – in the case of Anglo American – the recovery in the diamond market, which was the only…

The JSE had an excellent 2020 as market volatility erupted, sending trading volumes higher and as such the JSE saw revenue and profits markedly higher during the 2020 financial year. But a trading statement released on 25 June stated what we already know: Trading volumes have returned to normal, leading to an expected fall in headline earnings per share (HEPS) of between 24% and 32% for the six months ended 30 June 2021. This is actually slightly better than I expected but the challenge is how to grow those trading volumes in future. In addition, the JSE’s competition is more than just the new local exchanges. A company wanting to do an initial public offering can look anywhere across the world to list and South Africa has never been top…

i recently chatted with Viv Govender, a senior analyst at Rand Swiss, about global banks, since they are under cost pressure from increased regulation. He made an excellent point when he asked: If you were to design a bank from scratch today, would it look anything like existing banks? Today, a new bank designed from the ground up would not have branches or ATMs. It would function digitally with an app that manages all transactions. Deposits and withdrawals would be through retailers and not branches and support through WhatsApp or SMS. In other words, the new bank would look a lot like TymeBank and very little like the existing large banks. This doesn’t mean the traditional banks are going to disappear any time soon, they are adapting as best they…

after several shortcomings in Basel II financial regulations were identified during the 2007 subprime mortgage crisis, members of the Basel Committee on Banking Supervision (BCBS) began working on Basel III between 2008 and 2009, which was finally approved in November 2010. Simply put, the latter is a set of international banking regulations developed specifically for the stability of the international financial system. These regulations were originally proposed for implementation between 2013 and 2015, but following several delays, implementation was postponed until between March 2019 and January 2022. Why the history lesson? The Basel III agreements come into force on 28 June 2021 for European banks, and on 1 January 2022 for British banks, and it could create a few opportunities. For me, one of the most interesting passages in this…

the announcement by President Cyril Ramaphosa that businesses will be allowed to generate up to 100MW of power without a generation license is huge and has real implications for investors. This announcement needs to be gazetted before we know exactly what the terms and conditions are. Assuming they’re not onerous, it is a real game changer, albeit an overused cliché. Back in May, Goldfields announced they had permission to build a 40MW solar plant at their South Deep mine at a cost of around R660m. This is not cheap, but is ensures that they have power and it saves them money, due to Eskom’s high electricity tariffs. Goldfields estimated it would save them some R120m a year. So, the pay-off period is under five years (assuming single-digit Eskom tariff increases…

south Africa is a country abundant with natural resources, one of which is cannabis. The country’s climate is perfect for growing cannabis and the mild, sunny, seasonal climate has enabled SA to become one of the largest producers of unregulated cannabis in the world. Interpol rated SA as the fourth largest producer in the world, according to the government’s recently published National Cannabis Master Plan (NCMP). The Eastern Cape, KwaZulu-Natal and Limpopo are particularly well suited to cannabis farming. If legitimised, the country could boast a multibillion-rand legal cannabis market. The NCMP puts the current value of the SA cannabis market at about R28bn, a fraction of which is legal. Understanding cannabis Cannabis refers to all products made from the dried flower heads and leaves of the plant, cannabis sativa,…

the Cactus Coffee Shop has a five-star rating on Trip Advisor, an online travel company. Situated on the corner of the Old Golf Course Road and Third Avenue in Namibia’s Uis, a layby on the way to the famed Etosha National Park, the shop’s cappuccino and confection offering is one tiny example of how the Uis region has been given fresh economic impetus. The reason? The reopening of a tin mine once operated by Iscor in the1950s before closing some 40 years later amid a squeeze in the tin price. These days tin is one of a host of metals causing a stir globally for their ability to help the world decarbonise. The importance of this trend can’t be emphasised enough. Unlike the last metals supercycle, which was driven by…

It’s in the sparkle This issue’s isiZulu word is ubukhazikhazi. Ubukhazikhazi is glitz and glam/splendour. Unsurprisingly, so-called experts have declared that the stones unearthed in KwaHlathi are not diamonds, but mere crystal quartz. Unsurprising because I knew my people would be bamboozled from their wealth. They are being told the stones are crystal quartz because seeing us shine is unwanted. This all said, let’s say the stones really are crystal quartz, which they probably are, but don’t tell the so-called experts I believe them. Let’s say they are crystal quartz. That would not necessarily be a bad thing for the people of KwaHlathi. It’s not like they are a big mining company that invested billions, destroyed the environment and displaced populations, only to come up with measly crystal quartz. Crystal…

one of the existential questions of our time must surely be: Will artificial intelligence (AI) replace me at work? The good news for those who wake up in a cold sweat at night is that it is not happening (yet). Four of the world’s leading economists, Daron Acemoglu, David Autor, Jonathan Hazell and Pascual Restrepo, recently published an NBER Working Paper to find out whether robots have already started taking over. To answer this, they firstly show that between 2010 and 2018, there has been a rapid increase in job vacancies related to AI. That is, of course, good news for those who can talk to robots (i.e the AI programmers). They then classify the extent to which companies in their sample are “AI exposed”. The first interesting result is…

in 2020 the absolute value of agriculture exports increased by about 18% to R169.2bn compared to 2019’s R143.2bn. In addition, figures released by the International Trading Centre (ITC) indicate that the value of South Africa’s agriculture imports increased by a mere R95bn in 2019 to R97.9bn in 2020 – a tiny increase of R2.9%. So, the sector’s positive balance of trade of R71.3bn in 2020 was an enormous 47.9% higher than 2019’s R48.2bn. In 2020, the top ten destinations for SA agriculture exports were the Netherlands, Britain, Botswana, Namibia, Mozambique, Zimbabwe, China, the US, Lesotho and the United Arab Emirates. Citrus The citrus industry exported about 15% more by volume in 2020, namely 146m cartons (15kg each) against 126.6m cartons in 2019. Exports are expected to increase to 160m cartons…

BHP is a diversified resources company that extracts and processes minerals, oil and gas, primarily in Australia and the Americas. In 1994, a major portion of Billiton was acquired by the South African mining company, Gencor. In 1997, BHP divested from Gencor and was first listed on the London Stock Exchange. In April this year I wrote of a potential head and shoulders – a bearish pattern – that BHP’s share price was forming. At the time, BHP had not formed the final shoulder yet, but a selling level was established below 40 830c/share. Resistance encountered at 47 735c/share – a lower high than its all-time high at 49 575c/share – kick started the downward momentum of the final shoulder. BHP breached the selling level but has now bounced back…

CEMENT PRODUCERS Better prospects for Sephaku & PPC Sephaku and PPC, both cement producers, released their financial results for the year ended 31 March, on 24 and 21 June, respectively. Both companies are in a lot better shape than they were during 2020. It was so bad last year for PPC, with the issues regarding its operations in the rest of Africa, that a rights issue seemed probable. It was, however, ultimately avoided. Cement dumping by other nations in South Africa seems to have once again resumed, but a stronger rand should put a cap on that and may even reduce it to insignificant levels. PPC announced full-year headline earnings per share (HEPS) of 3c, but this should quickly correct to around 50c in the current year ending March 2022.…

after the volatility in the markets, owing to the coronavirus pandemic, many investors are on the lookout for alternative ways to reposition their portfolios. Apart from the above, the US Federal Reserve (the Fed) recently upset investors with the announcement that interest rates could be increased as early as 2023. Remember that higher interest rates have an opposite effect on the share market and could therefore lead to lower share prices. So now, a new catalyst has raised its head. It’s called inflation which, of course, resulted in government bonds beginning to weaken, hence the Fed’s announcement. In addition, the Fed chairman, Jerome Powell, also admitted that they have eventually begun talking about reducing its massive bond buying programme in terms of which they are buying US government bonds valued…

what do a discount retailer in Turkey, a wealth manager in China and a pharmaceutical group in Mexico have in common? They are all high-quality companies, that are fairly valued and well governed. And this makes them three of my favourite stocks. Despite short-term macro-economic headwinds, emerging markets (EM) are on a sustained upcycle as aggressive Covid-19 vaccinations begin globally, and the market shifts its focus to re-opening trade and the medium- to long-term structural growth potential not currently captured by EM valuations. The case for emerging markets is easy to find in the numbers: 5.8bn of the global population of 7.2bn people live in emerging market countries, and by 2023, 80% of the world’s middle-class consumers will live outside Europe and the US. The growth potential in these markets…

“MISHAPS COULD HAVE BEEN AVOIDED.” – Trevor Manuel, former finance minister, said government’s response to the pandemic was imperfect and that some mishaps could have been avoided, while others were out of its control. Manuel was addressing the Centre for Development and Enterprise’s webinar, which was themed “South Africa and the next five years: How do we resolve our political and economic crises?”. He emphasised that the decisions taken over the next five years are fundamentally important. On issues which the pandemic has exposed, such as rampant corruption, Manuel said SA is left as a weak state. “IT WAS DELIBERATE.” – Strive Masiyiwa, telecommunications billionaire from Kenya, said during a virtual summit on vaccine equality and equitable distribution, the shortage of Covid-19 vaccine doses on the African continent is a…

founded in 1990 and listed on the JSE on 4 July 2000 at R12.50 per share, Massmart Holdings is the second-largest distributor of consumer goods for cash in Africa – it owns Game, Builders, Makro and Jumbo. As of 31 October 2019, Massmart operated 442 stores in South Africa and 12 other sub-Saharan countries. In November 2010, Walmart, the American conglomerate, made a bid to acquire a majority shareholding (51%) in Massmart. At that time, the offer was valued at approximately R17bn (about $2.54bn). The deal was completed in June 2011. Share price history After testing an all-time high at 20 800c/share in 2013, Massmart entered a bear trend in January 2019 when it broke through the support trendline of its long-term bull trend. Investor confidence gradually slid as Massmart…

2020 was the year of “you’re-on-mute” work experiences, and googling “What is 5G?”, according to South Africa’s top five trending questions. As work and school from home extended with each lockdown level, we searched for faster, cheaper data connectivity and technological advances to support the new remote work, schooling and entertainment environment. SA telecommunications companies Vodacom, Telkom and MTN were faced with the need to modernise their infrastructure to support the accelerated growth in demand for connectivity at home. At the same time, they continued to grapple with regulatory pressures for mandatory data price decreases. In the context of a struggling economy and high unemployment rates, consumers may be unable to afford a premium price for the improved connectivity they so desire, which could result in margin and cashflow pressures…

times are changing and they’re changing fast. It feels like just last week that we were all driving around with large CD folders in our cars that our passengers flipped through while looking for something to listen to. Today, things are quite different. We now mostly have music libraries on our phones that we listen to by making use of some sort of music streaming app or service. As far as streaming services go, Spotify is probably the most well known as it has 345m total users around the world. That’s amazing, right? Not if you consider that despite having so many users the company still lost around $700m last year. Enter the unsung hero of music streaming: Tencent Music Entertainment (TME). Today, there are around 658m people in China…

holding companies have traditionally struggled to narrow the gap between their net asset value and the price at which its stocks are trading on bourses. Naspers*, and subsidiary Prosus, are no different. In a two-pronged move to address the substantial discount at which Naspers and Prosus are trading to their technology-laden assets, the companies announced a share buyback in November last year. By the end of June, Prosus has bought back in aggregate $1.37bn of its own ordinary N shares (or 0.73% of its total outstanding shares) and $3.63bn in Naspers ordinary N shares (or 3.67% of its total outstanding shares). These were sweet windfalls to investors. In addition, Prosus announced a share swap on 12 May where it aims to acquire more than 45% of Naspers’ outstanding shares in…

When it comes to deciding how to divvy up your retirement pot in a living annuity, there are some crucial considerations to be taken into account. Karen Wentzel, head of annuities at Sanlam Corporate, says it is advisable that funds in a living annuity is invested in a combination of a protection and a market-related portfolio. “For the protection component, the underlying portfolio will provide protection against negative investment markets. The asset allocation strategy should aim to achieve returns in excess of inflation plus three percentage points over periods longer than three years,” she says. “The market-related component should aim to achieve returns in excess of inflation over the long term. Short-term market volatility affecting the asset value of the market-related component should not be a concern to the pensioner.…