Innholdsfortegnelse for 8/20/2021 i Finweek - English

in this issue of finweek our contributors look at the aftermath and cost of July’s failed insurrection in KwaZulu-Natal and parts of Gauteng. The loss of life was unnecessary. The damage to property is preliminarily estimated in the billions of rand. And the toll on sentiment – of both local communities and businesses that were affected as well as investors – is unquantifiable. In response, President Cyril Ramaphosa acted sharply: He sacked the minister of defence and moved the minister responsible for intelligence gathering to a lesser portfolio. He scrapped the ministry of state security (a remnant created by jailed former president Jacob Zuma) and moved responsibility for the intelligence services into his own office. In the days following what the government calls a failed insurrection, the incapability of the…

“WE CAN’T CONDEMN YOUNG PEOPLE TO A CYCLE OF DEPENDENCE.” – South Africa’s new finance minister, Enoch Godongwana, expressed his disapproval of the basic income grant, saying that he would rather the funds be used to give work to young unemployed black people, instead of a handout, in an interview with Sunday Times. He said his argument is to invest in the youth and that the current approach with the grant does not address fundamental issues affecting youth unemployment. Godongwana said he wants to construct a fiscal framework which addresses the developmental needs of the economy. “I no longer believe that South Africa is a land of opportunity.” – Sygnia executive chair Magda Wierzycka said there are plenty of investment opportunities and there is no shortage of interesting investments –…

among South Africa’s rising mining executives count Hanré Rossouw, the departing CFO of Royal Bafokeng Platinum (RBPlat). Rossouw, who is due to replace CFO Paul Victor at Sasol in April, says his work is largely done at RBPlat, a mere three-and-a-half years after joining from Investec Asset Management. “It was a tough decision to leave RBPlat, but in terms of the difference I can make, I think that is largely completed,” he said in an interview with finweek. “It’s not a boring job, but the work I was mandated to do has been completed,” he added. Rossouw was commenting on the day RBPlat posted interim numbers demonstrating a company in rude health. It paid an interim dividend totalling R1.5bn following a similar-sized pay-out – its maiden dividend – at the…

with a 160-year heritage and headquartered in Durban, Aspen Pharmacare is a South African pharmaceutical company that distributes its products to more than 150 countries. It supplies a large portfolio of products, with more than 650 branded medicines, specialising in generics and treatments for HIV/Aids and tuberculosis. Aspen is one of the five largest pharmaceutical companies in Australia and has substantial presence in major developing markets such as Latin America, Russia, Eastern Europe, Sub-Saharan Africa and Southeast Asia. It manufactures approximately 23bn tablets annually and almost 80% of its revenues and earnings before interest, tax, depreciation and amortisation (ebitda) are generated from outside SA. Share price history Trading as a small business out of a house in Durban, Aspen managed to achieve revenue of R2.2bn by 2004 and grew to…

PGMs Valuations not concise I was chatting to Bruce Williamson from Integral Asset Management about platinum group metals (PGMs) and specifically whether prices could remain at current levels or even go higher. He pointed out over the last decade or so, the usage of PGMs has shifted from what miners mine. So, rhodium demand is now well ahead of supply and will likely remain so for many more years. Platinum also has a disconnect between supply and demand, while palladium will probably move into oversupply in the next few years. This is structural and supports the current prices, if not even higher prices for rhodium and platinum. My view is that the PGM miners’ valuations are not pricing in that PGMs will remain at current levels, never mind if they…

electric vehicles are the way of the future. There can be some arguments around which electric vehicle (EV) manufacturer is going to be the one to walk away with the whole pie, although as time goes by, we can see more and more competitors entering the space and perhaps who the ultimate winner is in terms of EV manufacturer becomes slightly less important. Particularly now that the more traditional automobile manufacturers are stepping up to the plate and bringing some good EV models to market. And no, we don’t mean listed EV manufacturers that have not built any cars yet. We mean the likes of VW, BMW, Toyota and many more. We’ve also seen a shift in policy in developed markets with Europe and the US almost leading the charge…

ahuge tax revenue windfall generated by high global prices for the minerals which South Africa exports has created a buffer shielding the country’s finances from this year’s costly shocks of civil unrest, a severe third wave of Covid-19, and continued loadshedding. Economists now expect total tax revenues – buoyed mainly by the profits of mining companies – to overshoot National Treasury’s forecasts by R100bn in the 2020/2021 financial year, enabling the budget deficit to shrink even after the additional spending. However, the unexpected expenditure will absorb money which could have been used to reduce SA’s heavy debt burden and bring down the cost of borrowing, which has been the fastest-growing category in the budget for the last few years. The revenue windfall will finance most of a R38.9bn package of…

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It has always struck me that one of the more popular definitions of what separates Homo Sapiens from other mammals is our ability to produce abstract art. More than 70 000 years ago, beach dwellers at Blombos on the southern coast created a “cross-hatched pattern drawn with an ochre crayon on a ground silcrete flake”. In short: they created art. The Blombos artwork suggests that these men and women, before they exited Africa to populate the world, had all the features of cognition and behaviour that we associate with ourselves today. From then to now, the purpose of art is to illuminate the world around us. But when the world suffers a horrendous pandemic, that illumination grows dimmer. Covid-19 has shut down exhibits, closed galleries and gutted demand. I asked…

BUY SELL HOLD Construction company Murray & Roberts’ full-year results to the end of June are expected in early September. After an 8c headline loss per share for the half-year through December, the company should be back in profit with the financial year ending June 2022. Since the December results, the company has announced over R6bn of new contracts awarded to it, adding about 10% to their orders. The order book is always risky as final profit margins are never certain. But the group has focused on the profitable areas of mining as well as oil and gas. These are strong sectors during the current commodity boom. Murray & Roberts has also kept its local infrastructure division going even as there was little or no work. We should see contracts…

i’ve been reading old articles on our mining stocks written between 2016 and 2018 when commodity prices were low, stock prices even lower, profits almost zero and dividends absolutely zero. I, and many other writers across the web and print publications, were bearish. Sure, there were some who were punting these commodity stocks, but they were a minority. I’ve been digging into the past after the recent Kumba Iron Ore dividend of 7 270c per share, which is almost equal to three times the share price in January 2016; while the Impala Platinum trading update says headline earnings per share (HEPS) will be at least 2 480c, more than the 2 000c the share was trading at in August 2018. Now, these are different beasts in that they are commodity…

i will be the first to admit that, shortly before it began, I didn’t really think South Africa stood a chance of emerging victorious from the 2019 Rugby World Cup. Yes, we have been champions twice before and we know how to hold that cup high, but the fact was that the Springboks found themselves in a bit of a drought situation in terms of winning. That, coupled with several coaches who tried and failed, didn’t leave SA supporters with much to believe in. Did they surprise us! After nearly 12 years, the British Lions found themselves facing the Springboks head-on again for the first time since 2009 and again the Boks dug deep and clinched the series. When we look at our local stock market, the picture doesn’t look…

in June, the country again recorded a trade surplus of R57.7bn, larger than the anticipated R54bn. In fact, we’ve been recording trade surpluses for 14 consecutive months, and for 21 out of the past 24 months. This year alone, the country recorded a trade surplus of R54bn in May, R51bn in April and R52bn in March. The cumulative trade surplus for the year-to-date is R255bn. There are two material factors that have contributed to these extraordinary numbers. Firstly, exports have risen more than 50% year-to-date. There are base effects in play given the fall-off in global trade in 2020 as Covid-19 hit the world. Both global manufacturing and global trade – in other words, the volume of goods being traded – are currently at all-time highs. China has had its…

As it tackles the aftermath of the looting and unrest in KwaZulu-Natal and Gauteng, the listed grocery retail sector is itself at an inflection point. All the country’s Big Five retailers have new chief executives in place, with Shoprite’s Pieter Engelbrecht the longest-serving leader since 2017. These businesses are large, well-established and not easily turned around in a hurry. Running the rule over the players in what – by international, developed market terms – is not a highly competitive market, analysts still agree that South African grocery retail is sophisticated and highly efficient. A lack of meaningful foreign competition has allowed for margins in certain market segments to remain extremely attractive, causing a “bunfight” over market share, rather than creating niches. So it was that old-school success stories like Game…

five days of devastation and the impact on the national GDP from looting and damage to South Africa’s shopping centres, malls, warehouses and infrastructure is estimated at R50bn, says the South African Property Owners Association (Sapoa). Following the civil unrest that unfolded in KwaZulu-Natal (KZN) and Gauteng after former president Jacob Zuma’s arrest, about 200 shopping centres were looted and damaged, 100 malls were burnt down or suffered significant fire damage and around 3 000 stores looted. The total impact of GDP loss in KZN alone is estimated at upwards of R20bn, reports Sapoa. Some R1.5bn was lost in stock, R15bn lost to property, over 50 000 informal traders have lost their livelihoods, approximately 1.5m people have lost their potential to earn an income and some 150 000 jobs are…

Various government departments, whether national or provincial, has the authority to licence certain sectors of the economy. For small business owners, the following sectors (and where to apply for a licence) may be useful: BUSINESS LICENCING AUTHORITY Restaurant Local municipality – apply for a certificate of acceptability for food premises Provincial government – apply for a liquor licence Childcare facilities (e.g. crèche) Local municipality – apply on a childcare facilities form Provincial social development department – apply to operate an early childhood development facility Haulier transport (trucking) Local municipality – apply for a professional drivers’ permit @finweek finweek finweekmagazine…

Tapaware in Japan This issue’s isiZulu word is tapa. Tapa is to take with reckless abandon or to partake in a frenzy of taking or to be part of a free-for-all. Therefore, looting is colloquially called ukutapa – to tapa. Question: What do you call crockery that was acquired through looting? Answer: Tapaware. All food prepared in Tapaware shall be called tapas. We sent our Olympics team to tapa medals in Japan, but the soccer team had to return quite early after being knocked out, with Mexico tapaing them like a true tapas spread of tacos, chorizos and nachos in their last match. The Mexican players could be heard singing “stoy disfrutando estas tapas”, as they tap-danced around them while our boys leaked goals like a faulty tap. We really…

the SA Communist Party (SACP) recently celebrated its centenary in South Africa, having held its founding conference on 1 August 1921 in Cape Town. Since then, the contribution of communists to SA’s political history has evolved over the last 100 years. Along the way, the SACP’s contribution has ebbed and flowed, making many political pundits wonder about the future of communism as an ideology in a modern economy like ours laced with high levels of income inequality and unemployment. Over time, the SACP fashioned itself more as a liberation movement than a communist outfit in the mould of the ones that were found in Lenin’s Russia or Mao’s China. In essence, the party had to prioritise fighting white domination before it could establish communism in South Africa, hence it ended…

the workplace looks far different today than it did before Covid-19 with companies rethinking their future and whether their workplaces will return to pre-Covid conditions. One trend that they are in fact experiencing in workplaces this year is a renewed focus on people, says Candice Neumann, an executive consultant at 21st Century. “If 2020 taught us anything, it is that companies that do not change will get left behind by those that do. This applies most importantly to issues concerning people.” And, actually, this is nothing new: As far back as the 1930s, researchers such as Elton Mayo and Mary Parker Follett found that aspects of human nature, such as relationships, were important motivating factors in the workplace. Ben Eubanks, chief research officer at Lighthouse Research & Advisory, says 2020…

what recently happened to Transnet – together with the World Bank’s ranking of South African ports at the bottom of a global list of 351 ports – presents a big challenge to policymakers. This is according to North West University Business School’s Professor Raymond Parsons. Says Parsons: “Given its dominance in the economy’s supply chain, Transnet’s temporarily backing out of its commitment to move goods in and out of the country has had widespread unintended economic and business consequences.” Vehicle exports statistics for July indicated a huge fall of almost one-third, or 8 381 units, compared with the 25 312 vehicles exported in July 2020. Last year, the export of vehicles and automotive components amounted to a new record of R175.7bn, equating to 13.9% of SA’s total exports. The automobile…

BUY SELL HOLD After declaring peace with the Nigerian government and agreeing to pay $1.6bn in the form of capital investment programmes for the next three years, MTN Nigeria has now implemented a new pricing framework for airtime purchases through banks. The lenders had previously cut MTN off from their platforms, preventing millions of customers from buying airtime. This was after MTN reduced commissions by almost half and asked to be paid a backlog of bills charged by the banks for the service. The Nigerian banking and communications regulators mediated and MTN Nigeria has agreed to reinstate the 4.5% commission it pays lenders for providing payment platforms on airtime purchases through them. MTN has now started to invoice and receive some payments from the banks and although it will take…

the remarkable recovery in markets since the pandemic lows in 2020 have fuelled renewed jitters that some form of correction is imminent. Because the economic reality does not justify present valuations. Fears rest on the growing impact of the Covid-19 Delta variant, the most contagious up to now, as well as indications that the US Federal Reserve may soon start “tapering” its quantitative easing programme. Sterling company results, on the other hand, supported markets in the second quarter, with more than 80% outperforming consensus views in the US. The US 10-year bond – the world’s most important financial indicator – traded at a yield of 1.25% at the end of July. After shooting up to 1.77% in March on inflation concerns, the yield dropped to as low as 1.13% since.…

the current dynamics of the online food delivery sector are fascinating to watch. The basic concept of food delivery has been with us for a long time, harping back to when we as consumers would call restaurants for takeaway meals by telephone. The rise of the internet, smartphones and marketplaces backed by deep-pocketed venture funding has taken the online food delivery industry to where it is today. The food delivery segment is viewed as attractive by the operators and investors in it for three primary reasons. The first is the sector’s very large addressable market. Estimates differ depending on the source, but the sector is generally viewed as being at least a $330bn opportunity globally. To give that figure some context, the global quick service restaurant (QSR) industry, when combining…

i often write about dividends because I love the cash flow, but also, they’re an important part of an investment’s return. Dividends also help to show the true health of a company. Currently we’re seeing super dividends from the commodity miners with Anglo American Platinum (Amplats) and Kumba Iron Ore respectively paying 100% and 99% of their headline earnings per share (HEPS) as a dividend to shareholders. For investors this means billions of rands that will flow into their accounts which they can either spend or deploy into the same or other investments. Those holding unit trusts or exchange-traded funds (ETFs) with these shares in the funds will also receive bumper dividend payments the next time the unit trust or ETF pays out dividends. In the case of Kumba and…

south Africa’s anaemic economic growth over more than a decade destroyed the prospects of many new entrants to the labour market. Drawing from various sources, finweek collated a comprehensive guide for those wanting to create a new business in SA. It doesn’t, however, look at the benefits and pitfalls of different business entities.…

Researchers have been studying and working with mRNA technology in vaccines for decades. They can be developed in a laboratory using readily available materials. This means the process can be standardised and scaled up, making vaccine development faster than traditional methods of making vaccines. mRNA vaccines have been studied before for flu, Zika, rabies, and cytomegalovirus (CMV). As soon as the necessary information about the virus that causes Covid-19 was available, scientists began designing the mRNA instructions for cells to build the unique spike protein into an mRNA vaccine. This vaccine teaches our cells how to make a protein – or even just a piece of a protein – that triggers an immune response inside our bodies. That immune response, which produces antibodies, is what protects us from getting infected…