Innholdsfortegnelse for 10/22/2021 i Finweek - English

South Africans are heading to the polls for the fifth round of municipal elections since the dawn of democracy in 1994. It may sound watered down, but these elections are critical as municipalities (local and metro) are at the forefront of delivering basic services to citizens, including voters. And the state of SA’s municipalities can at best be described as a failure. I’ve covered local government finances on the side for little over two years. Some memorable bits include the exasperation of the late former Auditor-General Kimi Makwetu when his organisation had to audit municipalities. It also includes the most expensive wire fence in Deneysville (Metsimaholo municipality) which was constructed for R21.7m rather than R400 000; a lack of printers, paper and ink to send statements to consumers in neighbouring…

sibanye-Stillwater concluded an R8bn share repurchase programme earlier this month, but its success belies no small degree of frustration at the gold and platinum group metals (PGM) miner. While a buy-back is a viable form of shareholder return – less shares in issue mean more earnings per share – its evil twin is a recognition that the market isn’t fully valuing the company. This notion of fair valuation was at the heart of recent comments by Laurent Charbonnier, Sibanye-Stillwater’s chief commercial and development officer. Rarely in the spotlight, Charbonnier raised the question at the firm’s PGM capital markets day on 23 September why one Anglo American Platinum (Amplats) share, the 80%-owned Anglo American subsidiary, was worth two Sibanye-Stillwater shares? “Clearly the market is always right and it always knows best,”…

motus is a diversified (non-manufacturing) business specialising in the automotive sector, which is divided into four business divisions: retail, import and distribution, motor-related financial services, and aftermarket parts. Motus has selected international presence, primarily in the United Kingdom, Australia and limited presence in Southeast Asia and Southern and East Africa. Employing over 17 000 people, Motus has 104 pre-owned motor dealerships, 232 passenger vehicle dealerships, and 20 commercial vehicle dealerships in South Africa alone. Share price history Motus was listed on the JSE on 22 November 2018 – for every one Imperial share, shareholders received one Motus share. Motus at the time maintained a market share of just under 20% in a highly competitive market. With national vehicle sales declining and customers trading down to entry-level models, Motus’ share price…

i don’t think there is a single South African who is not familiar with the Wimpy restaurant group. It always reminds me of long drives to some or other vacation spot and a quick stop for a Wimpy burger after refuelling the car somewhere along the way. While browsing the internet the other day, I came across a nearly 50-year-old Wimpy menu. Now, to place things into context, a regular Wimpy burger and chips will cost you R59.90 today. Consider that you wouldn’t have paid VAT 50 years ago, the burger must have cost you R52 then, right? Wrong. The Wimpy menu clearly shows us that a burger and chips cost a mere 35c in 1972. Why is this burger14 783% more expensive today (or why did the price increase…

financial markets are currently totally occupied by reserve banks wanting to reduce asset purchases. But what does it in fact mean, and why are the markets so nervous in this regard? Let’s first look at the history and pause fora moment at the concept of quantitative easing, or monetary stimulus. Quantitative easing is when a central bank purchases financial assets to get the economy up and running. Central banks therefore buy and sell government bonds and influence the circulation of money. The more money that’s available, the easier it is for the economy to thrive. Quantitative easing took place in 2008 when interest rates were reduced with the exclusive purpose of stimulating the economy and to get it up and running. And this kind of worked. A major problem when…

after a difficult few years, MTN has come roaring back, more than doubling its market capitalisation in the last year. While its share performance has brought the company back in line with historical valuations, the path ahead to a genuine rerating of the group remains challenging and will require faultless execution from management. Investing is all about entry and exit points. Though shareholders holding MTN over five years would have reaped gains just shy of 20% in that time, anyone buying into a devalued MTN 12 months ago would have enjoyed a return of 150%. That seems like a startling rerating of the African telecommunications giant, and it reflects several tailwinds boosting its core business, in tandem with shrewd leadership. It may seem surprising to speak of the oil price…

The South African government is a decade late in meeting its deadline to migrate from analogue to digital television services and free up valuable spectrum that can be sold to telecoms operators. Despite a new target of March 2022 being set, historical failures to meet many prior targets mean telcos are not holding their breath for a spectrum auction to take place any time soon, which is a problem for domestic network operators. Sub-1GHz spectrum, some of which would be freed up by the migration from analogue to digital of television broadcasts, is highly sought after because lower frequency spectrum allows telcos to cover wider areas with fewer towers. During lockdown restrictions mobile network operators benefitted from emergency spectrum being allocated by the communications regulator Icasa to meet the surge…

human resources. HR. From recruitment to managing leave to paying monthly salaries until, ultimately, you get the dreaded letter in the mail informing you that your services will not be required anymore. HR is the liver of an organisation: it unobtrusively ensures that everyone works smoothly, and where necessary, removes those that are harmful. You can’t live without one. Yet HR is typically an expensive part of any organisation. Many founders try to go it alone; when there are only a handful of employees, it is still easy to manage payroll issues themselves. But this becomes burdensome (and frustrating) very quickly, which is why HR tech is now a thing. I spoke to the founders of two South African HR solutions geared towards small businesses about what it is that…

covid-19 and pandemic behaviour have been a catalyst for change, most notably for the traditional retail, office and industrial property markets. Investment into the pandemic-impacted retail and office sectors is shrinking. The industrial sector continues to swell. Traditional property investment markets remain, but with the advent of hybrid office and work-from-home models, the structure of the property investment markets is changing, Ahmed Motara, listed property analyst at Stanlib, tells finweek. “Today, we talk globally about property sectors such as data centres, logistics, storage, hotels, senior housing and a range of specialised niches in the global property investment markets,” he says. “Some sectors continue to see strong capital growth, while others are better known for their income growth dynamics over time. As an overall market, however, we believe that income is…

With the UK removing South Africa from its list of countries where travelers should quarantine, called the red list, we can now expect increased holiday travel from the region. In 2019, 436 559 UK tourists arrived in the country with most visiting CapeTown. The 2020 numbers were way down, as have been the 2021 numbers. But 2022 could see travel returning strongly as numbers start picking up. We have three listed hotel groups, but Tsogo Sun Hotels has the largest exposure to CapeTown and wealthier tourists, and thus will see a larger uplift in room occupancies. The year ending March saw the company report a loss and the half-year to the end of September will at best deliver break-even with a reported loss more likely. But as occupancies pick up,…

it has been proven time and again that hiking interest rates prematurely, or excessively, can cause markets to lose ground. When central banks turn hawkish, a finely balanced approach is what is needed. But often things do not turn out as predicted. A renewed surge in inflation has caused jitters in markets as it coincides with central banks signalling an end to easy money policies and a commitment to hike interest rates next year. Equity markets reacted in a predictive way, recording the worst quarter to end-September since March 2020, raising renewed questions about why central banks are embarking on a very risky path at a time that global economies have barely recovered from the effects of the worst epidemic in a century. Rising inflation is part of the reason.…

construction is a highly cyclical sector with its performance dependent on economic booms and busts. Leading up to the 2010 Fifa World Cup, for example, the number of new JSE-listed companies in the construction sector dominated with firms such as Aveng, Murray& Roberts and PPC featuring in the JSE Top 40 Index. Unfortunately, this was followed by an unprecedented number of large contractors liquidating, filing for business rescue or delisting. Over the past decade, the country’s depressed economy combined with increased government debt and dampened investor confidence has led to low government and private sector infrastructure investments. However, with a renewed government focus on the sector, the investment case finally seems to be slowly turning around. Between 2008 and 2018 the value of public-listed construction companies fell by over 60%…

MTN’s resurgence over the last 12 months likely still does not consider the group’s nascent fintech and digital service offerings. Just how much could non-traditional revenue boost the group’s fortunes? Ninety One’s Samantha Hartard says while MTN’s asset realisation strategy has seen the group sell towers in Africa, it has a 29% stake in IHS Towers, which will list on the New York Stock Exchange soon. “This could provide a large value unlock and is a long-awaited initial public offering (IPO). Management has begun to address it in roadshows, but there will be stringent terms dictating when and how MTN can sell down its stake in IHS. It could take three years for MTN to unlock that value. We are yet to see a finalised valuation for the IPO, but…

So many reasons to dance This issue’s isiZulu word is isigidi. Isigidi is a million. Is it related to gida (dance) because if you have a million rand you gida with joy? That makes sense to me and the Lotto operator – Gidani*. Sometime last year, the Gauteng health department was reported to have prepared to dig over isigidi graves in anticipation of Covid deaths. So grim. People were understandably up in arms about this. Well, Covid-19 hasn’t killed nearly that many people. Do you know why? It’s those over isigidi graves because that whole story was a PR stunt designed to terrify people into staying indoors and following Covid protocols – it worked. I definitely didn’t want to be one of the over isigidi people who would be buried…

the N3 highway is arguably the most policed road in South Africa. I realised this when I recently travelled the 570km connecting Johannesburg, our country’s financial nerve centre, to Durban, the busiest port in Africa and one of the major trade gateways on the continent. All along the highway, I saw many police cars stationed at intervals while known hotspots like the Mooi Rivertoll plaza in KwaZulu-Natal were guarded by soldiers in armoured vehicles. I also noticed that the N3 is littered with speed and surveillance cameras. I could not shake the feeling that I was being watched and tracked from Johannesburg to Durban. Then, while I was pondering over the high level of security on the N3, I saw something peculiar – freight truck armadas of 10 to 15…

after being a repeat victim of crime, Thulile Mthethwa identified a gap in the market for security technology and crime response systems aimed at poorer communities. In 2013, she resigned from her full-time job as a software developer to focus on the development of this solution, which in 2015 was launched as MeMeZa Shout – South Africa’s first public alarm system. Elmarie Pereira joined Mthethwa in late 2014, after being introduced through a mutual acquaintance who knew they shared similar traumatic experiences: “We made a perfect team as we shared the same vision: To build something that would help vulnerable communities to shout their way out of crime,” says Pereira. The solution At the heart of MeMeZa Shout is a public alarm system, which has been conceptualised and developed right from…

the search for mineral resources critical to global decarbonisation is seeing mining companies weigh some unusual choices. Consider BHP – the world’s largest miner – which is said to be considering a return to the Democratic Republic of Congo (DRC), one of the world’s riskiest locations. The DRC is rich in copper and cobalt which, along with nickel and lithium, are crucial to electric vehicle battery and renewable energy production. Existing mines are depleting whilst a paucity of exploration spend means there’s little left in new resources for future production. It’s against this background that a debate is underway between non-governmental organisations on one side, and mining firms on the other regarding the viability of mining the seabed. According to Gerard Barron, CEO of Nasdaq-listedThe Metals Company, it would be…

Kumba Iron Ore, a subsidiary of Anglo American, is a supplier of iron ore to the global steel industry, engaged in the exploration, beneficiation, marketing, sale and shipping of iron ore. The company operates primarily in South Africa, with mining operations at its Sishen and Kolomela mines, both located in the Northern Cape, and Thabazimbi mine in Limpopo. Overthe past few weeks, Anglo American and Kumba’s shares have taken a hit from iron ore and platinum group metals price movements. This renewed collapse in commodity prices has shaved billions off the value of some of SA’s biggest mining companies. Iron ore, which tested an all-time high of $235.55 a tonne in May, lost more than half of its value to $90 in September as China, the biggest importer of iron…

CAPITEC Cost-to-income a concern Capitec’s* results, released on 30 September, were full of very large increases as the base effect from a year earlier worked in their favour as the six months ending August 2021 did not include the level of bad debts. The bank also added back provisions for defaults. Comparing the 2021 interim results to the same period in 2019 and removing the added provisions, Capitec’s results are ahead of 2019, resulting in real like-for-like growth. There was, however, one area of concern and that was costs as operating expenses increased by 32%. This pushed the cost-to-income ratio up to 45%. Capitec has always had a low cost-to-income ratio and it has slowly been moving higher, which is to be expected. More bank branches and the new business…

like a slow-motion train wreck, the energy crisis is unfolding and hardly anybody has taken notice. Perhaps “hardly anybody” is not entirely true, but when you look at positioning in both natural gas and oil futures contracts, it seems that the recent rally, well, the recent rip in energy prices, has been met with traders taking short positions. While speculating with mean reversion strategies is often touted as one of the more successful ways to trade the markets, in this case, it’s almost as if people are not looking at the fundamentals. So, what are the fundamentals? In previous editions of finweek we’ve spoken about supply constraints in the oil market, and particularly how the Covid-19 pandemic temporarily shifted demand dynamics to such a low level, and subsequently price, that…

The recapitalisation of Cell C poses an interesting conundrum for the South African telecommunications sector. Lockdown restrictions have had the same effect globally: providing a rising volume tide that lifted all telecommunication boats. As restrictions are eased, however, pricing is likely to come into focus again. “The revival of Cell C, which used to be the country’s third operator, is interesting because it now has a different operating model. Cell C does not want to be an infrastructure-led telco and has signed a roaming agreement with MTN. Globally, markets tend to consolidate to three players – this is seen as the ideal situation where all players can thrive. SA now has four, with Telkom successfully entrenching itself in third position,” says Ninety One fund manager Samantha Hartard. A relatively benign…