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Finweek English Edition - May 10, 2018

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10 May - 23 May 2018
SA: R30.20 (incl. VAT)
NAMIBIA: N$30.20
he past three months, I have helped a former colleague, let’s call her
siwe, with her job hunt after she was retrenched as a cleaner in the
ing where I work. Her story is that of millions of South Africans: she
dropped out of high school, so never got matric; her CV shows various
attempts to improve her skills (she went back to adult school to try and finish matric and
has basic security guard training, for example); and she lives far away from any potential
job. To meet me in Auckland Park takes four taxis and 90 minutes of travel time.
Her cleaning job was poorly paid, but at least it provided some income and a sense of
purpose. I thought her experience in a corporate environment would help her to secure
a new job, or at least an interview or two. But the reality is that there is an enormous
oversupply of low- and semi-skilled labour, and very few jobs available. A surprising
number of unskilled vacancies require a matric.
Registering with recruiters and applying for jobs also become expensive, with airtime,
transport costs, printing costs for CVs and registration fees adding up pretty quickly; more
so if you have no income. In theory, Busisiwe is entitled to unemployment insurance; in
reality, three months after losing her job, she is still being sent from pillar to post (with
more transport costs), and has yet to receive a cent.
Her experience forms one tiny data point of the story the World Bank tells in a recent
report on poverty and inequality in SA. The bank confirms what we already know: high
unemployment remains the key challenge for SA, and the country struggles to generate
enough jobs. The problem is worse if you’re black and female, unskilled, living in a rural
area, and from a poor background.
The prospects for eliminating poverty in South Africa by 2030 – the government’s
goal – will depend on economic growth and a reduction in inequality, the World Bank
says. Growth will be affected by the level of access the poorest groups have to economic
opportunities, as well as by fiscal redistribution, it says. Which is why Johan Fourie’s
column, on page 6, makes for a fascinating read. Referencing a recently completed US
study in North Carolina, Fourie makes a compelling argument for a basic income grant in
South Africa.
Such a grant would make a world of difference to Busisiwe in her attempts to fund her
job hunt and increase her skills. And, undoubtedly, for millions more. ■
In brief
10 News in numbers
12 Actuarial consulting gets a makeover
13 Why tin is making a comeback
Fund in Focus: Taking a bearish view on SA Inc.
House View: Combined Motor Holdings, MTN Group
Killer Trade: Kumba Iron Ore, Redefine Properties
Invest DIY: Long-term investing: Master the art of
doing nothing
Simon Says: Pick n Pay, Coronation,
Choppies, Tiger Brands, Tongaat Hulett, Clicks,
EOH, A2X, Purple Group
Global game-changers: A world without cash
Invest DIY: The danger of low-liquidity stocks
Investment: Sell in May and go away?
24 Debt: How to tackle it
In depth
30 Technology: Microsoft’s bet on a future in the cloud
34 Mining: Strong rand pummels debt-laden
On the money
39 Management: A message to those in the top job
41 Book review: Five business lessons from a winning
rowing team
42 Motoring: Topping a winning formula
44 Management: How to manage that person
on your team
45 Crossword and quiz
46 Piker
from the editor
6 Is this the solution to poverty?
8 China, US trade war to cost South Africa jobs
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By Johan Fourie
Is this the solution to poverty?
A long and healthy life, most would agree, is linked to things like access to water and sanitation, good education and
earning an income. But the conundrum is developing policy that can improve these for the poorest of the poor.
t educational attainment, and economic outcomes”.
he Holy Grail for development economists is to identify an
We know from earlier research that mental-health conditions, such
affordable policy intervention that will help the poorest
as attention deficit disorder, are more likely to affect poorer children.
escape poverty.
The authors concur: “We find that the children that start out with
We know that living a longer and better life is correlated
the most severe personality or behavioural deficits are the ones who
with many things: higher income from having a job, living in a house
exhibit the greatest improvements.” A universal cash injection, like
with clean water and sanitation, and access to better schools and
a basic income grant, is likely to have the largest impact on children
health facilities, to name a few. But the trouble comes when we try to
from the poorest households, improving personality traits and health
write policy to improve these things: which investment, given limited
outcomes even during their teenage years.
resources and political constraints, will most benefit children from
Such improvements in personality will have major
poor households? And why?
repercussions in adulthood. A large body of literature
A paper published in The American Economic
now shows that such traits are strong predictors of
Review in March by a team of economists and
finding a job, living in a good neighbourhood and
psychologists offers an answer. It uses a longitudinal
living a longer and healthier life.
unconditional cash transfer programme – the Great
Most remarkably, because the surveys also
Smoky Mountains Study in North Carolina – to
South Africans, a basic income grant of
included questions about parental health, the
examine how a cash boost for parents affected
authors could discuss potential mechanisms
children’s outcomes.
through which additional household income
Children from 11 counties were interviewed
affects child personality traits. They find that
annually from age nine until the age of 16. Their
per month – what is classified as the
the unconditional cash transfers resulted in “an
parents were interviewed at the same time. One
lower-bound poverty line by StatsSA –
improvement in parental mental health, the
subsection of these children are American Indians.
will require R509.4bn annually.
relationship between parents, and the relationship
These American Indian families began to receive,
between the parents and children in the treated
five years after the first survey, direct cash transfers
households”. A basic income grant may improve child outcomes in the
from the Eastern Band of Cherokee Indians tribal government as a
long run via the improvement in parental behaviours, stress reduction,
result of a new casino that came into operation. The cash transfers
and improvements in decision-making in the household.
were provided to all adult citizens of the tribe, regardless of their
A basic income grant is an expensive policy. A rough calculation
employment conditions, marital status, or the presence of young
reveals that, with 56m South Africans, a basic income grant of R758 a
children. This is substantially equivalent to a universal basic income
month – what is classified as the lower-bound poverty line by StatsSA
grant, a policy that is gaining popularity in academic circles.
– will require R509.4bn annually.
Because the surveys were initially undertaken for the purpose
This is a lot of money, but not impossible to find. We already spend
of collecting information about behavioural and mental health, the
R193.4bn on social protection, and another R66bn on social security.
authors have a lot of information about the children’s emotional
We pay R180bn on debt servicing, which can be reduced if we sell
and behavioural wellbeing at their disposal. Most importantly, the
government-owned assets and repay our debt.
surveys began before the introduction of the
A basic income grant will also help reduce the
unconditional cash transfer, so the researcher
reliance on free government services, such as
could compare the mental health conditions of
fee-free schools, and increase VAT income as
children in households who receive the transfer
consumption increases.
to those in households who never received it.
A basic income grant not only eliminates
This “natural experiment” is the closest thing
extreme poverty with the stroke of a pen, but
economists get to a laboratory experiment.
as the Great Smoky Mountains Study shows,
The results are remarkable. They show
it can drastically improve the emotional wellthat the increase in unconditional household
being and behavioural health of both children
income improves child personality traits,
and parents in our poorest communities, with
emotional wellbeing and behavioural health.
huge implications for their futures and that of
Because of the unique nature of their data,
the country. If we are serious about addressing the stark inequalities in
research can demonstrate that these improvements are for the same
SA, inequalities that help explain societal challenges like hopelessness,
child using the same measures over time. The formation of positive
crime, violence, and even populism, then a basic income grant is a
personality traits, like conscientiousness (doing one’s duties diligently
policy we can no longer afford to ignore. ■
and thoroughly) and agreeableness (being kind, sympathetic and
cooperative), is “crucial in determining long-term socioeconomic
standing and may also have strong effects on long-term health,
Johan Fourie is associate professor in economics at Stellenbosch University.
A basic income grant will also
help reduce the reliance on
free government services,
such as fee-free schools,
and increase VAT income as
consumption increases.
finweek 10 May 2018
By Peter Fabricius
China, US trade war to cost
South Africa jobs
New tariffs imposed by US president Donald Trump in the trade war between the US and China could
result in thousands of job losses in the steel and aluminium industries.
“ w
hen the elephants fight, the ants take a pounding,”
about 85% of the 1 333 Chinese products that the US targeted on 3 April,
said trade and industry minister Rob Davies in
“are intermediate inputs and capital goods, so the tariffs would damage
March about the rising tensions of a possible trade
American companies’ supply chains and competitiveness in making
war between the US and China.
goods and services to sell in the US and the world”.
He was sure that South Africa wasn’t in any country’s sights in such a
Van Staden says the upward spiral of input costs in a global trade
war. But it could suffer considerable collateral damage nonetheless.
war among economic giants would hurt SA likewise, mainly its vehicle
Trump fired the opening shots on 22 January by approving global
assemblers and other manufacturers.
safeguard tariffs on $8.5bn in imports of solar panels and $1.8bn of
Nedbank economists Nicky Weimar and Dennis Dykes warned on
washing machine imports. Then, on 1 March, he announced tariffs of
10 April that SA’s already faltering manufacturing production output was
25% on all imported steel and 10% on imported aluminium,
“particularly vulnerable to any further escalation in the trade war
on national security grounds.
currently raging between the US and China”.
On 2 April, China retaliated by imposing tariffs on
This could undermine an already patchy recovery of the
about $2.4bn of US imports of aluminium waste and
economy from a bad 2017. Inflation would then be pushed
scrap, wine, pork, fruits, nuts and other products.
up by a falling rand.
On 3 April, the Trump administration threatened to
The eventual impact on SA depends of course
slap a 25% import tariff on a further 1 333 Chinese
on whether the US-China trade war heats up. Some
products, worth $46.2bn, mainly machinery,
economists have warned of a severe global recession
mechanical appliances and electrical equipment.
or even depression, noting that it was America’s Smoot
Two weeks later, on 17 April, China slapped antiHawley Act of 1930, imposing heavy tariffs to try to save
dumping duties of 178.6% on sorghum from the US.
jobs, rather than the great stock market crash of 1929, that
The most direct harm to SA could come from Trump’s
plunged the US and the world economy into the Depression.
new import tariffs on steel and aluminium. Last year SA exported
Peter Draper, director of Pretoria-based Tutwa Consulting, doesn’t
about $375m (R4.7bn) worth of aluminium and $950m (R11.8bn)
think it will get that bad. He suggests that Trump and his Chinese
worth of steel to the US. The new tariffs would override the duty and
counterpart, Xi Jinping, could still sign a truce.
quota-free access that SA has to the US market under the Africa Growth
Trump is under growing pressure from agricultural groups, Republicans
and Opportunity Act (Agoa). The likely loss of those sales because of the
worried about this year’s mid-term elections, and others, to back off. But
steep new import tariffs would seriously damage a few
there is broader support for investment measures being drafted
A US-China trade war could
companies and cost thousands of jobs, Davies said. An
in Congress to tighten controls over Chinese investment in US
be good news for South
estimated 7 500 jobs in the steel supply chain alone
high-tech industries, and perhaps also controls over US outward
African wine, fruit and nut
are at risk.
investment in “sensitive” industries. Underlying this is a strategic
producers because of the
Aggravating the impact, the US has exempted
concern, shared by key US allies like the EU and Japan, about
Canada, Mexico, the EU, South Korea, Brazil, Argentina
China seeking to take the lead in the high-tech industries of the
future, Draper, says.
and Australia from the tariffs, giving them a huge
However the hardening ideological stance at the heart of
advantage over local manufacturers. SA tried to
the Trump administration, mirrored on the Chinese side by Xi’s
negotiate an exemption from the tariffs on the grounds
retaliatory tariff China
imposed on these US
‘”strong leader” projection and mobilisation of anti-US sentiment
that its exports represent such a tiny part of total US
around the “100 years of humiliation” narrative – are mitigating
imports, but did not succeed.
A US-China trade war could be good news for South
against a resolution.
African wine, fruit and nut producers, because of the 15% retaliatory tariff
The impact on SA depends on how these tensions play out.
China imposed on these US products, the Western Cape tourism and
“In a full trade war scenario, it is difficult to see how anybody wins.
investment agency Wesgro told Business Insider.
As the markets have been signalling, trade wars are bad for growth,
But Cobus van Staden, senior researcher on China-Africa relations
which would be bad for us. The bigger worry is that a sustained tussle
at the South African Institute of International Affairs, believes the
will undermine the WTO, and the foundations of the multilateral trade
order. It is already under enormous stress, not least owing to US
opportunities for local agricultural exporters would be small, in part
pressure on the dispute settlement system, but it could conceivably
because of our low yields. He believes the downside would be greater than
break in a worst case scenario,” says Draper.
the upside, largely because of the impact on manufacturing.
And that, clearly, would be a catastrophe for all. ■
In a world economy where products are increasingly made in global
supply chains, Trump is clearly shooting himself in the foot. The Peterson
Institute for International Economics in Washington has pointed out that
Peter Fabricius is a consultant to the Institute for Security Studies and a freelance foreign affairs journalist.
finweek 10 May 2018
in brief
Editor Jana Marais Deputy Editor Anneli Groenewald
Journalists and Contributors Simon Brown, Peter
Fabricius, Johan Fourie, Moxima Gama, Lloyd Gedye,
Mariam Isa, Marcia Klein, Glenneis Kriel, Schalk Louw,
David McKay, Melusi Tshabalala, Glenda Williams,
Amanda Visser Sub-Editors Stefanie Muller, MA
Farquharson, Joey Kok Editorial Assistant Thato
Marolen Layout Artists Tshebetso Ditabo, David
Kyslinger, Beku Mbotoli Senior Sales Executive Paul
Goddard 082 650 9231/ Marita
Schoonbee 082 882 7375/marita.schoonbee@ Sales Executive Tanya Finch
082 961 9429/ Publisher
Sandra Ladas
General Manager Dev Naidoo Production Angela Silver, Rae Morrison rae.
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finweek 10 May 2018
>> TREND: Actuarial consulting gets a makeover p.12
– PSG Wealth’s Schalk Louw on the tendency of market participants to
remove Naspers from their valuations in an attempt to justify market levels.
(See story on p. 22.)
– Mark Zuckerberg, Facebook’s chief executive, speaking
at Facebook’s annual developer conference in San Jose,
California, on 1 May, while announcing a slew of new products and technology
features, reported. “We have a responsibility to move forward on
what everyone else expects from us, to keep building in meaningful ways,” he said.
Facebook has been facing a number of scandals in recent months, particularly
around data privacy and the use of the platform to spread fake news and
manipulate elections. (Also see p. 33 on ways to protect your privacy online.)
“Bailing out SAA is financially reckless and
irresponsible. The scale of the amount of
money required is so gargantuan that it can
never be fixed and it will certainly never
be a going concern able to compete in the
world of modern aviation.”
– Leon Louw, executive director of the Free Market Foundation, comments
in an interview with Moneyweb following revelations that South African Airways
(SAA) urgently requires R5bn to continue operating, over and above a bailout of
R10bn it received in the previous financial year. According to Treasury, SAA needs
at least R20bn in order to break even by 2021. By comparison, it cost about R27bn
to construct the Gautrain system, according to Moneyweb. In the first nine months
of 2017/18, SAA reported a loss of R3.7bn, 71% above budget.
The FNB/BER Consumer Confidence
Index skyrocketed to an all-time high of
+26 points in the first quarter of 2018,
after hovering around -8 for most of
2017, FNB says in a statement. This
indicates that most consumers are now
optimistic about the outlook for the
economy and their household finances,
it says. Participants are asked about
their expectations on these matters
in 12 months’ time. The latest reading
surpasses the previous record high of
+23, which was reached in the first
quarter of 2007, when the economy
was growing at nearly 6%. It also
significantly surpasses the average since
1994 of +4, the statement claims.
Inland motorists in South Africa are
now paying R14.97 a litre for unleaded
95-octane petrol, a new record. The
price increase has been attributed to
rising international oil prices, as well
as the rand’s depreciation against the
dollar. Levies were also increased by
52c a litre in April, bringing the total
levies per litre to R5.33, or 36% of the
overall petrol price. The basic fuel price
is R6.45 a litre, according to the South
African Petroleum Industry Association,
with retail and wholesale margins,
storage and distribution costs making
up the rest.
Gallo/Getty Images
The Council for the Advancement of the
South African Constitution has accused
public protector Busisiwe Mkhwebane
of “watering down” a provisional report
by her predecessor, Thuli Madonsela, on
the Vrede dairy project, which saw state
funds diverted to pay for a lavish Gupta
wedding. Mkhwebane, who denies
wrongdoing, is accused of exonerating
ex Free State premier Ace Magashule
and then MEC for agriculture Mosebenzi
Zwane for facilitating the unlawful
project, Business Day reported. The
council’s case again raises questions
about Mkhwebane’s suitability for her
role following several scathing high court
judgments against her.
Apple launched a $100bn share-buyback plan
and increased its dividend by 16%, marking
the biggest increase yet in its capital returns to
shareholders, reports. Apple is adding
the $100bn buyback programme on top of
its existing capital returns programme, which
will have paid out $210bn by the end of June.
According to the report, it will pay out $13bn in
dividends a year. Apple says it wants to reduce
its net cash balance, which fell to $145bn by the
end of March, to zero over time. Revenue for the
three months to end March increased 16% yearon-year to $61.1bn, reports.
Oil prices have risen as high as $75 a barrel for
the first time in four years, on the back of strong
demand driven by a booming global economy,
and supply cuts by the Organization of the
Petroleum Exporting Countries (Opec) and
Russia, reports. Demand has increased
by more than 5m barrels a day, or more than
5%, in the past three years, with global oil
consumption expected to top 100m barrels a
day for the first time later this year. Analysts and
traders say that, despite the recovery in prices,
Opec and Russia are likely to limit supply for the
foreseeable future.
7 500
Businessman Christo Wiese, a major shareholder
in and former chairman of Steinhoff, through
entities in control of his family trusts, has
instituted claims to the tune of R59bn against
Steinhoff, Moneyweb reports. The amount
relates to two claims, according to Moneyweb:
the 2015 transaction that saw Wiese vend his
52% stake in Pepkor into Steinhoff, and the
subscription of shares Wiese entered into when
Steinhoff undertook a capital raising in 2016 in
order to fund the acquisition of Mattress Firm
in the US. The Wiese family started Pepkor in
Upington in 1965.
The US’s decision to reject South Africa’s
application for exemption from US President
Donald Trump’s import duties on steel (25% duty)
and aluminium (10%) may threaten about 7 500
steel jobs, Business Day reports. South African
steel and aluminium products are likely to be
displaced from the US market by products from
exempted countries like Canada, Mexico, South
Korea and those in the EU, because they would
be less competitive, the department of trade and
industry (dti) says. SA is a minor supplier to the
US, and imports therefore don’t threaten US jobs
or national security, the dti argues. (Also see p. 8.)
finweek 10 May 2018
By Glenneis Kriel
Actuarial consulting gets a makeover
Virtual Actuary has created a platform that allows its team members to escape the
rat race and be their own bosses.
fter working as an actuarial recruiter for more than eight
environment also seems to boost employee efficiency.
years, Adi Kaimowitz wanted to do something with the
Kaimowitz emphasises that the company is not a freelance
network of actuaries that he’d built up. He considered
platform where clients screen actuaries or publish jobs for which
actuaries have to pitch. It is an organised business, like any other
four business models, until he finally came up with one
actuarial consultancy: “We employ full-time teams headed by
that would appeal to him and actuaries generally.
actuaries with years of experience in their respective sectors.”
“Actuarial service is an advanced industry dominated by a handful
Getting actuaries on board was easy. “I think the industry was
of very big and a few boutique-type consultancies,” Kaimowitz says.
ready for a new type of actuarial consulting business and, in fact, the
“Professionalism and integrity are at the core of how the industry
encouragement and support from clients, thus far, have been beyond
operates. In both cases, the actuaries are salaried staff members who
what we were hoping for,” Kaimowitz says.
get a bonus at the end of the year should they reach particular targets.
The company started out with 20 actuaries and junior
The long hours and continuous stress of ever-increasing
actuaries and aims to eventually compete as a big
performance targets can get to most actuaries and
global consultancy. It is important that the juniors
possibly be associated with burnout. I realised what
are nurtured properly so that they develop into
was needed was a new remuneration model.”
competent actuaries and that the quality of
As a result, Kaimowitz and a group of
work is of the highest standard, Kaimowitz
actuaries launched Virtual Actuary in
says. Therefore the company did not want
January this year.
to grow too fast: “We have a 10-year plan
“We’re not saying that the old way
to be a major participant.”
of doing business is wrong,” he says.
Most of the members of the Virtual
“We are merely introducing a new
Actuary team have been working in
take on a consulting model. Instead
their respective sectors for many years,
of taking the bulk of the fees for the
and this has helped immensely with the
company, all our actuaries have been
sourcing of clients.
made share partners. Earnings made
“These actuaries come with an
doing a particular job are in effect shared
between the actuaries, while only a small
extensive network, which took years to
percentage is kept by the company.”
establish,” he says.
For those working for Virtual Actuary,
The company uses multiple channels to
it’s almost like freelancing, except that they
reach out to clients and have established a mini
benefit from being part of a bigger team in terms
franchise to support actuaries who are familiar with
of administration, marketing and resources. The
certain international territories.
Adi Kaimowitz is a founding
actuaries are able to write their own cheques based
“Possibly for the first time ever, there’s now a
member of Virtual Actuary and
part of the support and operational
on the number of assignments they do – some might
full team of actuaries ready to deliver on workflow
team of the company.
commit to work two hours a day, and others might opt
that could be very large. This is very empowering for
for a 50-hour week. The team leader
anybody wanting to take on a big client,”
assigns the work to staff based on these
Kaimowitz explains. “We’re able to split
the workflow, so we can have more than
Most of the work is done remotely,
one person working on a project while
from home, although some team
still keeping the fee reasonable.”
members might be based at client offices.
“The flexible work conditions are
Communication technology
especially appealing to mothers, who
The company benefits from
represent 13 of our 30 or so actuaries. It
communication technologies such as
is the idea of not having to sit in traffic
Zoom, Skype, Slack and Amazon Web
for an hour to get to work and being able
Services, allowing team members and
to be at home if your child is sick. It also
clients to work and share information
appeals to millennials and more mature actuaries who are looking for
from almost anywhere in the world.
more freedom in their career,” Kaimowitz explains.
Kaimowitz foresees the industry becoming more technologically
advanced over the next five or so years, allowing for even greater
efficiency. “Ten years ago, actuaries had to sit in front of a computer to
Starting up
work. These days they may be using four screens at a time, which makes
The company is a lean start-up, with no investors, running from
the work a lot easier and faster. Soon, they’ll be able to use virtual reality
profits generated through clients. Not having a centrally based
or augmented technology to consult even more efficiently.” ■
office space lowers overheads, allowing the company to offer more
competitive rates and higher earnings for employees. The more relaxed
Photo: Supplied
For those working for Virtual
Actuary, it’s almost like freelancing,
except that they benefit from being
part of a bigger team in terms
of administration, marketing
and resources.
finweek 10 May 2018
in brief in the news
By David McKay
Why tin is making a comeback
Tin is already used in the manufacture of cellphones, but demand is rising as new technology, including
electric cars, proliferates.
$35 000
$30 000
$25 000
Rapid demand
growth and rising
production costs
$20 000
Oversupply –
large Chinese
$15 000
$10 000
Resource depletion in
Indonesia and Peru
$5 000
Sep ’17
Mar ’15
Sep ’12
Mar ’10
Sep ’07
Mar ’05
Sep ’02
Mar ’00
Sep ’97
Mar ’95
Sep ’92
Mar ’90
Stock drawdown – lack
of new mine supply
Sep ’87
uring my interview with Anthony Viljoen,
CEO of Afritin Minerals, his phone rings. I
tell him he can take the call. “Don’t worry,”
he responds: “It’s a trader trying to buy
some tin from the mine.” Apparently, it doesn’t do to sell
metals too early to traders, especially if you want to get a
good price.
Afritin, a company listed in London, is hoping to
re-open the Uis mine in Namibia. The mine was formerly
operated by the steel manufacturer Iscor, but it’s been
closed for years. However, given the way the tin resource
is deposited – in discrete packages – it’s relatively easy to
operate open-cast mining operations. As a result, getting
into production is not the trial you may expect, particularly
compared to, say, re-opening an underground mine with
the steelwork, flooding and ventilation challenges.
Viljoen thinks the timing is good. The tin market is
facing a severe supply deficit and ownership of supply
is fairly concentrated, hence the interest of the trader
whose call was ignored, at least for now. If all goes well,
production on a pilot plant level will kick off in the second
half of this year.
Afritin is one of several exploration plays that are
making their way back into the purview of investors. It
isn’t listed in Johannesburg, but others are. Kibo Mining
is building integrated coal-to-power modules in Tanzania
and Botswana, while Orion Minerals is hoping to breathe
new life into the Northern Cape’s base metals industry.
Another is Tawana Resources,
a lithium development firm with
assets in Western Australia. It is
hoping to separately spin out an
exploration portfolio that includes
a prospect in Africa.
And then there’s Alphamin:
as with Afritin, it has recognised
in the primary tin concentrate
market a potentially significant
supply deficit.
According to Viljoen, the
commodity super cycle is alive and
well, notwithstanding the climb-down in commodity prices,
which ran from 2012 to about 2016. Since then, the market
for metals and minerals has both recovered, and changed.
Whereas industrial demand, mainly from China, previously
drove minerals and metals demand, the fresh impetus
behind the current super cycle is consumerism.
In addition to steel-feed minerals such
as iron ore and manganese, China wants more of the tin
that goes into transformers that, in turn, make mobile
phones work.
While this has long been the case, demand is growing
sustainably. Perhaps most importantly, supply can’t keep
pace. It’s the same for lithium and cobalt, which are used
SOURCE: Afritin
in the manufacture of electric vehicles.
Citing the Massachusetts Institute of Technology,
UK brokerage SP Angel singles out old-fashioned tin as
the metal tipped to be most exposed to new technology
from electric vehicles to robotics. Rio Tinto has cited an
interest in buying tin production, having sold nearly all
its thermal coal mines. If ever there was an indication of
how the super cycle has changed, that must be it: bulk,
unbeneficiated minerals swapped out for specialised
As for Afritin, Viljoen said the
company was looking for new
shareholders and, unlike many
juniors seeking to introduce
heavy-hitting institutional
investors, the company’s directors
are happy with retail interest in
the stock. He acknowledges, in
fact, that the UK listing wasn’t
ideal as Afritin’s assets were held
in Bushveld Minerals, the parent
entity that also has a UK listing
but which is focused on the development of vanadium in
South Africa.
“A lot of the shares went to Bushveld shareholders
and they have been sellers. I suppose there should have
been a restraint in place. [In addition to management’s
shareholding,] some 75% of the share register is made
up of four groupings, which leaves a free-float of about
15%. So now we are trying to bring in retail shareholders
through private client brokers in London. What’s helpful
about retail investors is they bring liquidity.
“We are seeing some generalist investors coming back
into the market and we think that’s a good thing.” ■
Some 75% of the share
register is made up of four
groupings, which leaves a
free-float of about
In addition to steel-feed
minerals such as iron ore and
manganese, China wants
more of the tin that goes into
transformers that, in turn,
make mobile phones work.
Anthony Viljoen
CEO of Afritin Minerals
finweek 10 May 2018
>> House View: Combined Motor Holdings, MTN Group p.15
>> Killer Trade: Kumba Iron Ore, Redefine Properties p.16
>> Long-term Investing: Master the art of doing nothing p.17
>> Simon Says: A2X, Choppies, Clicks, Coronation, EOH, Pick n Pay,
Purple Capital, Tiger Brands, Tongaat Hulett p.18
>> Global game-changers: Moving inexorably towards a cashless world p.20
>> Invest DIY: The danger of low-liquidity stocks p.21
>> Markets: Sell in May and go away? p.22
By Niel Joubert
Taking a bearish view on SA Inc.
The fund aims to grow retirement savings by meaningful, inflation-beating margins over the long term.
Fund manager insights:
South Africa Inc. shares re-rated significantly after Cyril Ramaphosa’s ANC
presidential election win, while the rand and government bondw yields also firmed
strongly, says fund manager William Fraser.
“These sentiment-driven outcomes are unsustainable,” he says. So the Foord
Balanced Fund has been cautiously positioned for some time.
“SA’s external deficit remains large, requiring funding by excess foreign investor
savings. The rise in US treasury yields puts this position at risk. South African
consumer shares are priced for sustainable earnings growth well beyond what’s
probably achievable, given SA’s low growth levels, muted real income growth and
falling disposable incomes,” Fraser says. “We therefore prefer non-SA growth assets
to SA Inc. shares and SA bond and cash assets for income yield.”
The fund is suitable for compulsory savers with an investment horizon of at least
five years.
Emphasising diversification and risk management and embracing economic
cycles to achieve superior long-term returns, the investment philosophy aims to
grow savings wealth in real terms across full investment cycles.
“Capital preservation during bear markets or major market dislocations is as
important as owning growth assets during bull-market cycles,” Fraser says.
At a stock level, the probability of future revenue streams is paramount in
determining value, and buying at the right price is crucial – paying too much
compromises future returns, he says.
Foord’s investment process is forward-looking with future revenue streams
forecast at least three years out. Portfolios are constructed by overlaying objective,
independent perspectives to test their composition.
“Balance is important – diversification is truly the only free lunch in investing. For
this reason, we don’t take a zero-one approach in building portfolios, irrespective of
the potential upside in a single theme or asset class.
“Foord’s philosophy therefore favours a more certain outcome with a lower
potential return over a less uncertain outcome that may deliver much better – or
worse – returns,” explains Fraser.
Fund managers:
The market value-weighted average total return of the
South African – Multi-Asset – High Equity unit trust
sector, excluding Foord Balanced Fund
Nick Balkin, Dave Foord, William Fraser and Daryll Owen
Fund classification:
South African – Multi-Asset – High Equity
Total expense ratio:
Fund size:
Minimum lump sum/
subsequent investment:
R50 000/R1 000
Contact details:
021 532 6969 or
RSA 10.5% (R186)
Foord Global Equity Fund
Foord International Fund
British American Tobacco
Capital & Counties
*finweek is a publication of Media24, a subsidiary of Naspers.
As at 31 March 2018:
■ Foord Balanced Fund
■ Benchmark
Why finweek would consider adding it:
1 year
finweek 10 May 2018
Since inception in September 2002
Foord has a long and successful track record of managing retirement-fund
portfolios. Foord aims to achieve returns that exceed inflation plus 5% per year
over any rolling five-year period.
The fund has outperformed its benchmark on an annualised basis over the past
seven-, 10- and 15-year time horizons.
The risk of capital loss is lower than of a pure equity fund, and in terms of
income, the fund has a medium yield – approximately double that of a general
equity fund. It’s also available as a tax-free investment account. ■
house view
By Simon Brown
Going full throttle
I first recommended Combined Motor
Holdings (CMH) a year ago and it has risen
almost 50% since then on the back of
excellent results that keep on coming.
Selling cars is a tough business, but CMH
is a master at the game, with an operating
margin of 4.2%. The stock is trading on a
historic price-to-earnings ratio of under 10
times and a dividend yield of around 5%.
South African vehicle sales have been
slow for the past few years and we’re starting
to see early signs of what could be a recovery.
Last trade ideas
Despite a period of falling sales, CMH
continued to improve profits and margins.
And the lack of spending on cars in South
Africa could result in pent-up demand for
new cars, which could add to the company’s
profit in future.
Perhaps the biggest risk is liquidity (also
see page 21, where I write about the risk of
low-liquidity stocks). The daily trading value is
modest, often with few buyers at current levels.
So buy carefully, don’t push up the price, and be
prepared to hold for the very long term. ■
Bowler Metcalf
26 April issue
Anchor Group
12 April issue
29 March issue
15 March issue
By Moxima Gama
Looking impressive once more
Gallo Getty Images/Pius Utomi Ekpei/AFP
MTN has been range-bound between 10 475c/
share and 15 650c/share since January 2016.
It started lifting off its key support in June 2016
and is now showing signs of further upside
within the consolidation phase of a potential
long-term bottoming-up pattern.
The mobile operator has seen significant
changes in leadership following the fine
imposed by the Nigerian regulator – initially
for $5.2bn – in 2015 after MTN failed to
remove more than 5m unregistered SIM
cards from its network in the West African
country, one of MTN’s largest markets. There
has been much progress since then, with
MTN saying it is ready to list its Nigerian unit
in Lagos by the end of the year “if market
conditions are appropriate”, Bloomberg
reported. The listing was one of the conditions
set by the regulator in 2015. MTN plans
to raise at least $500m from the sale of
shares, and could sell as much as 30% of the
business, Bloomberg reported, citing sources
close to the transaction.
In April, MTN was named the best mobile
network in South Africa after independent
network testing from MyBroadband and
P3 Communications, beating Vodacom for
the first time. This could help boost customer
numbers in SA, another key market for MTN.
The mobile operator and the pan-African
banking group Ecobank have also announced
a partnership to grow financial inclusion on
the continent by offering mobile money and
digital banking services to their users, Forbes.
com reported. The partnership will allow
Ecobank and MTN Mobile Money customers
to transfer money between mobile money
wallets and bank accounts, it said.
Last trade ideas
26 April issue
12 April issue
Exxaro Resources
29 March issue
Famous Brands
15 March issue
How to trade it:
Recently ending a near-term consolidation
between 12 075c/share and 11 060c/share,
I expect MTN to advance to 12 850c/share
at first and then head for a major resistance
level at 14 000c/share, where upside may
stall. Failing which, increase positions,
because upside to 15 640c/share should then
follow. A reversal below 11 805c/share would
extend the consolidation and possibly trigger
downside back to 11 060c/share. In this
instance, do not go long. ■
MTN advertising in the Maryland district of
Lagos, in Nigeria.
finweek 10 May 2018
marketplace killer trade
By Moxima Gama
A mere correction?
i ron ore miner Kumba is a major
exporter of high-grade ore
from its Sishen and Kolomela
mines in the Northern Cape.
Kumba fell to its lowest levels
at 2 490c/share between 2013
and 2015 after testing a high at
62 000c/share, with the decline
driven by falling iron ore prices.
The share then regained upside
at the beginning of 2016, surging
to 41 500c/share after breaching
major resistance at 23 130c/share
in September 2017, thanks to
higher prices and a rise in
production volumes and sales.
Outlook: Kumba retested a
key level at 40 500c/share and
closed a downward gap, which
occurred in 2014. After being
extremely overbought, it pulled
back within its bull trend in
52-week range:
R139.01 - R414.90
Price/earnings ratio:
1-year total return:
Market capitalisation:
Earnings per share:
Dividend yield:
Average volume over 30 days:
579 779
January as a corrective move.
It said in a production and sales
report for the quarter to end
March that total production
increased by 4% year-on-year
to 10.86m tonnes. Total sales
declined by 1% to 10.8m tonnes.
On the charts: Kumba is trading
in a wedge and has been holding
above the lower slope. Because
Kumba produces a single
commodity, its fortunes rest
SOURCE: Sharenet
largely on the price of iron ore.
How to trade it:
Go long: A positive breakout out of
the falling-wedge formation will be
confirmed above 30 460c/share.
This move would end the correction
and trigger upside movement back
to the 40 500c/share mark. Above
that level, Kumba could retest
49 280c/share.
Go short: The correction would
persist below 25 900c/share,
with downside potential to either
the support trendline of the
bull trend or the 20 215c/share
support mark. In this instance, go
short below 25 900c/share. ■
Set to test new highs
r edefine Properties is South
Africa’s second-largest
property group, with exposure
to retail, industrial, office and
student accommodation assets.
Its geographic footprint includes
SA, Australia and Poland.
Redefine has been trading
in a steady uptrend since 2007,
and only dipped to 805c/share
in 2015 after encountering major
resistance at 1 210c/share. It
managed to recover most of its
previous losses before gradually ranging in a channel with a
bearish bias.
Outlook: The group said in March
that domestic trading conditions
remained challenging, and that it
expected distribution per share
to grow by between 5% and
6% year-on-year in 2018. The
group’s interim results for the six
months to end February will be
released on 7 May.
finweek 10 May 2018
52-week range:
R9.66 - R12.17
Price/earnings ratio:
1-year total return:
Market capitalisation:
Earnings per share:
Dividend yield:
Average volume over 30 days:
12 621 160
On the charts: Redefine has
breached the upper slope of its
bear channel that commenced in
2016. Despite a tough operating
environment, Redefine has
continued to meet income
growth targets, thanks to a
diversified portfolio and its
endeavours to reduce leasing risk,
according to CEO Andrew Konig.
How to trade it:
Go long: A positive breakout was
confirmed above 1 130c/share.
But with the three-week relative
SOURCE: Sharenet
strength index (RSI) currently
trading in a symmetrical triangle,
trade has been range-bound.
We expect further gains once
the RSI has breached the upper
slope of its triangle.
Another buying opportunity
would be presented above 1 185c/
share, aiming for the all-time high
at 1 270c/share. Once defied, gains
to the 1 405c/share targeted mark
should follow.
Go short: A reversal through
1 130c/share could trigger panic
selling towards 1 060c/share.
Breaching that level would place
the 965c/share key level back
into the spotlight. ■
Moxima Gama has been rated as one of the
top five technical analysts in South Africa.
She has been a technical analyst for 10 years,
working for BJM, Noah Financial Innovation
and for Standard Bank as part of the research
team in the Treasury division of CIB.
marketplace invest DIY
By Simon Brown
Long-term investing: Master the art
of doing nothing
Profit is often created over years, or even decades. But it can be difficult to simply leaving your portfolio alone
over the long term. Especially when short-term events occur.
i met a long-time reader of finweek
recently. He is a self-confessed “oldtimer” who’s been investing locally
since the 1970s. He commented to
me that the hardest lesson he has had to
learn is that sometimes it’s best simply
to do nothing. He added that this lesson
still serves him well as he continues to
manage his portfolio.
I think this is absolutely true. The art of
doing nothing is important. Yet it is very
hard to do.
When we start on our investing journey,
we’re learning and absorbing information
consistently. Hopefully, we’re also having
fun as we progress. In truth, we never stop
learning. (Although the rate of learning
certainly slows at some point.)
But the problem is the never-ending
barrage of information that has intensified
in recent years.
It is not just the bi-annual release of
results from companies. We also have live
prices giving us constant feedback, as well
as expert opinions, social media and the
media generally all trying to interrupt us
as we strive to do nothing, tempting us to
react and transact. The market is trying to
suck us into action when our best response
is nearly always to take no action.
Sure, results are important, and we
need to read them. But you do not need
to be the first person to read them. The
abovementioned investor says he only ever
reads results on the weekend when he can
sit quietly with a printed copy and study
them at his leisure. He is refusing to be
pushed into making knee-jerk responses.
His comment on share prices was
equally illuminating, he said he checks on
the prices of his investments a few times
a quarter at most. The exception here is
when he is buying – then he does keep
a closer eye on the market. He uses SMS
alerts from his stockbroker for certain price
levels at which he may want to buy more of
a specific stock. Other than that, price is of
little concern to him as a long-term investor.
How to master the art of
doing nothing:
1. Accept that investing really is a longterm activity. Therefore you need to think
long term and not get suckered into taking
actions based on short-term developments.
Take a look at some of the star
performers over the past decade or two.
The share prices are likely well up over the
period. But if we take a closer look we’ll see
periods of either flat-lining prices and at
times falling prices. Yet, as we zoom out,
we see the long-term trend working in our
favour. Quality stocks don’t go up every day,
every week, or even every year. But over
decades they certainly do, and they offer
inflation-beating returns that create wealth.
Quality stocks don’t go up
every day, every week, or
even every year. But over
decades they certainly do,
and they offer inflationbeating returns that create
2. Create a routine for your long-term
investment portfolio. I wrote recently how
I dissect a new set of results (see How
to read company results in the 1 March
edition or visit
But take it a step further. When are
you reading the results? I very much
like the weekend idea as it offers
pressure-free time. When do you
update the investment thesis for a
particular stock you either own or
are interested in owning again, on
the weekend is ideal.
3. Know what you like about the
specific company you are invested in
and hence what will make you change
your mind about holding it. I have written
before about knowing the top three things
that attracted you to a particular stock
( and keeping this
list on hand when reviewing results.
In the end, the art of doing nothing is
very much the art of devising a process.
Come up with one that helps stop you
from responding in knee-jerk fashion, so
you can be a mindful and successful longterm investor. ■
finweek 10 May 2018
marketplace Simon says
By Simon Brown
The market loved the Pick n Pay results,
which showed turnover in the 52 weeks to
25 February increase by 5.3% year-on-year.
The retrenchment programme was included
in these results and the impact should be felt
this financial year. But I am going to beat my
old drum: the operating profit margin. At 2.2%
it remains pretty much what it was when
Richard Brasher took over as CEO in 2013 and
this was one area in which I expected to see
some improvement. Maybe I expected too
much too soon. But for now, on a price-toearnings ratio (P/E) of over 30 times, this
stock remains far too expensive for me.
for now
A weak asset under management (AUM)
from Coronation. Its AUM fell to R588bn after
being R614bn at the fund manager’s year
end in September, and R616bn at the end of
December. The market itself was not kind in
the first quarter, as it lost some 7%. Had the
AUM tracked the market, it would have been
around R573bn. But Coronation actively
manages its funds and the expectation is that,
first, it would get inflows and, second, generate
market-beating returns, both of which would
add to the expected AUM. But instead it
appears neither was achieved and after a good
start to the year, the share is pretty much flat
for 2018. A decent dividend yield pays to hold
the share, but it is concerning when AUM
shrinks. This will flow into weaker profit and
dividends. I suggested a buy back in October
and would continue to hold for now.
finweek 10 May 2018
Still decent
Choppies published its results almost a month
late after uncertainty about the “value of
inventory” and withdrew its trading update. I
was therefore concerned that the uncertainty
would lead to worse results – and although the
initial update said headline earnings per share
(HEPS) were expected to be higher by between
20% and 30%, they came in 19% higher. So
even though this is below what was a wide
range, it is still a profit and decent growth. The
company further states that “no material issues
were identified, and the additional procedures
did not result in any changes to the financial
results”. This is good news for shareholders, but I
continue to avoid this small food retailer, which is
operating in a highly competitive area, as it really
requires a large footprint if it is to get the true
benefits of scale – something Choppies is a long
way from achieving.
I continue to avoid this
small food retailer, as it
really requires a large
footprint if it is to get the
true benefits of scale.
Beware the
Tiger Brands has confirmed that the Listeria
monocytogenes ST6 type strain (LST6) was
present in its products and originated from
one of its production facilities. The market
seems unconcerned, however, as the share
is only trading some 10% off the levels it
was at before the recall of products linked to
the listeria outbreak. But what we have is a
potentially large unknown, because classaction suits are being filed. While many see
an opportunity, I am staying away, as I dislike
unknowns in my investing.
Wait for
My trade idea on Tongaat Hulett didn’t
work and I exited at break-even in October.
Tongaat’s latest trading update is ugly, with
HEPS expected to be down by at least 30%
with no lower end to the range. No mention
of property or starch is made in the update,
so sugar seems to be the problem as imports
hurt prices. This is driven by a global sugar
price that peaked in October 2016 but which
is now almost 50% lower. This will correct as
production is removed due to the lower
prices. And, locally, Tongaat is getting some
import protection from the government. Both
of these steps will help in time. Results are due
late in May and will be worth a closer
look, because maybe Tongaat is starting to
offer value.
Gallo Getty Images
Still too pricey
Investment website’s
founder and director, Simon Brown, is
finweek’s resident expert
on the stock markets. In this column
he provides insight into recent
market developments.
Images: Shutterstock
stock tips
marketplace Simon says
An amazing business with a top-notch
management team – but still very
expensive on a P/E of around
Keep an
eye on P/E
The Clicks results once again showed great
operational leverage, with revenue up 10%,
diluted HEPS up 14.8% and the dividend
increasing 16.5%. An amazing business with a
top-notch management team – but still very
expensive on a P/E of around 36 times. The
market is undaunted by this sky-high P/E, as
the share trades at all-time highs, but I can
(and am) buying Shoprite* on a P/E of some
23 times. Fully a third cheaper and, compared
to Pick n Pay and Clicks, with an operating
margin more than double the former.
Wait for the
dust to settle
The EOH share price continues to fall even as
unverified news stories are withdrawn. Below
4 000c/share at the time of writing on 30
April, the share is back at 2013 levels. I have
written before about how EOH’s business
model is under threat because it requires,
in part, the issuing of new shares – shares
which few, if any, sellers would be happy to
take instead of cash. But we’re also seeing a
confidence issue, especially after the vote at
the annual general meeting (AGM). The falling
share price is also spooking investors and
many people have asked me whether it is time
to buy. The answer is no. Wait for the dust to
settle and the price to start moving higher.
to JSE
Sanlam has listed on the new A2X exchange
– the seventh listing in the six months the
exchange has been in existence. This is
a significant milestone, because Sanlam,
with its market cap of some R180bn, is a
solid Top40 stock with daily value traded of
hundreds of millions, and at times billions,
of rands. For now, pretty much all trade is
going via the JSE, but this will start to shift.
It shows that A2X is a serious competitor to
the JSE and will take some of its revenue –
and hence profit. This will be a slow process,
however. My broker, for example, does not
offer me access to A2X as yet. But as an
investor, costs are an important consideration
and if I could buy the same share on different
exchanges, I would most definitely buy on the
cheaper exchange. The JSE has been working
to reduce costs, but in time the arrival of A2X
will see it making less money, although it will
still be a very profitable business. However,
valuations have to consider the JSE losing
perhaps as much as 15% to 20% of its
volumes to the new exchanges.
Purple Group, owners of 70% of Easy Equities,
published results for the six months ending
February. With just under 60 000 funded
accounts, the low-cost brokerage is still losing
money – but the losses are getting smaller as
Easy Equities manages to sign up more active
accounts, and Purple’s Satrix partnership
grows even faster than Easy Equities. The
other Purple businesses, Global Trader and
Emperor, continue to struggle as competitors
steal their lunch from them. Easy Equities has
no real competition in the no-frills, discount
brokerage space and the results show
operating cost per client reducing (almost by
half), while revenue per client has increased
some 10%. With most operating costs being
fixed, increasing numbers of active clients
will see this leverage effect continue. I expect
Easy Equities to break even when it has some
100 000 to 120 000 accounts. With almost
R190m in cash, Purple has a decent war chest,
but it also has challenges. Getting to breakeven seems likely within the next two years
(maybe three). But growing to meaningful
profit will be hard, and will require the troubled
Global Trader and Emperor to start kicking in
some decent profits. As an industry, we need
this low-cost proof of concept to succeed, but
as an investor, I would rather adopt a waitand-see approach. ■
*The writer owns shares in Shoprite.
finweek 10 May 2018
marketplace global game-changers
By Mariam Isa
A world without cash
In developed countries, consumers are increasingly comfortable with a shift towards cashless payments. But critics
point to possible problems with hacking, invasion of privacy, and limited access to the internet.
t bank. In total, coins or banknotes are only used in 1% of all payments in
he concept “cash is king” is rapidly becoming outdated in modern
Sweden – even casinos only use cards.
economies, with many governments, financial institutions and
Most of the country’s banks no longer allow
businesses speeding up the transition to a
customers to withdraw or pay cash over the
society in which cash will be obsolete.
counter, and Eurostat figures show that 85% of
Sweden, Canada and the UK are nearing the
Swedish people between the ages of 16 and 74
point where cards, digital bank transfers and
banked online in 2017, compared with 68% in the
cellphone payments have replaced the use of cash.
UK and an EU average of 51%.
France, the US, China, Australia and Germany are
Public transport systems in many modern cities
moving rapidly in that direction, too.
– including London – no longer handle cash, using a
Supporters of the trend believe that using other
system of “contactless payments” instead, where a
means to pay for products and services is more
chip embedded in a credit or debit card can be waved
efficient, safer, and completely transparent – leaving
over the point of sale to pay for a journey without the
a digital record that will make money laundering and
use of WiFi.
tax evasion much more difficult.
In China, however, most people who access the
But critics point out that enabling companies and
internet do so using smartphones and have little
governments to track every individual transaction
use for credit and debit cards. People in big
will rob people of their privacy and generate the
urban centres rely on mobile wallets created
kind of data that can be used for nefarious
by China’s dominant online giants, Alibaba
purposes – as was the case with Cambridge
and Tencent, to pay for anything from
Analytics’ use of Facebook data in US
hospital appointments to taxi fares and
elections and the Brexit vote.
market produce.
They say cash theft is being replaced by
Even beggars reportedly accept money
fraud and computer hacking, while phones
through Tencent’s WeChat, or QR codes
and cards can also be stolen. Governments
linked to payment accounts.
with access to payments data in countries
The United Nations Capital Development
where people use phone apps for most of
Fund hosts the “Better than Cash Alliance”,
their payments can, for example, disrupt major
a group of governments, international
protests by ordering companies not to process
organisations and companies that intends
payments from any phone in the area of unrest.
to speed up the transition from cash to digital
Critics also argue that the elderly – many of
payments, in the belief that this will increase the number
whom do not use the internet – will struggle, and
of people included in the formal financial system and give
that millions of poor, unbanked people will eventually
them access to credit and savings accounts.
become even more marginalised.
In Europe, cash transactions
However, it appears that although many individuals
Research from the World Bank’s Global Findex
will amount to only
in developed countries are keen to adopt new payment
database shows that 1.7bn adults – mainly in the
technologies, they are reluctant to give up the option of
developing world – still cannot access a bank account or a
using cash. A survey by Swedish polling firm Sifo in April
mobile money provider.
showed that seven out of 10 Swedes still wanted to be
Even in the US, an estimated 16m adults are unbanked
of all payments by 2020.
able to pay with cash in the future.
and another 24.5m are underbanked, meaning that they
Sweden’s central bank, the Riksbank, is also cautious,
rely on services such as payday loans, cash advances, and
saying that while transformation of the country’s payment
other “alternative” products.
infrastructure is “essentially positive”, it has to take place “at a rate that
Nonetheless, the march to eradicate cash is gathering momentum.
does not create problems for certain social groups or exclude anyone from
The consulting firm Capgemini has estimated that electronic payments
the payment market”.
will grow by about 10.9% a year between 2015 and 2020 and forecasts
And few advocates of a cashless society appear to have considered
that in Europe, cash transactions will amount to only 0.5% of all
that, without electricity and the internet, the whole payments system
payments by 2020.
would collapse. ■
A growing number of retail outlets in cities from New York to
Stockholm and Beijing no longer accept cash, to the consternation of
tourists from less tech-savvy countries.
Mariam Isa is a freelance journalist who came to SA in 2000 as chief financial correspondent
for Reuters news agency after working in the Middle East, the UK and Sweden, covering
Only a quarter of the people in Sweden say they use cash at least
topics ranging from war to oil, as well as politics and economics. She joined Business Day as
once a week and the proportion of cash transactions in the retail
economics editor in 2007 and left in 2014 to write on a wider range of subjects for several
sector has plunged to 15% from 40% in 2010, according to the central
publications in SA and in the UK.
In China most people
access the internet
using smartphones
and have little use for
credit and debit cards.
finweek 10 May 2018
marketplace invest DIY
By Simon Brown
The danger of low-liquidity stocks
Private equity is not for sissies – and has much in common with low-liquidity stocks, argues Simon Brown.
i often mention that buying a low-liquidity stock is
like investing in private equity. I want to expand on
private equity and how and why it works. We’ve also
seen two new listings planning to come to the JSE
via private equity – Libstar and Consol, with the last
cancelling its listing towards the end of the April.
Public equity
The first distinction to be made is between
private and public equity. Public equity
is exchange-listed stocks, therefore
those we’re buying on the JSE.
Aside from the extra layer of
protection afforded us by the
JSE’s listing requirements,
we also get liquidity and
price discovery.
Liquidity is important,
and typically a liquid
listed company will trade
at a higher valuation
than the same company
that’s not listed. This is
because being able to turn
an investment into cash is
an advantage; sure, we’re longterm investors, but the ability to
buy or sell with ease still matters.
Private equity
Private-equity companies are much harder to transact
in. Imagine if we owned a local business. Selling it would
be an arduous and expensive process, taking potentially
months coupled with large agent fees. Buying would be
equally hard and expensive.
Also important is that
large volumes of stock
trading on the JSE help
create price discovery – in
other words, a generally
agree on price for the stock.
Now we can argue that a
particular stock is expensive
or that the market is ignoring
it. But the market is the
consensus, and if it disagrees
with us, we either walk away
(if it’s expensive) or back up our truck to buy loads (if we
consider it cheap).
Private equity has none of this price discovery
because it lacks liquidity, so it’s impossible to determine
a fair value. And this is why I often refer to low-liquidity
companies as private equity. The difficulty in buying and
then selling it is in itself a problem, but it also means we
do not have efficient price discovery, and we therefore
need to be careful.
A large private-equity company often starts life
as a listed company, with Consol having spent a long
time listed before private-equity managers took it
private. Generally, one expects private equity to
be buying out and delisting JSE stocks
during discounted market prices, but
sometimes they get this wrong, as
in the case of Edcon.
Private-equity managers
use debt to buy the company
and put much of that debt
back into the company,
using the company’s
profits to pay it off. If this
works well, they then
relist the company (still
with some debt) using
a high valuation, getting
two profit windfalls. Firstly,
by buying cheap (mostly)
and selling expensive. But
also by using the company’s
profits to pay off its own debt.
As we’ve seen with Edcon,
this doesn’t always work if the debt
overwhelms the company, but it’s a great
profit generator if it works as planned.
But private equity is not for sissies. I tried a few
unlisted private-equity-style investments way back in
the day, and regardless of the quality of the company I
was buying, I never saw the profits I had anticipated.
This is also why I referred
above to some listed stocks
being almost as if they’re
private equity. Low liquidity
means inefficient price
discovery, which can work to
our advantage but it also adds
risks when we buy and sell.
Our buying can push
prices higher, and selling can
send prices lower, but even
more scary is that there may
not be sufficient buyers or sellers for us to transact.
So be careful of low-liquidity stocks. Only buy when
they truly are the best and you’re happy holding on to
them for the really long term. ■
I tried a few unlisted privateequity-style investments way
back in the day, and regardless of
the quality of the company I was
buying, I never saw the profits I
had anticipated.
finweek 10 May 2018
marketplace investment
By Schalk Louw
Sell in May and go away?
Following this market axiom could end up costing you in the long term.
lthough we’ve survived the first
Friday the 13th of the year (it
fell in April), we’ve already been
overtaken by another apparition
that makes an annual appearance: The
ghost of May. “Sell in May and go away,” they
say. This expression can be found in many
headlines, articles and on social media every
year, and every year I have shown that Maysellers have had little success over the past
two decades when following this trend. So
what should you do? Should you be worried?
We are all aware that share prices and
markets move up and down. But when we
examine these trends in Graph 1 based on
the FTSE/JSE All Share Index (Alsi) over
the longer term (and by longer term, I mean
decades), two things become clear:
First is that the general trend is upwards.
Stock markets are trading higher today than
they were 10, 20 or 50 years ago. In fact,
the Alsi managed to deliver an average of
inflation plus 8.4% in annual returns over the
last 20 years, despite the fact that we were
on the verge of a massive correction 20 years
ago, and actually experienced an even bigger
one 10 years later.
Second, this upwards trend hasn’t all been
one-way traffic: it has come with its share
of potholes. These potholes, or drops in the
market, are also known as market corrections.
61 000
50 000
Stock markets
are trading higher
today than they
40 000
30 000
20 000
12 000
10 000
8 000
6 000
4 800
4 320
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '10 '11 '12 '13 '14 '15 '16 '17 '18
years ago.
Mean = 15.9049
Standard deviation = 2.88724
'03 2004 2005 2006 2007 2008 2009 2010
2014 2015 2016
2017 '18
Gallo/Getty Images
Is the market cheap or not?
Although valuations are looking much better
now, the market as a whole isn’t really cheap,
and at its current price-to-earnings ratio
(P/E) of 18.4 times is still trading
comfortably higher than its
20-year average of 15.3 times.
Many will be eager to
point out that Naspers*
is a massive part of the
index, trading at a P/E
of 87 times all on its
own. Increasingly, people
have taken to excluding
Naspers from their
valuations in an attempt to
justify market levels.
It doesn’t matter how you look at it,
though, because Naspers remains a part of
the index: excluding it is like trying to build
a bicycle without wheels. As an alternative, I
finweek 10 May 2018
would suggest using the FTSE/JSE All Share
Limited Index (J303), which contains the
same shares as the Alsi, but caps all of them
at a maximum of 10% weight per
share. But even when Naspers
is limited to 10% weight, the
market still trades at a P/E
of 17.6 times (see Graph 2).
Sell in May and
go away?
I always enjoy testing
the success of this wellknown market expression
and this year is no exception.
Investors may have had some
success twice in the last three years if they
had followed this trend, but quite a different
picture emerges once we analyse the data
over a longer period. If you had managed
to make average-priced sales every May
for the past 20 years, you would have been
disappointed to discover that in 75% of the
Decembers of those years, markets actually
traded higher than in May. In other words,
the May bears were only correct a quarter of
the time.
The bottom line is that although the
market isn’t priced cheaply, and although we
can’t exclude the possibility of a correction
due to the rising tensions between the US,
China, Russia and North Korea, it remains
of the utmost importance that you stay
disciplined when it comes to your longterm asset allocation. Don’t give in to your
emotions. Remain focused on the positive
trend of the longer term. ■
Schalk Louw is a portfolio manager at PSG Wealth.
*finweek is a publication of Media24, a subsidiary of Naspers.
marketplace directors & dividends
23 April
25 April
23 April
Exercise Options
26 April
23 April
Exercise Options
26 April
23 April
Exercise Options
26 April
23 April
Exercise Options
26 April
South Ocean
23 April
Exercise Options
26 April
23 April
Exercise Options
26 April
23 April
Exercise Options
26 April
Adrenna Property
23 April
Exercise Options
26 April
23 April
Exercise Options
26 April
K Wheaton
27 April
2 May
NT Madisa
26 April
30 April
AP du Plessis
23 April
Exercise Options
2 May
AP du Plessis
26 April
2 May
R Napier
24 April
26 April
M Teke
African Dawn Capital
Kore Potash
Group Five
R Napier
24 April
26 April
DJ Pretorius
24 April
25 April
X Guan
26 April
Exercise Options
30 April
MV Ramollo
24 April
30 April
MV Ramollo
25 April
30 April
JP Mouton
23 April
Exercise Options
25 April
W Fitchat
24 April
Exercise Options
26 April
W Fitchat
24 April
26 April
W Fitchat
25 April
Exercise Options
26 April
W Fitchat
25 April
26 April
MZ Mkhize
24 April
25 April
L Norval
24 April
26 April
L Norval
24 April
26 April
M Breeden
26 April
Exercise Options
2 May
DA Fischel
26 April
Exercise Options
2 May
58 252.12
17 834.22
75 898.36
21 237.70
51 419.21
H Ford
26 April
Exercise Options
2 May
CAC 40
552 050
S Marsden
26 April
Exercise Options
2 May
1 261 211
G McKinnon
26 April
Exercise Options
2 May
FTSE 100
T Pereira
26 April
Exercise Options
2 May
750 930
3 080 845
M Roberts
26 April
Exercise Options
2 May
D Sangar
26 April
Exercise Options
2 May
J Wilkinson
26 April
Exercise Options
2 May
A Ahern
26 April
26 April
26 April
26 April
N Gudka
26 April
26 April
26 April
26 April
26 April
26 April
ED Hertzog
8 January
30 April
ED Hertzog
10 January
30 April
MR Sorour
13 March
30 April
TSB Jali
18 April
26 April
RH Field
20 April
Exercise Options
26 April
S Rosenthal
24 April
25 April
A Daehnke
MC Olivier
24 April
23 April
30 April
24 April
All data as at 17:00 on 2 May 2018. Supplied by IRESS.
2 246 787
*Percentage reflects the week-on-week change.
DY (%)
finweek 10 May 2018
cover story debt
By Amanda Visser
South Africa’s credit-active
consumers have R1.7tr in
combined debt. The experts
explain how to get out of
the red, and how to avoid
taking on bad debt.
finweek 10 May 2018
cover story debt
outh African consumers are
under increasing financial
pressure due to high
unemployment and increases
in living expenses such as for transport,
utility bills, food and the VAT rate. As
a result it has become a challenge to
manage and pay off debt.
Data from the National Credit Regulator
(NCR) shows that total consumer credit
was R1.71tr at the end of March last year,
up from R1.66tr in 2016. This is equal to
more than 40% of South Africa’s GDP. The
14 registered credit bureaus have records
for almost 25m credit-active consumers,
with nearly 40% of consumers having
“impaired records”, according to the NCR's
2017 annual report. In 2016, there were
nearly 24m credit-active consumers, of
whom 40% had “impaired records”.
Most people fall into a debt spiral
because of unforeseen circumstances.
This, warns the NCR, may include medical
expenses, a divorce, losing one’s job, not
saving enough or income not keeping up
with increased costs.
Then there are some “foreseen
circumstances” that can be avoided, but
often are not. These include uncontrolled
gambling habits and poor money
management, the regulator says.
Reinhard Pettenburger, CEO of Debt
Therapy and chairman of the Debt
Counsellors Association of South Africa in
the Western Cape, says clients who have
managed to keep up with their renegotiated
debt repayments for many years are
now struggling to maintain their monthly
instalments in debt review.
He says his firm has had to renegotiate
some of the agreements with banks
because people are simply unable to make
ends meet.
Below, a number of experts provide
advice on how to manage and pay off your
debt, and what to do when you’re in over
your head.
How much debt can you handle?
Niel Fourie
Public policy actuary at
the Actuarial Society of
South Africa
The 14 registered credit
bureaus have records for
almost 25m credit-active
consumers, with nearly
of consumers having
“impaired records”.
Reinhard Pettenburger
CEO of Debt Therapy and
chairman of the Western Cape
branch of the Debt Counsellors
Association of South Africa
Niel Fourie, the public policy actuary at
the Actuarial Society of South Africa, says
there are some general rules of thumb to
determine how much debt one can take on.
Although the decisions may vary from
person to person, he advises people not to
spend more than 30% of their income on
a mortgage bond, as this is generally the
largest chunk of household debt.
“It is important to draft an honest
budget and carefully look at your current
spending patterns and what your current
income is,” he says.
Fourie advises that one allows for an
“expense buffer” for unforeseen expenditure
such as medical expenses or a car that
breaks down or gets stolen.
The minute you find that you are unable
to service your debt, the trouble starts.
If you are in the unfortunate position of
having to sell your house at short notice,
you might find yourself being in an even
worse situation.
For example, in the financial crisis of
2007/08, many people were forced to
sell their homes. But because of market
conditions at the time, many consumers still
had outstanding debts, even after selling
their homes.
finweek 10 May 2018
cover story debt
Honest budgeting is also important,
because many credit providers still offer
more credit than what people can afford.
“Do not fall into the trap of buying
things you do not need to impress people
you do not even know,” says Fourie.
Good debt versus bad debt
Debt is normally considered “good” when
you use it to obtain an asset that increases
in value over time or has “incomeproducing capacity”, explains Fourie.
A study loan (income-producing
capacity) or a mortgage bond on a
property (increased value) is generally
considered good debt.
Some people consider vehicle financing
“good debt” if it has income-producing
capacity, but Fourie is not convinced.
Because a car depreciates in value, this
kind of debt cannot really be considered
good, he argues.
“Anything where you have to finance
spending, such as short-term loans for
a holiday, or for clothes, is considered
bad debt. If you start using loans and
credit cards to fund your lifestyle, you are
on a treacherous path. It might lead to a
debt spiral. That is a difficult space to be
in,” warns Fourie.
Soré Cloete
Senior legal manager at
Old Mutual Personal Finance
“If you start using loans
and credit cards to fund
your lifestyle, you are on
a treacherous path.”
South African urban households seem
to have lost some of their appetite for
personal loans.
The 2017 Old Mutual Savings and
Investment Monitor, released in July last
year, shows that the number of people
from working metropolitan households
who took out personal loans from
financial institutions dropped from 21%
in 2016 to 14% last year. The portion of
income used to service debt remained the
same, at 16%.
Garnet Jensen, senior director at
TransUnion, says the type of debt in
a consumer’s portfolio is a very important
Debt can be broadly broken down into
secured and unsecured debt. Secured
debt is a loan that is granted against an
asset, usually a house or vehicle, which is
used as collateral against the loan.
“Simply put, if the borrower does not
honour his debt repayments over time,
the lender can seize the asset and sell it to
recoup their money,” he explains.
The interest rate on this type of debt
depends largely on the credit rating of an
individual; the more creditworthy a person
is, the lower the interest charged.
Unsecured debt, such as credit cards
How to get out and stay out of debt
There are spending habits you can control and strategies you can follow to stop digging yourself into a hole.
When people find themselves in a debt spiral,
they should start their recovery by talking to
their credit providers to try and renegotiate the
terms and period of repayment.
If all feels lost, it may be a good time to reach out
to a registered debt counsellor who will be able to
guide you on the way forward.
Soré Cloete, senior legal manager at Old Mutual
Personal Finance, says the first step is to see where
your debt is and what you can pay off first.
The most obvious debt is to be found on credit
cards and through personal loans because of the
high interest rates charged.
“You do want to have good debt such as a home
loan or a student loan because that is how you
finweek 10 May 2018
accumulate wealth. Once you have gotten rid of
your bad debt, which influences your credit score,
you may even approach your credit provider or bank
for better rates on your home or student loans.”
Cloete warns that credit providers will consider
your spending patterns over a period of time. Once
you have got rid of your bad debt, you can certainly
try to renegotiate the interest rate on your good
debt, but it will not happen overnight.
Only enter into debt when you can afford it. If
you cannot afford a new pair of shoes, do not give in
to impulse spending.
Cloete says that if you cannot afford to
repay debt, think twice about putting another
person at risk by asking them to take credit on
your behalf. Their problem is eventually going to
become your problem.
The basic principle of a monthly budget is
echoed by both Cloete and Garnet Jensen, senior
director at TransUnion, and was popularised
by US senator and former Harvard professor
Elizabeth Warren in her book All Your Worth: The
Ultimate Lifetime Money Plan.
The 50/20/30 budget rule divides after-tax
income into spending of 50% on needs, 30% on
wants and allocating 20% to savings.
Needs include rent or mortgage payments,
car payments, groceries, insurance, healthcare,
minimum debt payment and utilities.
Wants include dinner and movies out, a new
cover story debt
and personal loans, does not have the
backing of assets to serve as collateral: “If
the borrower defaults, the credit providers
have to implement legal action, which
can be lengthy and expensive with no
guarantee of success.”
Jensen says this type of debt usually
comes with a higher interest rate to
ameliorate the risk of the loan. If people
have more unsecured debt in their
portfolio, they are classified as “high risk”
when applying for more credit.
“Credit providers are compelled by the
National Credit Act [NCA] to perform
affordability assessments when granting
or extending credit and the act has
certain minimum prescriptions in this
regard,” Jensen explains.
Not only is the consumer’s credit
report and credit score taken into
account in the assessment, the debt-toincome ratio is also considered, as well as
the credit provider’s ability to collect the
debt in terms of the debt-to-asset ratio.
Consumers can determine their debtto-asset ratio by dividing their total debt
by their total assets. Simply put, this ratio
shows how many of one’s assets one will
have to sell to cover the cost of the debt.
“The right ratio is more complex to
handbag, and holidays.
Savings include adding money to an
emergency fund in a bank savings account,
making retirement annuity contributions or
investing in equities.
Savings can also include debt repayments.
While minimum payments are part of the
“needs” category, any extra payments reduce
principle and future interest owed, so they are in
fact savings.
The 50/30/20 rule of budgeting can help
to keep spending in check. If spending in one
category seems to be “abnormal” – such as for
clothing or entertainment, find ways to reduce
spending in those categories. ■
ADDITIONAL SOURCES: The 50/30/20 budget rule – Investopedia
These factors are considered
when credit bureaus calculate your
credit record.
Credit scores are used by credit providers
to determine the amount of credit to offer a
consumer, and on what terms.
A consumer’s credit score is calculated
by a credit bureau based on a person’s credit
report. The bureau considers how a consumer
pays their bills, how much debt they have and
how all of that compares to other creditactive consumers.
Each bureau has a different way of
calculating the score. They take into account
different forms of information, including
information their organisation already has
on you, or your employment circumstances.
Major credit bureaus like TransUnion and
Experian provide a free credit report once a year;
consumers are advised to check their reports
and immediately query any possible errors.
Reinhard Pettenburger, CEO of Debt
Therapy and chairman of the Debt Counsellors
Association of South Africa in the Western Cape,
says one factor that may affect your credit score
is the number of searches companies and banks
have made because of multiple applications for
credit or store cards.
“The thinking is that you have been trying
everyone and everywhere to get credit, but you
were not successful. If you were successful
there would only have been one or two
searches. This increases your risk and reduces
your credit score.”
Another factor affecting consumer’s credit
score is how long they have been in the same
job and at the same address. Credit providers are
looking for stability in consumer behaviour.
The record also shows on which accounts
payments were made late, and for how long
accounts have been in arrears. The consumer’s
credit record also reflects default judgments.
Derick Cluley, head of international analytics
company FICO’s Africa operations, says the
single most important component of the credit
score is the payment history, which makes
up 40% of the total score. Late payments will
reduce one’s credit score.
A high score means the consumer has a
healthy credit record. It will make it easier to
borrow money at a lower interest rate. ■
determine, as it depends on a number of
factors like the type of debt and life stage
of the individual,” says Jensen.
However, if your debt is significantly
higher than the value of your assets, you
will be considered a risk to creditors.
Soré Cloete, senior legal manager
at Old Mutual Personal Finance, says
consumers should avoid using credit on
“unnecessary items” and instead pay
cash if they can afford it.
“Close unused credit accounts that are
fully paid. Forgotten retail debt can have
a negative impact on your credit record.
Also avoid using one credit card to pay off
another credit card. This is not paying off
debt. It is merely delaying repayment and
attracting more interest,” Cloete says.
Fourie notes that although there is
a cap on the minimum and maximum
interest rates credit providers are
allowed to charge, these institutions
still find ways of making money. Many
try to make up the “interest cap” by
charging more for insurance or upping
management fees.
There are several measures available
to consumers who have fallen into a debt
spiral. But ignoring the matter is not one
of them.
Do not ignore your debt.
Prioritise and pay your debt.
Avoid borrowing to pay off debt.
Cut down on your expenses.
Never skip repayments when
under debt review.
6. Prioritise your home loan.
7. Always act on a letter of demand.
8. Approach credit providers when you
cannot pay your debt.
9. Seek help from a debt counsellor.
10. Plan to save money every month.
finweek 10 May 2018
cover story debt
Getting out of a debt spiral
If you have additional funds available and
are looking to pay off your debt sooner,
you should aim to first pay off the debt
that carries the highest interest rate,
says Jensen.
This is unsecured debt such as
credit cards and personal loans. Many
store cards, such as clothing accounts,
for example, have interest-free credit
windows. Try to pay off the total bill within
this period to avoid interest charges.
“Do not spend more on the card
before you have paid off the total, and
avoid extending your payment period,”
advises Jensen.
Cloete says it is advantageous for
consumers to pay more than their
monthly instalment amount. This will
reflect positively on their payment history.
Consolidating debt
Consolidating one’s debt offers consumers
the opportunity to take out one large loan
to cover several smaller loans – it simply
Debt counsellors
are under a legal
obligation to disclose
the full cost of debt
restructuring upfront.
It is important to shop
around as not all debt
counsellors’ fees are
the same.
means that all your debts are consolidated
into one lump sum, says Jensen.
“It might sound counter-intuitive,
but if used wisely, consolidation can be
an effective way to get yourself out of
unmanageable debt.”
Consolidated loans are usually longerterm loans that come at a lower overall
interest rate and have lower monthly
instalments. However, because they are
longer-term loans, it may mean consumers
end up paying more.
Furthermore, Pettenburger warns,
consolidation loans only work if the
consumer is truly disciplined. Many use
the loan to pay off credit-card debt, but
immediately start using the credit card
once the debt has been paid.
“Then they need another consolidation
loan to pay the card. The debt spiral gets so
out of control that nobody wants to lend
them money anymore,” he says.
Consumers may also consider
consolidating their debt under their
existing home loan. This is applicable to
Debt review is not suitable for all consumers
Opting for debt review may seem like the ideal solution if you are indebted, but this option is not always as
straightforward as you may think.
Debt review is a legal process that allows overindebted consumers to hang on to their assets and
protect themselves from legal action by creditors.
Garnet Jensen, senior director at TransUnion,
says that although it might sound like the ideal
solution to an unmanageable debt situation, it is
important to realise that there are downsides to
debt counselling.
The first thing to understand is that there are
costs involved. “Although the application fee for
debt counselling is nominal, there are fees that
will be worked into your payment restructuring,”
he says.
The National Credit Regulator (NCR) has
published clear fee guidelines on its website.
Debt counsellors are under a legal obligation
to disclose the full cost of debt restructuring
upfront. Shop around, because not all debt
counsellors’ fees are the same.
When choosing a debt counsellor, an
finweek 10 May 2018
may impact a consumer’s credit rating, Jensen
important consideration is whether he is
says. “You will be listed at all credit bureaus as
registered with the NCR, advises Jensen.
being under debt review, and you will not be
Using an unregistered counsellor may leave
able to access any form of additional credit until
consumers unprotected by the law.
you have paid up your restructured debt and are
Reinhard Pettenburger, CEO of Debt
issued with a clearance certificate.”
Therapy and chairman of the Debt Counsellors
Pettenburger says that due to
Association of South Africa
some unscrupulous debt counselling
in the Western Cape, says
Under debt review, the
counsellor will attempt to
practices, the industry’s reputation
consumers should investigate
reduce the consumer's total has been tarnished.
the agency’s infrastructure,
monthly instalments by
“People are being ripped off, and
how long it has been in
that increases mistrust. The NCR
business, and get feedback
must get rid of the bad apples or this
from other consumers about
will continue to happen.”
the company. If counsellors
to 40%.
He says consumers only approach
offer a 30% to 40% reduction
debt counsellors when they are so
in monthly instalments,
deeply in debt that nobody is prepared to extend
consumers can feel safe. But if the promises of
more debt. In many instances, this may be a bit too
reductions in monthly instalments sound too
late, since consumers need a certain amount of
good to be true, they are, he advises.
money to clear their debt.
Another consideration is that debt review
cover story debt
people whose outstanding loans are less
than the value of the property.
The consumer may be able to secure a
loan against their home and consolidate all
their unsecured debt into one facility.
All the debt will then attract an interest
rate of around 10% compared to having
interest rates of up to 27%, which is the
maximum interest rate on personal shortterm loans.
But Fourie warns: “It is, however,
important to look at the term and
interest rate of the new home loan when
considering this option.”
Debt review
If you can’t pay cash,
consider the following:
Debt review is a legal process that was
introduced with the NCA. It allows overindebted consumers to hang on to their
assets and protect themselves from legal
action by creditors.
Jensen says that when entering
into debt review, a person allows a debt
counsellor to obtain a court order on their
behalf and to draw up a manageable
Ask yourself whether you really need the item
you are about to buy on credit. If it is a nice-tohave item, rather save up for it and pay cash.
If the item is essential, make sure you can
afford the repayments even if interest
rates go up.
Shop around for the lowest interest rates
and charges.
Carefully read the terms and conditions before
you sign and make sure you know exactly
what you are paying for.
Repay your debt as quickly as possible.
repayment plan. The counsellor will liaise
with creditors to renegotiate payment at
lower interest rates. (See sidebar.)
Paying debt versus saving
Very few investments offer or guarantee
a return of 17% or more. However, interest
rates on personal loans and credit cards
range from 17% to 27%.
Consumers who have personal loans or
credit card debt would be wise to first pay
off these debts before starting to save,
says Fourie.
“The question becomes more difficult if
you have a home loan with an interest rate
of, say, 10%, where there are investments
where you can make a higher return.”
He says an option is to continue with
the monthly bond payments and invest in
another asset class.
“The question is easier in terms of the
short-term personal loans. The repayment
of short-term expensive debt is a
‘no-brainer’,” says Fourie. ■
SOURCE: Actuarial Society of South Africa
Under debt review, the counsellor will
attempt to reduce the consumer's total monthly
instalments by 30% to 40%. The interest rates
on unsecured debt is reduced to 0%, the rate on
secured debt such as a home loan is reduced to
around 8% and on motor vehicle finance to 11%.
The Debt Counsellor Rules System was
developed by the commercial banks and the debt
counselling industry. This is a set of standard
rules for debt review upon which the banks and
credit providers have agreed. The process entails
an analysis of the consumer’s credit report and
their ability to meet their repayment obligations.
People who negotiate deals outside these
rules are not acting in the best interests of
consumers, says Pettenburger.
The banks will accept the review proposal if
the repayments fit into the Debt Counsellor Rules
System. Creditors are informed of the debt review
process and the agreement has to be made by
an order of the court or approved by the National
Consumer Tribunal.
“The consumer is untouchable as long as
they continue to pay their monthly instalment.
As soon as they miss a payment, the banks may
terminate the agreement. It has happened,”
says Pettenburger.
Once the consumer has cleared all their
unsecured debt, they will receive a clearance
certificate from the debt counsellor. Credit
bureaus will then remove the notification that the
person is under debt review from his profile.
If consumers do not fit into the rules
system, debt counsellors use a pro-rata
formula for repayments.
However, the banks are under no obligation
to accept or reduce interest rates. The consumer
may then remain under debt review for a longer
period. It could also mean that the banks will not
accept any repayment offer and fight the matter
in court.
“Debt counselling is not a solution for
everyone and in some case we have to turn
consumers away and advise another course of
action,” says Pettenburger.
Consumers may consider sequestration. This
can result in legal action from credit providers.
However, in most instances there is little to no
hope in ever collecting the money.
Pettenburger says around 3% of all his clients
have been back for debt review after getting a
clearance certificate – but then falling back into
bad spending habits.
Amendments to the credit act imposed an
obligation on credit providers that prohibits them
from even attempting to collect on prescribed
(expired) debt, says Jensen.
“Prescription is, however, not always
interpreted in the same manner and consumers
are advised to reach out to the NCR or the Credit
Ombud if they feel that a lender is not acting in
accordance with this requirement,” he adds.
Jensen says consumers can also dispute any
listing on their credit report, which they think
should not be reflected as result of prescription,
with the credit bureaus.
Credit bureaus will request the credit provider
to submit credible evidence as proof that the
listing is correct. However, the bureaus cannot
interpret or mediate between a consumer and a
provider where there is a dispute. The consumer
will be referred to the NCR. ■
finweek 10 May 2018
in depth technology
n to
Having missed the boat on key technological developments for years, Microsoft’s strategic decisio
shift its focus from Windows to cloud services is reviving growth.
j ust four years after Satya Nadella took over
Microsoft is also luring customers to Office
the helm at Microsoft, the US technology
365, the cloud-based version of its workgroup looks set to report its strongest
productivity software. As part of its growth
annual growth in more than a decade.
strategy for the cloud, it will open two data
Microsoft’s results for the March quarter,
centres in South Africa this year, and has
which comfortably beat analysts’ expectations,
announced new data centres in Abu Dhabi,
showed that Nadella’s strategic shift, from a
Dubai and Germany.
core focus on Windows to prioritising its cloud
services, was the right move. Commercial cloud
revenue grew 58% year-on-year in the quarter
It took just under two years on Nadella’s watch
to $6bn, with the gross profit margin improving
for the Microsoft share price to surpass its preby 6 percentage points to 57%.
dotcom crash levels, something Ballmer hadn’t
When Nadella was appointed to succeed
managed to achieve in more than 14 years of
Steve Ballmer as CEO in February 2014,
running the business.
Microsoft shares were trading at around $34,
In his 2017 book Hit Refresh: The Quest to
giving the group a market capitalisation of
Rediscover Microsoft’s Soul and Imagine a Better
about $315bn, according to
Future for Everyone, Nadella
Thomson Reuters data. The
It took just under two explains how the company,
share price has nearly tripled
which is based in Redmond,
since then, trading at $94.25 years on Nadella’s watch outside Seattle in the US,
on 2 May, giving Microsoft
its way. By 2008, when
for the Microsoft share lost
a market capitalisation of
co-founder Bill Gates stepped
nearly $730bn.
price to surpass its pre- down as chairman of the
Of the 39 analysts polled
company, personal computer
dotcom crash levels.
by Thomson Reuters, 19 rate
(PC) shipments were still the
the stock a buy, an additional
lifeblood of Microsoft. The
13 believe it will continue to outperform the
group’s mission, after all, has been “a computer
market, six rate it a hold, none an underperform
on every desk and in every home”.
and only one a sell.
But after peaking in 2011, PC shipments
Digging into the numbers, it is easy to see
began to shrink, with research company Gartner
why the majority of analysts were so positive.
reporting the 14th consecutive quarter of
Azure, its public cloud service that competes
declining PC shipments in March. (See graph
with Amazon Web Services, the leader in the
on p.31.)
global market, saw revenue growth of 93% in
At the same time, sales of Apple and Google
the quarter, with its premium offering reporting
smartphones and tablets were on the rise,
its 15th straight quarter of triple-digit growth,
producing revenues from search and online
according to Goldman Sachs.
advertising that Microsoft hasn’t matched,
These growth rates are likely to continue,
Nadella writes.
Nadella said during the results conference call
One example of how Microsoft missed out
on 26 April, as “we’re still in the early innings
on key consumer trends while fixated on its
of the cloud transition”. Customers tend to
Windows and Office cash cows is the Zune,
start with limited services on Azure, such as
the music player it launched in 2006, about
storage and infrastructure as a service, before
five years after Apple released its iPod. That
buying higher-layer resources such as artificial
it took five years for Microsoft to catch up is
intelligence (AI), he explained.
bad enough; what's worse is that two months
finweek 10 May 2018
By Jana Marais
Steve Ballmer
Former CEO at Microsoft
Bill Gates
Microsoft co-founder
Satya Nadella
Microsoft CEO
in depth technology
Microsoft’s corporate culture was widely seen
as one of the major reasons why it fell behind
its rivals during the Ballmer years. During his
time, a “stack ranking” system was in place
for employee reviews. In short, this meant
that every business unit within Microsoft
was forced to “rank” certain percentages of
its employees as top, good, average, below
average and poor performers.
“Each employee had to prove to everyone
that he or she knew it all and was the smartest
person in the room,” Nadella writes. Instead
of collaborating within and across teams,
employees focused on outperforming their
colleagues to score as high as possible in the
six-monthly review.
Under Nadella, various initiatives have been
launched to change Microsoft’s culture to one
that fosters innovation across the organisation,
ensures better collaboration across teams and
removes the barriers that kill ideas, says
Tim O’Brien, general manager, global
communications at Microsoft.
“It has changed from a
know-it-all to a learn-it-all
culture,” he told journalists
during a media visit to
Microsoft’s headquarters in
March.* “A lot of fear of making
mistakes has been removed.”
Microsoft also has a new mission: “To
empower every person and every organisation
Shipments in million units
later, in January 2007, Apple announced the
imminent arrival of the first iPhone. By the
March quarter of 2012, sales of the iPhone
alone outstripped Microsoft’s total quarterly
revenues. The Zune was discontinued in 2011.
Microsoft also lost out on e-readers and
tablets – it developed an e-reader in the late
1990s, when Bill Gates was still CEO, some
years before Amazon launched the Kindle, and
had a tablet before Apple launched the iPad,
but these were never released. It also lost out on
earnings from internet searches, where Google
remains the undisputed leader in revenue and
market share.
Ballmer’s efforts from 2012 to grow
Microsoft by focusing on “devices and services”
and to catch up with rivals, notably Apple,
included the ill-fated acquisition of Nokia’s
devices and services business for $7.2bn in
2013 – a deal that saw most of the 25 000
employees who joined Microsoft from the
cellphone firm laid off by 2016. Microsoft
eventually wrote off $7.6bn from the purchase.
262. 54
2006 2007 2008 2009 2010
2012 2013 2014 2015
2016 2017
SOURCE: Statista
$10 000
$8 000
$6 000
$4 000
$2 000
$67.14 - $97.90
34 706 932
52-week range:
Price/earnings ratio:
1-year total return:
Market capitalisation:
Earnings per share:
Dividend yield:
Average volume over 30 days:
on the planet to achieve more.”
The results speak for themselves. Overall,
Microsoft revenue increased by 16% to $26.8bn
in the quarter. Achieving organic growth of over
10% in the quarter is a “big achievement” for
a company of its size, Deutsche Bank’s Karl
Keirstead said during the results conference call.
In the March quarter, the company reported
across three key business divisions. Its
More Personal Computing
section – which includes
Windows, Xbox and other
gaming products, Surface
devices and search engine
advertising revenue – was the
biggest contributor to revenue, with $9.9bn of
the $26.8bn. But it also recorded the slowest
growth across the three divisions, with revenue
finweek 10 May 2018
in depth technology
increasing 13% year-on-year.
Second is Productivity and Business
Processes, which include Office, professional
networking service LinkedIn and Dynamics,
Microsoft’s line of enterprise resource planning
and customer relationship management
software applications. This division contributed
$9bn to overall revenue, reporting growth of
17% year-on-year.
The Intelligent Cloud sector, which includes
Microsoft’s server and cloud revenue, its
cloud computing service Azure and Enterprise
Mobility, reported growth of 17% year-on-year
to $7.9bn. “Every organisation today needs
cloud-based infrastructure and applications
that can convert vast amounts of data into
predictive and analytical power through the use
of advanced analytics, machine learning and
AI,” Nadella writes in his book.
Speaking during the conference call,
Microsoft’s chief financial officer Amy Hood
said revenue growth would continue to be
driven by the transition to cloud services, and
Microsoft would grow its investment in capital
expenditure to meet this demand.
Microsoft’s focus is “on being a growth
company, even at our scale”, Hood said. ■
*The author visited Microsoft’s head office in Redmond in the
US as a guest of Microsoft.
Microsoft CEO Satya Nadella’s views on the technologies that will shape the future.
Three key technologies will shape the
technology industry, the global economy
and society in the years to come: mixed
reality, artificial intelligence (AI) and
quantum computing, writes Microsoft
CEO Satya Nadella in his 2017 book
Hit Refresh: The Quest to Rediscover
Microsoft's Soul and Imagine a Better
Future for Everyone.
On mixed reality
“With mixed reality, we are building the
ultimate computing experience, one
in which your field of view becomes a
computing surface and the digital world
and your physical world become one. The
data, apps, and even the colleagues and
friends you think of being on your phone
or tablet are now available anywhere
you want to access them – while you’re
working in your office, visiting a customer,
or collaborating with colleagues in a
conference room.”
This is different from virtual reality,
which largely blocks out the real world,
immersing the user in a completely digital
world, he explains.
As part of its mixed reality efforts,
Microsoft has developed the HoloLens,
the world’s only self-contained
holographic computer. The headset allows
the user to combine their digital and
finweek 10 May 2018
physical worlds, while the self-contained
nature of the headset provides peripheral
vision and allows users to have their
hands free. The glasses have been used in
complex surgeries, for example, as well as
for more commercial applications such as
training aircraft crew and fixing lifts.
Research and advisory firm Gartner
predicts that virtual reality technologies
are probably five to 10 years away from
mainstream adoption.
Matthew Brisse
Research vice president
at Gartner
science fiction to reality. The cloud has
made tremendous computing power
available to everyone, Nadella writes, and
This is becoming the third “run time” –
complex algorithms can now be written
the system on top of which programmers
to distil insights and intelligence from the
will build and execute applications.
mountains of data.
The PC was the first run time; the web
Gartner predicts that global business
the second. Nadella writes: “In an AI
value from AI will total $1.2tr in 2018,
and robotics world, productivity and
increasing to $3.9tr in 2022. Businesses
communications tools will be written
will, for example, increasingly use AI to
for an entirely new
reduce labour costs,
platform, one that
“In an AI and robotics as robots take over
doesn’t just manage
simple requests and
world, productivity and tasks from human
information but also
learns from information
drive revenue,
communications tools agents;
and interacts with the
e.g. robo-advisers in
physical world.”
financial services; data
will be written for an
A confluence of
mining and pattern
entirely new platform.” recognition to increase
three breakthroughs
– big data, massive
revenue through better
computing power and sophisticated
microtargeting and segmentation; and
algorithms – is accelerating AI from
decision automation, Gartner predicts.
in depth technology
Tim O’Brien
General manager, global
communications at Microsoft
Amy Hood
Chief financial officer
at Microsoft
On quantum computing
Quantum computing will allow us to go
way beyond the bounds of Moore’s law
– the rule that the number of transistors
in a computer chip doubles roughly every
two years and will continue to do so – by
changing the very physics of computing
as we know it, Nadella predicts.
While classic computing is bound by
its binary code and the laws of physics,
quantum computing advances every
kind of calculation – maths, science and
engineering – from the linear world of
bits to the multidimensional universe of
qubits, he explains.
“Instead of being simply a 1 or a 0
like the classical bit, qubits can be every
combination – a superposition – which
enables many computations all at
once. Thus, we enter a world in which
many parallel computations can be
simultaneously answered,” he writes.
Gartner says quantum computing
“holds great promise, especially in
the areas of machine learning (ML),
AI and cryptography. Today’s data
scientists, focused on ML, AI and big
data analytics, simply cannot address
some difficult and complex problems
because of the compute limitations of
classic computer architectures. Some of
these problems may take today’s fastest
supercomputers months or even years
to run through a series of permutations,
making it impractical to attempt.
Quantum computers have the potential
to run massive amounts of calculations
in parallel in seconds,” according to
Matthew Brisse, research vice president
at Gartner. ■
When you use the internet, companies such as Google track
every search and interaction. Fortunately, there are options
for those who want to protect their privacy.
By Lloyd Gedye
Surveillance capitalism is
Earlier in April, I was researching
a story on food retailers who offer
credit to consumers. Within a few
hours of my initial searches, I was
contacted by Woolworths offering
me a credit card. Credit cards have
been available from the retailer
since 2014, but this was the first
time I had ever been contacted and
offered one.
As I don’t shop at Woolworths,
that’s probably understandable. But
within a few days I had also been
contacted by Absa, which also offered
me a credit card. Again, I don’t bank
with Absa and I’d never been offered a
credit card before now.
My keyword searches in Google
had clearly identified me as a
consumer in search of new lines
of credit.
It’s a simple example, but
one that clearly illustrates what
happens when we as consumers
get lax about protecting our privacy
in a world where surveillance
capitalism is ever present.
Use a private search engine. By
now we as consumers should
understand that every keyword
search we punch into Google gives
it that little bit more information
about us. So a private search engine
is an important tool. DuckDuckGo,
Search Encrypt, Start Page and
Gibiru are just some of the services
available to us.
Install Tor on your computer for
browsing. Tor works by encrypting
and routing your internet browsing
through a series of relay servers.
This makes it harder to link your
computer to the websites you visit.
If you don’t want your internet
browsing to be monitored, it’s the
best chance of protecting your
online anonymity.
Use end-to-end encrypted
services. If you don’t want your
inbox mined for data, then an
encrypted email service is a
must. Switzerland-based service
Protonmail is one option that I
found very easy to switch to. When
it comes to messaging services,
Facebook says that subsidiary
WhatsApp has end-to-end
encryption, but after what we now
know about the company, can
we take that claim at face value?
Telegram and Signal are two of
the apps that offer a more secure
messaging option.
Disable location services.
Technology companies can use
location services to track our
day-to-day whereabouts, as this
is incredibly useful information for
targeted advertising.
Tape over all webcams. It has
already been reported widely that
cameras on phones, laptops and
digital televisions can be used to
spy on consumers. You can cover
them with commercially available
web-cam covers, but a piece of
masking tape will also do the trick.
Delete your social media accounts.
Yes, it’s a drastic step, but you need
to ask yourself if the benefit you
are getting from these apps justifies
the invasion of your privacy. As
someone who went cold turkey on
social media a few years ago, I can
say I really don’t miss Facebook
and Twitter as much as I originally
thought I would. ■
finweek 10 May 2018
in depth mining
By David McKay
miner, because the platinum
Neal Froneman’s recent acquisition spree is weighing heavily on the
sector’s high operating costs impact the bottom line.
Gallo/Getty Images
i t’s fair to say that Neal Froneman, CEO
of Sibanye-Stillwater, hasn’t always
been the best friend of government and
its department of mineral resources in
particular. For instance, litigation against
former minister of mineral resources
Mosebenzi Zwane, for the inappropriate use of
the Mine Health and Safety Act, which cost the
company’s Kroondal Platinum Mine millions of
rand in lost revenue, is still ongoing.
So it was with some surprise to hear
current mineral resources minister, Gwede
Mantashe, bestow praise upon Froneman.
(Mantashe is, by his own admission, an
inexperienced cabinet minister, having been
head of the mines portfolio for fewer than
two months at the time of writing... He may
change his tune.)
Says Mantashe: “Froneman is from
the empire that was created out of Harmony.
That model knows how to best mine
marginal resources. I’m looking forward
to seeing what they do.” The reference is
to Froneman’s purchase of Rustenburg
Platinum Mines (RPM) from Anglo
American Platinum (Amplats).
The transaction, completed in 2017 at
a cost of some R4.5bn, is thought to have
saved thousands of jobs because Amplats
increasingly considered the asset non-core;
certainly, it was loss-making in its hands. For
a while, there was a chance that a portion
of RPM’s roughly 300 000 ounces a year of
platinum production might be shut, but in
October 2017, Sibanye-Stillwater announced
the production was safe, and 15 000 jobs that
mined it.
The question now, however, is whether
that’s still the case?
SA’s platinum sector – and mining
in general – is bleeding badly at R12 to
the dollar. According to Patrick Mann, an
analyst for Deutsche Bank, a 30% to 40%
improvement in the rand price for the
basket of platinum group metals (PGMs), is
finweek 10 May 2018
Neal Froneman
CEO of Sibanye-Stillwater
“Froneman is from
the empire that
was created out
of Harmony. That
model knows how to
best mine marginal
resources. I’m looking
forward to seeing
what they do.”
Gwede Mantashe
Minister of mineral resources
required for all of the industry to turn a profit.
In actual numbers, that’s a rand basket of
R28 000 per platinum ounce.
According to Stephen Forrest, principal
consultant at SFA Oxford, a research house
that collects and interprets market data
for the World Platinum Investment Council,
the current platinum price (excluding other
PGMs palladium and rhodium) should be
seen as “mine closure inducement”. Normally,
market analysts and executives talk of
incentive pricing – a price required for new
platinum production – but that’s the wrong
way of thinking about the market currently,
says Forrest. “This is the price that closes
mines. The problem is the cost at which the
platinum is being mined in SA,” he adds.
Coupled with these difficult conditions
is Sibanye-Stillwater’s recent back story of
voracious deal-making, which has seen it
buy the US palladium and platinum producer
Stillwater Mining, for about R30bn. SibanyeStillwater also has a transaction on the
boards to merge with Lonmin.
The company is heavily indebted.
“We estimate overall group margins stand
at approximately 4%, or 1% after interest
charges,” said Adrian Hammond, an analyst
for Standard Bank Group Securities, in a
March research note. “After factoring in
what is a seasonally slow start for the South
African mining industry, we estimate the
company to be free cash neutral at best for
the first quarter.”
So times are hard for Froneman. He
acknowledged even as early as December
that the speed at which the company
planned to pay down debt would be slowed
by the strengthening of the rand, although
the general feeling is that the debt is
manageable. Covenants with lenders were
relaxed to 3.5 times from 2.5 times its pretax earnings – defined as earnings before
interest, tax, depreciation and amortisation –
but will snap back to 2.5 times next year.
in depth mining
Outlook improves for
Petra Diamonds
13 500
The company, which is also heavily indebted, may be
able to pay down its debt faster if diamond prices recover.
13 000
12 500
12 000
11 500
11 000
May ‘17
Jul ‘17
Sep ‘17
Nov ‘17
Jan ‘17
Said Goldman Sachs in a report on 28
March: “Our thesis on Sibanye-Stillwater
is based on our view that the sell-off on
balance-sheet concerns is overdone and
that the company has other options such
as streaming deals and/or issuing another
high-yield bond before tapping the equity
market.” As it turned out, Sibanye-Stillwater
unveiled the replacement of a $350m
revolving credit facility with a larger $600m
facility at lower interest rates and which
could be extended to $700m.
But it isn’t getting much easier for the
country’s platinum miners. In March, Royal
Bafokeng Platinum suspended plans for
a R900m to R1bn rights issue to fund the
development of its Styldrift 1 mine – which is
essentially an expansion.
“The industry is in a great deal of
difficulty,” says Paul Dunne, CEO of Northam
Platinum. “We are now 15% off the price
peak of the previous six months. These
companies – platinum firms in SA – have
been quite marginal for six months, and now
we’re down about 15% in rand terms. The
quantum of cash burn at industry level is
significant relative to market capitalisations
and balance sheets.”
By way of illustration, the current basket
price in rand for PGM production from mines
on the Western Limb of the Bushveld (mines
here are normally older) is about R22 500
per platinum ounce, and the cash burn is
about R5 000 per platinum ounce for a large
amount of the resource base, which is a lot of
unprofitable platinum production, says Dunne.
“Dividends have been stopped, stayin-business capital has been reduced or
stopped, capital expenditure has been
stopped […] the lemon is being squeezed
extensively,” Dunne says. “A lot of meat in
these companies has just been eaten up,
and these were dividend-paying gorillas only
10 years ago.” ■
Mar ‘17
May ‘18
Johan Dippenaar
CEO of Petra Diamonds
Petra said in February that
it had frozen some
in capital expenditure over the next
three years in order to focus on
paying debt.
Another company contending with balance-sheet pressures
is Petra Diamonds, the UK-listed firm that has built a
business by buying up the mines De Beers can no longer
profitably operate. While the company is a good operator,
its aggressive expansion campaign to 5m carats from less
than 1m has led to significant debt build-up, which the
weaker rand, a number of operational setbacks, and weaker
diamonds prices have not helped to reduce.
Petra said in April that it had agreed with its lenders for
a waiver of debt covenants as of 31 December and a reset
of the covenant terms for 30 June and 31 December this
year in terms of which there will be interest adjustments on
the debt.
“The finalisation of this agreement with our lender group
validates its support of Petra’s business and strategy, as we
negotiate this final stretch of our expansion programmes,”
said Johan Dippenaar, CEO of Petra Diamonds. A
statement from the lenders, which have Rand Merchant
Bank, Nedbank, Absa and Investec in their ranks, said it
was “supportive” of Petra, as it neared the end of its “heavy
investment” cycle.
Petra said in February that it had frozen some $60m
in capital expenditure over the next three years in order
to focus on paying debt. The miner had earlier posted an
after-tax loss of $117.7m in the six months ended December,
compared with a profit of $35.2m in the corresponding
period in 2016. Most of this was due to a $118m impairment
charge it took due to the higher costs at its operations and a
write-down on the value of its lower-grade stones.
Net debt as of 31 December was at $644.7m, an
increase of about $30m compared to its net debt position
on 30 September.
But analysts think that Petra is well positioned, provided
it can ramp up its Cullinan mine. “We expect Petra to remain
within covenants,” says RBC Capital Markets. “The issue,
however, remains the $628m net debt in a lower diamond
price/stronger rand environment.”
Handily, the bank thinks the diamond market is due a
recovery. “The diamond market appears to be on the cusp of
a recovery,” it says, citing De Beers’ production downgrade
from 2019 to 2020, which will take an estimated 2m to 4m
carats of diamonds out of the market, equal to 2.5% of the
global market. This should help bolster prices. “We expect
diamond prices to recover 4.5% in the 2018 calendar year
and a further 3.4% in the 2019 financial year as prices begin
the shift back towards tighter markets,” it says.
Says Goldman Sachs: “While the market view on
diamonds has clearly improved over the last six to 12
months, especially on the back of US tax cuts, we believe
investors need to see delivery of the Finsch and Cullinan
projects and the much-promised free cash-flow inflection
before the shares start to perform.” ■
finweek 10 May 2018
in depth energy
ment signs new independent power
The energy sector is expecting major changes as
t he South African energy sector is facing
a major dilemma. While international
trends are pointing towards a privatised
multi-player energy landscape with
renewable energy making up a larger portion
of the mix, South Africa has an energy
system that is 80% dependent on fossil fuels
and is a large employer in the country.
In order to meet its commitments to the
Paris Climate Agreement signed in 2016, SA
has to reduce its carbon emissions by just
less than half by 2030. This is the context
within which the South African government
recently signed 27 new independent power
producer (IPP) contracts, after three years of
delays, and announced the implementation
of a carbon tax from January 2019.
Deloitte carbon tax expert Gerhard Bolt
says the world is moving towards “microgrid” energy-generation markets. “It’s
inevitable,” he comments. A microgrid is a
localised group of electricity sources that are
connected to a centralised electricity grid,
known as the macrogrid, but which are also
able to function autonomously.
This transition means potential job
losses for many working at fossil-fuel-based
Not surprising, then, that many union
officials see the Renewable Energy
Jarredine Morris
A representative of the
Industry Task Team on
Climate Change
Bradley Preston
Head of listed investments at
Mergence Investment Managers
Independent Power Producer Procurement
Programme (REIPPPP) as the vehicle that
will deliver the privatisation of SA’s energy
sector – and subsequent job losses. The
REIPPPP was launched in 2011, and all the
projects commissioned have pre-approved
tariffs for the next 20 years.
Jesse Burton, a faculty member at the
University of Cape Town’s Energy Research
Centre, says reductions in renewable energy
costs mean that contracts overseas are being
signed at below the operating cost of Eskom’s
more expensive coal-fired power plants.
“One thing no one talks about is that SA
needs a plan for the phasing out of coal over
the next 30 years,” she comments.
It is imperative that workers and
communities who face upheaval from
unplanned coal-plant closures are protected,
Burton believes. She argues that what SA
needs is the new, least-cost Integrated
Resource Plan (IRP) to take care of the
emissions from the electricity sector, as this
was the cheapest way to reduce emissions.
Luc Koechlin, managing director of EDF
South Africa, said energy companies such
as EDF need to know where the country
wants to go.
“How is the country going to tackle
unemployment in the coal sector and climate
Photos: Supplied
How will carbon tax work?
South Africa’s carbon tax was first mooted
by Treasury in 2010 but has been subject to
multiple delays since then. It was finally adopted
by Cabinet in August 2017 and is set to be
implemented from January 2019.
The tax is set at R120 per tonne of
carbon dioxide equivalent. The first phase, which
will run from 2019 to 2022, will offer tax breaks
that can reduce the tax to as little as R6 per tonne.
South Africa is among the top 20 carbon dioxide
emitters in the world, with total emissions from
the consumption of energy at 461.29m metric
tonnes in 2011, according to the latest available
data from the US Energy Information Agency.
China, which ranked top, had total emissions of
finweek 10 May 2018
8.7bn tonnes the same year.
Many stakeholders whom finweek spoke
to feel that the carbon tax is not the appropriate
tool to use to cut emissions.
Jarredine Morris, a representative of the
Industry Task Team on Climate Change, a
non-governmental organisation whose members
include many of SA’s biggest carbon emitters and
high-energy users, says the carbon tax is set too
low to really effect change and it will be costly for
businesses to comply with and implement.
“We support South Africa’s efforts to address
climate change, but the carbon tax is not suitable,”
he states. Morris says that SA is within range of
where it needs to be to meet its Paris Agreement
commitments and is likely to be within that range
until some time between 2022 and 2025, making
a carbon tax premature.
Most countries choose between a carbon
tax and a carbon-budget approach, which
allocates a “tolerable quantity of greenhousegas emissions that can be emitted in total over
a specified time”, according to the World Wide
Fund for Nature.
SA has decided to implement both a carbon
tax and a carbon budget.
The current carbon-budgeting regime,
launched in 2016, is run on a voluntary basis.
Companies approach the department of
environmental affairs and apply for a carbon
in depth energy
producer contracts and sets a date for carbon tax to be implemented.
change?” he asks. “Investors want to put
their money where there is policy certainty.”
By Lloyd Gedye
available. He said the new IRP would guide all
future energy procurement, so South Africa
has a “well-managed” energy sector.
Lessons learnt
Speaking at the recent Africa Power
Roundtable conference in Sandton,
department of energy (DoE) director-general
Thabane Zulu said there had been a long
period of policy uncertainty and that the recent
signing of the 27 IPP contracts represented
the “gearing towards policy certainty”.
“Policy certainty is key going forward,” he
said. “No more stop-start.”
The consequences of government’s stopstart policy position were evident in the tale of
one manufacturer, who said he had to retrench
220 people. “I have to come to events like
these to get my voice heard,” he said.
Zulu admitted that the DoE had learnt
from its mistakes and would make sure
not to repeat them. “We’re building from
those lessons,” he said, suggesting that bid
windows five and six of the IPP would see
changes implemented.
Zulu said the DoE was finalising the new
IRP and promised “the dawn of a new era”
in the energy space. He added that there
was ongoing engagement between Cabinet
and the DoE over the IRP, and this was the
department’s priority. No timeline is yet
budget, which effectively gives them an
allowable quantity of greenhouse-gas emissions
that may be emitted in total over a specified
period. According to Morris, this process will be
mandatory from 2020.
After the first phase of the carbon tax, there
is a scheduled review process that will look to
align the carbon-tax and carbon-budget regimes.
But the first phase of the carbon tax runs until
2022, resulting in a two-year overlap between
the two systems.
This will be onerous for business, cautions
Morris. It will effectively cause a “double
penalty”, where companies are forced to cut
emissions and pay tax on them.
It’s also difficult for industry to calculate its total
exposure to the carbon tax, as regulations are still
required on some of the tax breaks, says Deloitte
“Investors want
to put their money
where there is
policy certainty.”
carbon-tax expert Gerhard Bolt.
Technical work to figure out what those
regulations will be is also still being undertaken.
After the regulations are in place, there still has
to be a period of public comment, Morris says,
pointing out that Treasury is running out of time.
Bolt says companies in sectors such as
petrochemicals, cement and metals are big
carbon emitters, and they can’t do that much
about it, which means a carbon tax will do little
to reduce their emissions. On the other hand,
companies that burn fossil fuels have more
flexibility, as they can look into alternative energy
sources, such as renewables, to cut emissions.
Both Bolt and Morris argue that the socioeconomic impact assessment for the carbon
tax is not comprehensive and fails to take
into account the real potential job losses and
The rise of renewables
According to Burton, the recent signing of the
27 IPP contracts has created a much more
positive sentiment in the sector after three
years of delays: “I think that we have seen a
renewed vigour in the space. The interest has
never really gone away, but developers didn’t
have anything to do for several years.
“The challenge now is to maintain the
momentum, so that South Africa can continue
to take advantage of the cost reductions we’ve
seen globally,” she adds.
Peter Baird, head of African private equity
at Investec Asset Management, says that
with solar- and wind-energy-generation prices
having fallen significantly, these technologies
can no longer be ignored: “It’s not treehugging, save-the-planet stuff – it’s cold, hard
He believes that renewables will emerge as
a bankable, wealth-creating industry, but right
now there is still a lot of risk.
Baird warns that investors should “tread
carefully” at the moment.
“We are witnessing a profound change,” he
says. “There is a lot of money to be made, but
economic impact of the tax.
Bradley Preston, head of listed investments
at Mergence Investment Managers, says that
it is quite difficult to tell what the impact of the
carbon tax will be on companies, as the rebate
system is complex. Investors need to look at what
a company’s potential exposure to carbon tax is,
what percentage of its margin that equates to and
the company’s ability to pass on that carbon tax
to consumers, he advises.
Investors will also need to understand
companies’ production practices. Sephaku
Cement, for example, has a much newer
collection of cement plants and claims it produce
far fewer emissions than rival PPC, Preston says.
Similarly, companies operating deep-level mines
will have a higher carbon footprint than those
with open-cast mines. ■
finweek 10 May 2018
in depth energy
“Over the next five years,
renewable energy is coming
to equity markets.”
Suing for change
Peter Baird
Head of African private equity at
Investec Asset Management
also a lot of money to be lost.”
It’s a little early for retail investors to
get involved in renewables, with mostly
institutional investors and a few venture capital
firms in the market currently, he adds.
“But there is a lot coming,” Baird says. “Over
the next five years, renewable energy is coming
to equity markets.”
According to Corneleo Keevy, head of credit
risk management at Ashburton Investments,
local investors have very limited ways of
getting exposure to the renewable energy
market in SA at the moment.
One option is to invest in infrastructure
investment holding companies such as GAIA
Infrastructure Capital and Hulisani, which
are listed on the JSE, and the AltX-listed
Renergen, he says.
Hulisani, which listed on the JSE in April
2016, is an African energy-investment
company that plays in the coal, gas, solar, wind,
hydro and biomass sectors, while Renergen is
an alternative-energy company that listed on
AltX in 2015.
Prudence Lebina, GAIA Infrastructure
Capital’s CEO, says that the company
operates in the secondary market, purchasing
infrastructure assets in the energy, transport,
water and sanitation sectors when they are
almost completely built and operational. The
company looks for operational returns of at
least CPI plus six percentage points.
Keevy points out that it is important
for investors to understand what type
of investment they are making in these
“These are essentially yield vehicles in a
secondary market,” he explains. “You are not
investing in the projects at an early stage; they
are being acquired once constructed.”
As these projects have an agreed 20-year
tariff plan, they should provide steady and
predictable revenue. “They are not a growth
story,” says Keevy. “More a yield story, so they
have limited appeal.” ■
finweek 10 May 2018
Courts worldwide are increasingly becoming the
battlegrounds for climate change.
In January this year, the City of New York went
to court to claim damages from the world’s five
largest oil companies for the consequences of
climate change. In California, San Francisco and
Oakland have done the same. So have several
counties in the state.
“These guys are under assault from many
fronts,” comments Peter Baird, head of African
private equity at Investec Asset Management.
In April, Friends of the Earth Netherlands
announced that it would take energy company Shell
to court if it does not act on demands to address its
impact on the climate.
A letter delivered to Shell demanded that the
fuel giant aligns its business model and investments
with the climate objectives of the Paris Agreement,
phases out its oil and gas production, reduces its
emissions to zero by 2050 and comes to an agreement
on implementation, interim targets and public
accountability. Friends of the Earth Netherlands gave
Shell eight weeks to avert a lawsuit.
A spokesperson for Shell told The Guardian at
the time that the company strongly supported the
Paris agreement. “But we believe climate change
is a complex societal challenge that should be
addressed through sound government policy and
cultural change – to drive low-carbon choices for
businesses and consumers – not by the courts.”
Donald Pols, director of Friends of the Earth
Netherlands, said Shell is among the 10 biggest
climate polluters worldwide and that it has known
for over 30 years that it is contributing to climate
change, but continues to extract oil and gas and to
invest billions in the search for and development of
new fossil fuels.
“Shell’s current policy is on a collision course
with the Paris Agreement,” says Roger Cox, the
lawyer who will pursue the case for Friends of the
Earth Netherlands.
“It seems like Shell considers the damage it does
to the climate as an awful but necessary evil,” he
says. “The law, however, opposes Shell’s view.”
Cox won a landmark climate case against
the Dutch government in 2015. The court ruled
in this case that the Dutch government must cut
its greenhouse-gas emissions by at least 25%
(compared to 1990 levels) by the end of 2020.
The Dutch government has taken the judgment on
appeal. It will be heard at the Hague Court of Appeal
on 28 May. ■
>> Book Review: Five business lessons from a winning rowing team p.41
>> Motoring: Topping a winning formula p.42
>> Management: How to manage that person on your team p.44
By Marcia Klein
A message to those
in the top job
Too many CEOs remain oblivious to the challenges faced by employees. Below are some pointers to consider.
Mark Lamberti
Former CEO of Imperial
1. It is not okay to be racist or sexist. And
certainly not if you are a leader.
Don’t be like former Imperial CEO Mark Lamberti
and call one of your employees an affirmative
action appointment who is not worthy of
advancement – not in the heat of the moment,
and not behind their back.
If you are Cell C CEO Jose Dos Santos, you may
not say that women have a “bitch switch”.
Some employees have what it takes to
advance and get more money or a better position
and some do not. Either way, it has nothing to
do with their race or gender, unless, of course, it
is part of a deliberate attempt to keep them “in
their place”. If you don’t understand that yet, you
should not be the CEO.
Jose Dos Santos
CEO of Cell C
2. Your huge salary is for handling crises.
Steinhoff directors Johan van Zyl, Heather
Sonn and Steve Booysen unashamedly attempted
to reward themselves €100 000 to €200 000
each, and to give directors additional fees to attend
Heather Sonn
Chairperson of
Steinhoff International
meetings so they could deal with the disaster
they oversaw and signed off on, and have the
responsibility to fix. (Van Zyl has since resigned.)
MTN Group former executive chairman
Phuthuma Nhleko did the same thing, getting
R72.2m in pay and bonuses for negotiating the
reduction of a fine slapped on his company by
Nigerian regulators.
Just because you are lucky enough to be in a
position to get performance and share rewards
when the company does well (and, let’s face it, this
is not always of your doing), you are not entitled
to make up other awards to keep bonuses flowing
when things are going badly.
Your job is to make sure the company succeeds
and, if it doesn’t, your job requires you to fix it. That
is, supposedly, exactly why you are paid so much.
You don’t deserve your multimillionrand salary.
There are many people who work as hard as you
do, with as much skill, experience and responsibility,
who are earning a fraction of your salary.
The difference between them and you is
opportunity, not your superiority.
In fact, your risks and responsibilities are
probably lower than many. You have a team behind
you that carries the responsibility, and few CEOs
have historically borne the consequences of their
company's misfortunes.
Your salary is set by your equally overremunerated board and is not based on anything
other than comparisons with all the other CEOs
finweek 10 May 2018
Gallo/Getty Images
i t is 2018 and many South Africans are more
enlightened than they were during the country’s
blighted past.
Yet many in corporate leadership positions
remain oblivious, living in a blissful bubble created
by their having too much money, too many yes men
telling them they are right, and too little humility to
think that any need for change applies to them.
Here are the 11 things that corporate leaders
should know by now (but that many don’t):
on the money management
7. Your culture should not necessarily be the
who are also earning too much.
Ask any CEO about their salary and they will
tell you it is a board decision and has nothing to
do with them. If you cannot acknowledge that
your salary is excessive and undeserved, you are
out of touch with reality.
company culture.
Just because you believe in it or it is the latest
recommendation of a management guru, your
company may not be better off being ruled with an
iron rod, excessive box-ticking and performance
monitoring, constant team-building, endless
meetings or impenetrable hierarchies.
Your employees need to work productively
in a good environment, be treated with respect
and have the opportunity for promotion. They
certainly don’t need to live in fear or be subjected
to your own follies.
4. The excuse that you just can’t
find the right black people or women
to fill important posts just doesn’t
wash anymore.
The fact that there are still only a handful of
black and women CEOs of major companies and
that most boards and executive teams are still
predominantly white and male, means you have
not made enough of an effort to attract and
promote people from other backgrounds.
Just because you are comfortable with your
old networks does not mean it consists of the
only people with ability or potential.
And just because most of your lower-level
workers make your diversity targets look okay,
or that you have black or women executives
in charge of human resources, transformation
or communication, does not mean you have
transformed the company.
5. Doing whatever it takes to meet revenue
and profit targets, regardless of the
ethics, is not okay.
Neither is it okay for companies such as
KPMG, SAP, McKinsey and others to have any
involvement in corruption or suspicious deals,
contracts or practices.
It is also not okay to point fingers at
government corruption or incompetence but
apply different standards to the private sector
or yourself. Corrupt or unethical practices are
unacceptable. If CEOs are involved in bad
governance, dodgy accounting or crime to get the
results they need, they can’t excuse themselves
by claiming they’re merely great risk-takers who’re
“pushing the envelope.” They’re unethical or
corrupt, and so are their companies.
8. The minimum wage is just R20 an hour.
Herman Mashaba
Mayor of Johannesburg
earning the
minimum wage
can take home
R3 500 a month
– probably what
you spend on
your cellphone
contract or on
one or two good
nights out.
finweek 10 May 2018
Gallo/Getty Images
If you are being paid R5m a year, you are earning
R417 000 a month.
Employees earning the minimum wage can take
home R3 500 a month – probably what you spend
on your cellphone contract or on one or two good
nights out.
Workers need to feed their families, educate
their children and get transport to and from work.
Do the maths.
9. Don’t turn a blind eye to the treatment
and pay of outsourced cleaning and
security staff just because your suppliers are
in charge.
Johannesburg mayor Herman Mashaba
announced that the city will hire 1 400 former
Jozi@Work and contract staff to ensure “fair
remuneration and dignity is provided to these
contract workers”. These employees now have
permanent jobs and earn R6 000 a month instead
of the R2 200 they were being paid.
Companies can take a leaf out of his book.
People who contribute to the smooth running and
success of your business deserve a living wage.
Show more respect for employees’
private lives.
Although it is acceptable in some circumstances
to expect employees to work overtime, on public
holidays and on weekends, it is not acceptable to
demand that they make these sacrifices without
compensating them with time off or additional pay.
6. The company is not your personal
fiefdom, even if you are the CEO and a
significant shareholder.
It is not okay to use company resources for your
benefit. It is not okay to hire your partner, go on
personal trips, be flown up to work every week
from your beach house at the company’s expense
or take family and friends out to dinner on your
company credit card.
This behaviour has become widespread and
brazen, reflecting the attitude that this kind of
conduct is acceptable.
You earn enough. Spend your own money on
yourself, just as your employees have to.
You should be asking yourself why you
are reluctant to pay this.
KPMG offices in
Johannesburg. Government
has cancelled its auditing
contracts with the firm after
a string of scandals, including
its handling of Gupta accounts
and of VBS Mutual Bank.
11. You need to invest just a little in
people’s futures.
People have to start their careers at the bottom,
but unpaid or low-paid internships mean that many
students will be excluded from the opportunity
unless their parents can continue to support them
while they work. Help to give students just a tiny
taste of the opportunities you have had. ■
on the money book review
5 business lessons from a
winning rowing team
The remarkable accomplishments of an Olympic rowing team hold lessons for life and work and show how teams
can perform against great odds – and triumph.
Photo: Supplied
t he Boys in the Boat, which tells of
the epic journey of a rowing team
from the University of Washington,
has lessons just as relevant to the
workplace today as it did for the crew of
determined men who rowed their boat
to victory, glory – and gold – at the Berlin
Olympics in 1936.
It’s an inspirational, true story set against
the backdrop of the Great Depression of
the 1930s. The book recounts the life of Joe
Rantz and eight other working-class youths
who go from obscurity in the US Midwest
to beating elite rowers from the likes of
Harvard and Yale to make it
to the 1936 Olympics. Daniel
James Brown tells a tale of
commitment, psychology,
leadership, determination,
teamwork – and rowing.
At USB Executive
Development (USB-ED)
and finweek’s recent We
Read For You (WRFY) event,
Carl Kies, CEO of Reutech,
explained that George Yeoman
Pocock – the “Yoda-like spiritual guru” of
the story and legendary race hull builder –
exemplified many of the qualities lacking in
effective leaders today.
True leaders are those who have vision,
an unwavering commitment to success
and faith in the abilities of their teams.
“Those in positions of leadership need to
have the humility to give their employees,
regardless of rank, the space to pull together
to contribute at a high level,” said Kies.
“Egos must yield for the good of the team.”
There are many parallels between
teamwork, management and leadership
that can be drawn from Brown’s book.
“Executing strategy often requires
teamwork; it cannot be done alone,”
he adds.
Five key lessons from the book include:
All good strategies start with a vision
Just as the rowers set their sights on
Olympic gold, businesses also need to have
a vision. A clearly articulated vision is the
basis of any effective strategy.
It is vital for a leader, manager or
business owner to define the vision and
cascade a practical plan to achieve it at
every level of the business. Every member
of the team needs to live the vision –
especially the leader.
It is about focus – ‘Mind in Boat’
The “boys in the boat” came from
humble backgrounds with no
competitive rowing experience
before college. What they did
possess was grit, determination
and a single-minded purpose and
shared will to succeed.
Driving their efforts was an
unrelenting focus on the end
goal. Taking your eye off the ball
is a slippery slope to failure – as
many a doomed strategy will attest. For the
coxswain and eight rowers it was always
about “MIB” – “Mind in Boat”.
No ‘I’ in team – playing to one
another’s strengths
Teamwork is about people trusting in one
another’s capabilities and setting one
another up for success.
Plan, execute, monitor, repeat
Success comes from repeating multiple
processes over and over again to get the
balance right. Excellence often comes
from discipline.
Finding ‘the swing’
Those who have participated in rowing
Carl Kies
CEO of Reutech
will know that it is all about “hitting the
swing”, that moment when energies and
efforts are aligned in perfect harmony.
When a boat hits its swing, it goes
faster with more glide between strokes.
Finding the “swing” is reliant on absolute
trust between team members. In the
workplace, trust catalyses “swing” – a
synchronicity of effort and purpose.
As Pocock says in the book: “It is hard to
make that boat go as fast as you want to.
The enemy is the resistance of the water…
But that very water is what supports you
and that very enemy is your friend. So is
life: the very problems you must overcome
also support and make you strong in
overcoming them.”
The remarkable achievements of the
1936 Olympic team reminded a country
of what can be done when a team pulls
together to create a perfect melding of
commitment, determination, and optimism.
For businesses, individuals and as team
South Africa, The Boys in the Boat is a
reminder to pull together to show the world
what we may be able to achieve as one
unified nation. ■
finweek is the USB-ED’s media partner in its We Read For You
series (WRFY). The next event will be held on 15 June, where the
book Emotional Agility: Get Unstuck, Embrace Change, and Thrive
in Work and Life by Susan David will be presented. To register,
please visit Admission is free.
finweek 10 May 2018
on the money motoring
By Glenda Williams
Topping a winning formula
The sixth-generation VW Polo is larger and sportier-looking than its predecessors.
hen you’ve got a winning
formula, it’s hard to better it. But
Volkswagen might have done just
that with its latest generation VW
Polo. The locally built predecessor was a gem of
a car. The new, sixth-generation VW Polo, also
built locally, is even better.
Longer, lower, wider, more sporty-looking
and offering advanced features like Blind
Spot Monitor, Park Assist with Manoeuvre
Braking, a Multi-Collision Braking System and
LED headlights that are normally reserved for
premium vehicle classes, the attractively priced
Polo’s success looks set to continue.
In South Africa the compact hatchback
is a top seller in the passenger car segment,
second only to sibling Polo Vivo. Aside from
all it offers, it’s a nod to the superb build
quality – inside and out.
Along with the three standard Trendline,
Comfortline and Highline trim lines, also
offered are the special edition Polo beats
(includes a 300-watt sound system), and
R-Line package which features C-shaped front
air curtains, side sills, boot spoiler, rear diffuser
and 17-inch Bonneville alloy wheels).
The Trendline and Comfortline models come
with an agile and efficient 70kW 1.0-litre turbo
engine, while the Highline’s 85kw 1.0-litre
turbocharged three-cylinder mill offers added
power and an additional 25Nm of torque.
The performance-focused halo model, the
Polo GTI, will launch in the second quarter.
finweek 10 May 2018
The sixth-generation
VW Polo is 81mm longer,
69mm wider and 8mm
lower than its forebear.
Testing one of the more affordable of
the five models in the one-litre Polo line-up,
finweek took to the roads in the VW Polo 1.0
TSI Comfortline.
Outer appeal
The VW Polo 1.0
TSI Comfortline
is a delight to
drive, planted on
the tar yet nimble
when required.
The new VW Polo cuts a very handsome
figure. That it looks a bit more Golf-like
is bound to delight buyers in the Polo’s
price range.
This is the first Polo based on VW’s
modular transverse matrix (MQB) platform
that allows for more dynamic fashioning of its
larger proportions.
The exterior is now more sporty and
masculine. It’s longer by 81mm, wider by
69mm, and 8mm lower than the previous
generation. The hatchback’s more dynamic
and powerful silhouette boasts shortened
overhangs, wheels repositioned further to
the front and rear, longer roofline and rear
roof spoiler.
An arrow-shaped double line – dubbed
the “tornado line” – that extends from the
front wings to the tail lights, together with
the long line of side windows reaching into
the C-pillar, gives the new Polo an even
lengthier appearance and visually lowers the
centre of gravity.
The visage too has a more dominant
stance. The bonnet extends further downward
into the redesigned bumper. Glass surfaces
in the shape of headlights (now available
on the money motoring
with LED technology), fog lights and turn
signal lights are plentiful. Also forming the
revamped face are a new radiator grille,
V-shaped air intake and secondary narrow
intake that spreads across the entire width
of the car.
At the rear, new trapezoidal-shaped
tail lights are worked into the shoulder, the
horizontal line below them flowing into the
bumper to underscore the car’s width.
Inner workings
Fresh design has not been limited to the
exterior. New dashboard and cockpit layouts
are a departure from the former generation.
The previous vertically oriented dashboard is
now horizontally styled with a slight angle that
favours the driver.
A harmonious flow of display and
instruments includes the 6.5-inch colour
infotainment display which is now higher and
in the driver’s line of sight.
This new Polo is also the first to sport
digital instrumentation, which adds to the
new look and feel.
The compact hatch boasts an impressive
list of standard features. On the Comfortline
this includes a connectivity package
featuring Bluetooth and USB, the “plus”
multi-function display, the composition
colour infotainment system with six
speakers, the leather-covered multi-function
steering wheel, LED daytime running lights,
front and rear electric windows, front and
rear curtain airbags, automatic post-collision
braking system and driver alert system.
Options fitted to the test vehicle included
the car’s connectivity feature App Connect,
which allows you to access apps like
messaging, music and navigation on your
smartphone, voice control with speed limiter,
cruise control and composition media with
iPod/iPhone interface, all of which worked
efficiently and smoothly.
Now wider and longer with improved cabin
space, the cockpit is well insulated from road
noise and offers good all-round visuals.
It’s easier to get in and out of the rear too.
That optimised entry and exit comes courtesy
of the longer wheelbase.
Photos: Supplied
Road act
VW’s MQB platform has been adapted for the
new Polo. This brings improved body stiffness
and enhanced crash properties even while
body weight is unchanged, despite the new
hatchback’s greater size.
Superb body stiffness brings on-road
stability and a cabin free of squeaks or rattles.
The dashboard is horizontally
styled with a slight angle to
favours the driver.
Engine: 1.0-litre three-cylinder
0-100 km/h: 10.8 seconds
Top speed: 187km/h
Power/Torque: 70kW/175Nm
Transmission: 5-speed manual
Fuel consumption (claimed
combined): 4.5litres/100km
Fuel tank: 40 litres
CO2 emissions: 103g/km
Luggage volume: 350 litres
Safety: Front and rear curtain airbags
Warranty/service Plan:
3 years/120 000km warranty;
3 years/45 000km service plan
Standard price: R264 700
The suspension too is bang on, unruffled by
speed bumps or rutted roads and offering
excellent ride quality.
The VW Polo 1.0 TSI Comfortline is
a delight to drive, planted on the tar yet
nimble when required. And given that the
engine is no more than a one-litre, it is
surprisingly sprightly and responsive. VWs
new generation TSI engines with start-stop
technology and regenerative braking bring
improved power and torque output to the drive.
The car’s small but extremely efficient
and perky engine is more than adequate for
a lively driving experience. Quick off the line
with superb pull in first gear, the compact
hatchback negotiates inclines decently, cruises
effortlessly and has ample overtaking ability.
The manual five-speed gearbox is refined
with slick gear changing and the clutch
engagement is dynamically balanced with little
exertion required to operate.
Keen to test the car with five adults to
determine space and the effect of weight
on performance, four adult humans piled in,
my Labrador – seated regally in the rear –
standing in for the fifth anthropoid.
Despite the added weight that included
some goodies in the boot, the car performed
admirably, even on inclines. Space, too, was
generous, with ample legroom and headroom
at the rear, a prerequisite for long jaunts.
The week of the car test was marked by
continuous rain and flooded roads and, one
late afternoon, hail… lots and lots of hail. After
I sought refuge in undercover parking waiting
for the extreme conditions to abate, we were
back on the sodden and somewhat icy roads.
The short story is that the Polo’s
windscreen wipers, headlights, demister and
heater were all put to the test and worked
a treat. And on-road performance in the
wet with the car’s 15-inch alloy wheels was
confidence inspiring.
I have but two minor gripes. One has to
do with low-down torque in second gear
on inclines, and the other is the car’s noisy
unlocking mechanism. Both of these trivial
irritations, though, pale into insignificance
given the vast number of superior attributes
that this car offers.
Back in the day – no rolling eyes please,
hear me out on this – things were made to last,
the product of quality materials and precision
workmanship. And with the VW Polo, this still
holds true. That this comes with handsome
design, top-notch fit and finish and advanced
features in an affordable package is all the
more appealing. ■
finweek 10 May 2018
on the money management
By Amanda Visser
How to manage that person
on your team
There’s usually one employee who makes your life as a manager hell. What’s the best way to deal with the
troublemakers on your team?
v ery few managers have had the privilege of
being the head of a team in which everyone
gets along splendidly and not a single person
rubs anyone else up the wrong way. Such
a team is almost as far removed from reality as a
married couple who never fights.
Most managers have encountered at least one
person in their team whom they simply could not
stand. The employee has the uncanny ability to irritate
you by merely being present. They find your buttons
and keep pushing them, incessantly.
Fatima van Toorn, labour specialist and owner of
FvT HR Consulting, says that in many instances the
manager and an employee are at odds because of poor
work performance. Some people show their best
side during the interview, but once in the
job, their attitude changes.
Older managers may also
struggle with millennials,
because they are under the
impression that the young
ones lack an old-fashioned
work ethic. Then there are
the smarty-pants who
sometimes are better
qualified or cleverer than
the manager – but in most
instances, these individuals
simply want to put their
managers in their place publicly.
“This causes major disruption
because other colleagues will notice,
and the manager will be left exposed and
humiliated,” explains Van Toorn.
The manager might have inherited a team and find
that they dislikes one team member merely because
they’re incompatible. They may have different political
opinions or different values.
Paul Waldeck, an executive coach and founder of
Winspire People, says the responsibility rests with the
manager to find out what their own buttons are, how
these triggers got there and why they react in the way
they do when these buttons are pushed.
Waldeck focuses on “culture discovery” and how the
misalignment of values causes interpersonal conflict.
Negative emotions and reactions are − generally
speaking − triggered due to value mismatches.
finweek 10 May 2018
The value mismatch
There are some key values that act as the filter for the
way people interact with each other or perform tasks.
“If there is a value misalignment between the
manager and a team member – which often happens
– the connection is broken. It becomes a negative
communication spiral purely because of the different
value languages,” Waldeck explains.
The task of the manager is to understand the
values of the people they are managing. He says that
in a world where people “have things to do”, managers
often neglect to “manage people” by understanding
who they are, what their values are and what makes
them do things in a certain way. Instead, they are
managing items on their to-do lists.
Van Toorn says clear indications of
a breakdown in relationships
include: lack of respect being
expressed non-verbally (like
eyes being rolled when the
other person is not looking)
or body language indicating
an unwillingness to
communicate (like turning a
back or crossing arms).
Other things to look out
for is when a team member
goes over the head of the
manager, to another manager
or even to the manager’s superior.
Also, when one-liners are the only
way of communication, or a team
member seeks every opportunity not to
be at their desk – longer smoke breaks, lunches, or
staying off sick for the slightest sniffle – you know
something is up, she says.
Waldeck says people are creatures of habit and
tend to stick with behaviours that worked in the past
– even if it is clear that they are no longer working.
The manager might be avoiding the irritating team
member – and may even start communicating
through other team members with whom they have
better relationships.
Fatima van Toorn
Owner of FvT HR Consulting
and labour specialist
The task of
the manager is
to understand
the values of
the people
Paul Waldeck
Executive coach and
founder of Winspire People
Finding the solution
It is up to the manager to implement change and
come up with a solution, Waldeck notes.
on the money quiz & crossword
According to Van Toorn, a first step can be an
“offline” discussion between the manager and the
problem employee, without the presence of third
parties. She calls it a “clear-the-air” session.
“Talk openly, and share your experience with the
employee, and see if the employee is mature enough to
work on the relationship.”
If that doesn’t work, and you’re not able to set “the
rules of engagement” going forward, it is time to call
in the experts. This can be the manager’s own boss,
a human resources (HR) specialist, or a career coach
who’ll act as facilitator. It will probably take more than
one session – it is almost like marriage counselling.
If the employee is at fault, they need to be aware
of the consequences. They have chosen to act in this
way, and have to make a career decision to work with
the manager and give their full cooperation.
If the employee has legitimate problems with the
manager, then the manager’s behaviour needs to be
addressed. “However, if the employee is not fitting in, and
this causes disruption and influences work performance,
or he or she is bad-mouthing the manager and it impacts
on the company’s reputation, then they must know that
their actions could lead to dismissal.”
When Waldeck does executive coaching, he
uses an innovative way to teach managers how
to be sensitive to the value language of their team
members – horse riding. He teaches them the basics
of horseback riding and then gets them to complete
an obstacle course on horseback while being timed.
Once they are done, Waldeck explains what makes the
animal feel safe – in other words, he helps the people
on the course speak the “value language” of the horse.
“Once you understand what the horse needs,
the dynamics change,” he says, using the example
of a manager who had never been on the back of a
horse. She did the initial course in two minutes. After
understanding the “value language” of the horse she
cut her time by a full minute.
Van Toorn’s advice to employees who have been
given the opportunity to clear the air and to work
with and not against the manager, is to choose to be
happier. Otherwise you have to choose to be unhappy
somewhere else, she says.
Congratulations to Lyle Pretorius, who won a book prize in a recent giveaway.
Well done! This week, it could be your turn to win. We’re giving away
a copy of Understanding Financial Statements: The Essential Guide to
Understanding and Interpreting the Financial Statements of a Business by
Mark Graham, Jimmy Winfield and Taryn Miller. To enter, complete the online
version of this quiz, which will be available via from 7 May.
1 Which soccer team recently won the
local Premier Soccer League title?
6 True or false? The latest addition to the
British royal family is Princess Victoria.
2 True or false? The president of
South Korea is Park Geun-hye.
7 In which South African city is the Moses
Mabhida stadium located?
3 Which local businessman has sued
Steinhoff for R59bn?
■ Markus Jooste
■ Patrice Motsepe
■ Christo Wiese
8 True or false? Icasa recently ruled that MTN,
Cell C and Vodacom must allow data to roll
over so customers can use it after 30 days.
4 Supply the missing word: IAAF
stands for: International Association
of _______________________________________
9 In which country is the city of Chernobyl,
associated with a notorious nuclear disaster,
■ Ukraine
■ Russia
■ Finland
5 Of which healthcare company is
Shrey Viranna the CEO?
10 True or false? Russian President Vladimir
Putin went to the US on a state visit recently.
NO 707JD
1 Specially select kind chap for review (4-4)
5 Soundly mock boy’s school (4)
9 Stir up tea to the colour of moleskin (5)
10 Function or source of power (7)
11 Row at English banquet (4)
12 Fellow, we hear, steps in to give counselling
13 Manipulating English, deaf and stubborn as a
mule (5,2,6)
18 Rescues survivors of French origin (8)
19 Call for Tyneside editor (4)
20 English dramatist devours the French
delicacy (7)
21 Having two right by Thursday’s opening (5)
22 Look about for wisdom (4)
23 Humanitarian touch initially intended to make
one happy (4-4)
2 Penny-pinching woman with a crop (7)
3 Take one’s finger off or put it on? (7)
4 Edge round interchange to the barrier
6 Non-diet concoction hummed (7)
7 Roll-on operator (7)
8 Common to the French carriage (6)
13 Get funny sleeping bag (7)
14 Sort of cast without supporting actors?
15 Ambassador not involved in the flap with
the coral islands (6)
16 It’s possible to have engagement
without exploitation (7)
17 Determine to back alternative form of
shock treatment (7)
The don’ts in a troubled relationship:
■ Don’t take it personally.
■ Don’t pick on the employee.
■ Don’t abuse your power by overburdening
the troublemaker.
■ Don’t be provoked by what the employee does.
■ Don’t ignore the issue.
The dos in a troubled relationship:
■ Try to get to the bottom of the problem.
■ Deal with the matter sooner rather than later.
■ Act fairly.
Solution to Crossword NO 706JD
ACROSS: 1 Robotically; 9 Elevate; 10 Reeds; 11 Inner; 12 Gawkier; 13 Daniel; 15 Kenyan; 18 Roister;
■ Escalate to a neutral party if you can’t find solutions. ■
DOWN: 2 Odeon; 3 On a free; 4 Ice age; 5 Arrow; 6 Leerily; 7 Bewildering; 8 Astronomers;
14 Naivete; 16 Eyesore; 17 Craves; 19 Teach; 21 Segue
20 Epsom; 22 Noema; 23 Vlogger; 24 Bewhiskered
finweek 10 May 2018
On margin
Loving the lova life, buddy
This issue’s Zulu word is dedicated to the
legends who take “sick leave” on Fridays
and/or Mondays. We see you. We know
what you’re up to. Salute.
Lova is related to the English word
loaf. Not loaf of bread or meat loaf. Lova is
to loaf – as in the verb. To lova is to bunk.
As in bunking work or school. South
Africans love to lova.
The word is also used to describe an
unemployed person – ulova. If you’re
loafing around the neighbourhood
because you don’t have a job or don’t go
to school, you are ulova – a loafer.
Ulova is also a term of endearment,
used mostly by men towards each other.
If a guy calls you lova it doesn’t mean
he thinks you’re unemployed; he’s just
saying: “Hey, buddy.”
Obviously, if someone sends you
a text that reads, ‘Hey, lova’, it can be
confusing. Are they hitting on you? What
do they want?
Some people can lova even when
physically at work. Just look at MPs, local
government officials, Cape Town’s water
management task team, bureaucrats
in some home affairs offices or traffic
departments … so many lovas.
With all the public holidays recently,
some people haven’t been to work in
weeks. They are the evil geniuses who are
amazing at this lova thing. I couldn’t plan
like that. In fact, public holidays always
catch me off guard, then throw off my
schedule. After a public holiday, I never
know whether I am coming or going. I am
an amateur.
On a serious note though, Productivity
SA says we are a nation of lovas, and that
is not good at all. We need to get off our
asses and get working.
– Melusi’s Everyday Zulu, by Melusi Tshabalala
Tebogo Masike @t_masike89
No matter how rich you are… we are all
equal at the licensing department.
Darrel Bristow-Bovey @dbbovey
Caster Semenya seems to have a
degree of calm, dignity, grace and
forbearance that I just do not associate
with elevated testosterone levels.
Adam Liaw @adamliaw
Trying to book flights in rural China
and if an airline’s website can crash
this much, I’m excited to see what the
plane’s going to do.
Dan Paris @_DanParis
I’m not saying Scottish people lose
all sense of perspective when there’s
a wee bit of sunshine, but I just saw
a woman doing her ironing in her
front garden.
Adulting @adultproblem
Adulting: wanting to be invited but not
wanting to go.
Lynette Ntuli @MsNtuli
“Stop shrinking yourself to fit places
you’ve outgrown.”
VeryBritishProblems @SoVeryBritish
“We should definitely organise
something soon!” – Translation: See
you at the next wedding.
“Charm is the ability to insult
people without offending
them; nerdiness the reverse.”
– Nassim Nicholas Taleb, Lebanese-American
essayist, scholar, statistician, former trader
and risk analyst (1960 - )
finweek 10 May 2018
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