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Finweek English Edition - November 08 2018

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ENGLISH EDITION
8 November 21 November 2018
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from the editor
contents
Opinion
a
nweek
k we often write about unemployment. We write about the
untry’s unemployment levels and how devastating it is for the
onomy, and for its citizens, when 6.2m people are sitting at home
– unable to find jobs.
When specific sectors experience job losses, or specific companies announce
planned retrenchments, we write about it. About the impact it will have on those
communities, and how it will trickle through to other elements of life. We write
about what it means for that specific sector as a whole, and how it will impact
other sectors.
But news is always slightly harder to swallow when it hits close to home. As it
did for me as a journalist when, at the end of October, the SABC announced that,
“should retrenchments be necessary”, it expects to retrench 981 employees. That
is a very specific number. So specific that the cynical would say a list with 981
names on it already exists. But let’s not be cynical. The SABC also expected that
1 200 freelancers (out of 2 400) would be affected.
Everybody in the media industry (and probably also most people outside
of it) would be very aware of the fact that this industry has been experiencing
tough times for at least a decade. Newsrooms in the country that have not gone
through the feared “Section 189” process over the last ten years, could probably
be counted on one hand.
Don’t get me wrong: As a South African, I have been equally frustrated by the
disastrous effects of years of mismanagement at the public broadcaster. And, of
course, the dire financial situation at the SABC has to be addressed.
But what I find even more frustrating is that 2 181 employees now find
themselves in a position of very real job uncertainty. Should the retrenchments
become a reality, they will be joining the hundreds of journalists and other
media professionals who have already been pushed out of the industry through
countless rounds of retrenchments in recent years.
Very soon, I fear, there will be very few of us left to write about the devastating
impact of unemployment, about top-level corruption at state-owned enterprises,
about state capture, about opportunities lost. ■
6 Ramaphosa’s number one challenge: getting rid
of patronage politics
8 SA’s plans to curb debt: Ratings agencies give us
benefit of the doubt
In brief
10 News in numbers
12 Can this tech improve mining productivity?
Marketplace
14
15
16
17
House View: Calgro M3, Shoprite Holdings
Killer Trade: Telkom, TFG
Invest DIY: Dealing with delistings
Technical Study: The bear market puzzles
everyone
18 Simon Says: Clicks, Combined Motor Holdings,
Coronation, Dis-Chem, Famous Brands, gaming
industry, JSE, Pick n Pay Stores, Vivo Energy
20 Investment: Know what you are paying for
21 Invest DIY: How to react to a bear
Cover
22 How to pick stocks in a lacklustre market
Focus on
28 Your guide to medical aid and insurance costs
On the money
40 Motoring: A machine meant to be driven
43 Tech: If things had gone to plan…
44 Management: How micro-management
impacts on business
45 Crossword and quiz
46 Piker
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opinion
By Johan Fourie
GOVERNANCE
Ramaphosa’s number one challenge:
getting rid of patronage politics
There is sufficient evidence that patronage is a terrible system. If not addressed at all levels of South African
government, chances of growing the economy to where it needs to be, will remain slim.
Photo: www.guoxu.org
p
of the state and are responsible for the delivery
resident Cyril Ramaphosa is
of public services and the implementation of
on the investment offensive.
policies. Understanding how to promote and
Because the South African
incentivise bureaucrats is central to improving
economy is stalling, he is
organisational performance.”
desperate to attract investors who will create
For much of human history, bureaucrats
jobs and boost incomes. One way to do that,
were appointed through patronage. The way
he believes, is by hosting summits; a Jobs
you moved up in society was mostly the result
Summit and an Investment Summit could be
of who you knew rather than what you knew.
just the thing to invigorate investor appetite
Even in the US today, more than 8 000 federal
for South Africa.
positions are still allocated “at the pleasure of
But it’s a hard sell. Not only is global
the president” (if, of course, he is competent
economic growth on the wane, South
enough to do so).
African internal policies and politics are not
It is not only in government that you find
creating the stable, low-risk environment that
patronage, we often see family ties and personal
investors crave when the returns are unlikely
connections play an important role in new
to be double digits.
board appointments.
Whatever the merits of land
Theoretically at least, patronage
redistribution, calls for what
can be a good thing. Loyalty to
seems to be an unnecessary
the superior may incentivise
constitutional change to
subordinates to not shirk
allow expropriation create
their work. But patronage can
uncertainty. An inability
also be bad for organisational
to reduce crime – the one
performance, as favouritism may
issue that affects all South
disincentivise subordinates to work
Africans – makes our country
at all because they have the protection
less attractive as an investment
Guo Xu
of their superior.
destination. The Economist’ recent
Assistant professor in
For long, though, it was difficult to
article on Cape Town’s high murder
business and public
policy at the Haas
prove which of these two outcomes
rate, for example, will undoubtedly
School of Business
are most likely to occur. Xu, however,
hurt tourism. And although Tito
at the University of
has found a novel approach to do just
Mboweni’s appointment seems to
California, Berkeley
that. He transcribed thousands of
have satisfied markets, it is never
personnel and public finance records of the
a good sign to have a revolving door for the
British Colonial Office during the late 19th
second-most important office in government.
and early 20th centuries. He then measured
All of these ills are rooted in our public sector
how closely governors in the colonies are
incompetence – the result of a bureaucracy
connected to the Secretary of State, the
built on patronage rather than the efficient
official in England who appointed them.
provision of public services – that makes doing
He shows that governors connected to the
business an expensive and frustrating exercise.
Secretary – as family members, members of the
This is the one thing Ramaphosa’s
same party, or even as school buddies – enjoyed
government must begin to address if we are to
higher salaries through the promotion to higher
create the right conditions for growth.
paid and larger colonies. However, this is only
As Guo Xu of the Haas School of Business
at the University of California, Berkeley notes in true for the period before the Warren Fisher
an upcoming American Economic Review paper: Reform, a policy that changed the appointment
process from patronage to meritocracy.
“State capacity is fundamental to development
It is not only that these appointees (before
and growth. Bureaucrats are a key element of
the Reform) earned higher salaries. They also
state capacity: they embody the human capital
6
finweek 8 November 2018
performed worse. Xu finds that a colony’s
public revenue performance declined in
years when a governor with close ties to the
Secretary of State rules.
“This is consistent,” says Xu, “with the
interpretation that patronage exerts a
negative effect on the performance of socially
connected governors. Consistent with the
previous result, the fiscal performance gap
disappears after the removal of patronage.”
The lesson? Patronage is bad for
performance.
A new National Bureau of Economic
Research (NBER) study sheds some light
on why this might be. Three economists use
very detailed information, including firm-level
balance sheet data, social security data, patent
data and detailed data on local elections in Italy
(between 1993 and 2014) to show that firms
that are more connected to politicians are likely
to be less productive.
They identify a leadership paradox:
“When compared to their competitors,
market leaders who are more likely to be
politically connected, are much less likely to
innovate. In addition, political connections
relate to a higher rate of survival, as well as
growth in employment and revenue, but not
in productivity.”
It seems to work like this: when a firm
has strong political connections, they use
these connections, legally or illegally, to
get preferential contracts, tariffs or other
regulations that allow them to beat the
competition. When a firm has few or no
political connections, they are forced to
innovate to be better than the competition.
Ultimately, more innovative firms are more
productive and dynamic.
Patronage, the evidence shows, is a terrible
system. But it’s become endemic in the South
African state. Without attempts at addressing
a patronage system that pervades all levels of
government, no investment summit will push
SA’s economic growth to where it needs to be. ■
editorial@finweek.co.za
Johan Fourie is associate professor in economics at
Stellenbosch University.
www.fin24.com/finweek
opinion
By Mariam Isa
ECONOMY
SA’s plans to curb debt: Ratings
agencies give us benefit of the doubt
Further credit rating downgrades are unlikely ahead of the Treasury’s February budget, when it will be more clear if
economic revival strategies will work.
Shutterstock
s
outh Africa’s financial markets may have wobbled in
response to the bad news in Treasury’s medium-term
budget policy statement (MTBPS) last month, but South
Africans run the risk once again of seeing their glass as half
empty rather than half full.
The fact is that for the next few months the country will avoid a
downgrade from Moody’s Investors Service — the only agency to still
have an investment-grade credit rating for SA — despite significant
deterioration in official forecasts for budget deficits and debt ratios,
both to concerning levels.
Moody’s took the bad news in its stride, saying in an issuers note a few
days later that although the MTBPS was “a credit negative”, the risks to
Treasury’s latest fiscal projections were “balanced” and its tax collection
assumptions were achievable.
This means that unless there are unexpected political
or economic shocks, Moody’s is on track to keep its
sovereign rating for SA — together with a stable
outlook — unchanged until the country’s 2019
budget in February, when it will be clear whether
Treasury has managed to meet, and perhaps
even exceed, its latest targets.
It also means that until then, the country
will avoid the downgrade which would knock
its government bonds out of the Citigroup
World Bond Index, triggering damaging
outflows of the foreign capital invested in
domestic bonds and equities and putting further
pressure on the depreciating rand.
By the same token, Standard & Poor’s analyst for
SA, Ravi Bhatia, was fairly sanguine when he spoke at
a conference in Johannesburg on 30 October, pointing out
that although economic growth forecasts had been revised sharply
down for this year and next, the expected longer-term trajectory was
essentially unchanged.
He did not dwell heavily on the unexpectedly big adjustments to
Treasury’s outline of higher budget deficits and increased debt issuance,
or on its plans to shift to more short-term borrowing to cover rising debt
costs — saying only that Treasury’s debt management strategy has
always been “credible”.
Although he was careful not to give clues ahead of S&P’s next
scheduled rating update on SA on 23 November, his remarks can be
seen as a sign that the rating agency is likely to keep its BB rating on the
country — which is the lowest given by all of the top three rating agencies
— unchanged until the February budget.
Fitch, which has SA’s sovereign rating a notch below Moody’s at BB+,
was more critical in its response to the MTBPS. But Fitch also signalled
that it was likely to stand pat for now, while keeping a close watch on the
“evolution of fiscal policy” in response to the recession, as well as political
and social pressures ahead of next year’s general election.
8
finweek 8 November 2018
Many analysts have been cautiously upbeat on the MTBPS,
highlighting the fact that it managed to avoid raising spending ceilings
despite the large revenue shortfalls projected for the next few years, as
well as an unexpected R30bn overshoot in the expected public sector
wage bill, which gobbles up more than a third of the budget.
The main reason for this year’s revenue shortfall was the fact that the
South African Revenue Service, which was badly mismanaged under
former President Jacob Zuma, is going to refund companies R20bn of
value added tax — a step seen by many as a boost to the economy which
is also likely to help restore business confidence.
At the same time, rather than setting aside more money for wages in
the bloated public sector, Treasury shifted that burden to national and
provincial departments, saying they had to absorb the costs of the pay
increases within their own baselines.
Doubt has been cast over whether the strategy will
succeed, but government has since said it will develop
a renumeration strategy to help those departments
foot the bill. That should help avert cuts in service
and capital spending which would have amounted
to a form of concealed fiscal austerity — a step
Treasury has said it will not take to avoid hurting
the economy.
Treasury officials have also made clear that
new tax increases will be avoided, although the
main budget document contained a warning
that fuel levies would have to rise sharply over
the next few years to cover liabilities in the Road
Accident Fund.
President Cyril Ramaphosa’s economic stimulus plan,
funded by shifting R32.4bn of public spending, has not
been seen as much of a boost for the economy — in fact, Bhatia
described it as a “fiscally neutral” oxymoron.
However, the investment which SA looks set to receive over the
coming months is much more encouraging for the growth outlook,
with $20bn pledged at last month’s investment summit and $35bn
beforehand, including $10bn each from Saudi Arabia and the UAE.
Last, but certainly not least, the country’s new and outspoken finance
minister, Tito Mboweni, wields far more political clout than his predecessor
Nhlanhla Nene, and will do his best to make the ANC toe the fiscal line.
The day after the MTBPS was unveiled, he warned Parliament’s
finance committee that if government borrowing was not curbed
fast, the country would have to approach the International Monetary
Fund for a loan — something which would only be extended with
painful conditions. ■
editorial@finweek.co.za
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
topics ranging from war to oil, as well as politics and economics. She joined Business Day as
economics editor in 2007 and left in 2014 to write on a wider range of subjects for several
publications in SA and in the UK.
www.fin24.com/finweek
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in brief
EDITORIAL & SALES
Acting Editor Anneli Groenewald Journalists
and Contributors Simon Brown, Lucas de
Lange, Johan Fourie, Moxima Gama, Lloyd
Gedye, Mariam Isa, Schalk Louw, David McKay,
Petri Redelinghuys, Amanda Visser, Glenda
Williams Sub-Editors Jana Jacobs, Katrien
Smit Editorial Assistant Thato Marolen
Layout Artists David Kyslinger, Beku Mbotoli
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10
“IN 2000, R56BN WAS DEPLOYED
OFFSHORE BY SA INVESTORS AND
TODAY IT’S AROUND R516BN.”
- Natalie Phillips, the head of SA Institutional at Investec Asset
Management, comments in an article in Business Day on a growing trend
whereby local investors diversify through offshore assets. “The trend is
massive and it’s going to continue because you have the ability to participate
in fantastic investment themes globally,” she was quoted by the paper as
saying. “You can invest in sectors and subsectors that are not prevalent in the
SA market, like fintech, artificial intelligence and other disruptors.”
“THE TRICK IS TO FIND
COMPANIES THAT ARE LIKELY
TO STILL BE AROUND IN 20 OR
50 YEARS FROM NOW, AND THAT
ARE TRADING AT PRICES THAT
ARE ATTRACTIVE ENOUGH TO
BUY, EVEN IN THE BAD TIMES.”
- Petri Redelinghuys, founder of Herenya Capital Advisors, in finweek’s cover
story on p.22, in which he provides guidelines to assist investors in finding value
when markets are offering little. “As investors,” he writes, “we must remember
that bear markets and recessions are huge opportunities for us to buy into great
companies at great prices and attain great returns over the long term.”
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>> MINING: Teaching a ‘dinosaur’ the possibilities of tech p.12
finweek 8 November 2018
“While she made mistakes, you could rely
on Merkel even if you didn’t like her.”
- Jan Techau, the Berlin-based director of the Europe programme for the
Marshall Fund, is quoted as saying in The New York Times. His comments come
after German Chancellor Angela Merkel announced that she would not be running
for another term. Widely considered “the poster woman for Europe’s democratic
centre”, as the paper put it, there are major concerns as to the effect her departure
will have on the political stability of her country and the bloc.
www.fin24.com/finweek
DOUBLE TAKE
BY RICO
THE
GOOD
On 30 October, Chancellor Angela
Merkel announced that Germany
would be pledging €1bn to invest in
Africa, according to EWN. The creation
of the fund is aimed at encouraging
small- and medium-sized enterprises
(SMEs) to grow their presence on the
continent by providing loan and equity
financing to European and German
SMEs seeking to invest in Africa, equity
financing for African SMEs as well as
the establishment of a network offering
advice to potential investors, the online
news outlet reported.
THE
BAD
While the ANC’s Brian Hlongwa has
stepped down as the party’s chief
whip in the Gauteng legislature, he’ll
remain as an ordinary member, reported
dailymaverick.co.za. A June report by a
special investigating unit “linked Hlongwa
and 11 others to R1.2bn in alleged
corruption and fraud while he was
health MEC between 2006 and 2009”,
according to the site. His fellow party
member Qedani Mahlangu, also a former
health MEC, is implicated as a central
figure in the Life Esidimeni tragedy. On 30
October, a provincial integrity committee
recommended that both be suspended
as additional members of its provincial
executive committee, but the Gauteng
ANC has rejected this recommendation.
Gallo/Getty Images
THE
UGLY
With unemployment rising further for
the third quarter, from 27.2% to 27.5%,
a total of 6.2m South Africans are now
jobless. This was according to Stats SA’s
Quarterly Labour Force Survey, released
at the end of October. According to Stats
SA’s broad definition of unemployment,
which includes those who are no longer
looking for employment, the figure rose
from 37.2% to 37.5%. While President
Cyril Ramaphosa’s attempts to secure
investment into the local economy
appear to be reaping some success,
one thing is certain: It will take years
before we see any meaningful dent in
addressing arguably one of the biggest
socio-economic crises in this country.
@finweek
finweek
PROPERTY WAITING FOR 2019
JOB CUTS
R440m
28.58%
The SABC plans to save R440m per annum by
retrenching almost 1 000 of its permanent staff
members and by reducing its freelance head
count. It is also trying to get back another R60m
which was lost to the public broadcaster due to
alleged irregular appointments, salary increases
and promotions. The broadcaster has indicated in
a statement that the contracts of half of its
2 400 freelancers will not be renewed. During the
2017/18 financial year the broadcaster generated
revenue of R6.6bn and suffered a loss of R622m.
The salary bill is reported to be sitting at R3.1bn.
Top management at the broadcaster has been
purported to earn salaries running into millions
per annum. Its controversial axed CEO Hlaudi
Motsoeneng earned close to R3m per annum.
He was fired after being found guilty of bringing
the SABC into disrepute and causing irreparable
damage to his employer.
According to Business Day, the SA Listed Property
(SAPY) index has already lost 28.85% this year,
due to what the paper called “weak economic
growth, low business confidence, struggling
consumers and the sell-off in the Resilient group
of companies”. The latter lost R120bn in market
capitalisation when it experienced a share price
collapse at the beginning of the year. According
to the paper, asset managers are expecting the
sector to recover next year, with Garret Elston
from Reitway Global expecting a total return of
between 10% and 15%.
finweekmagazine
Hlaudi Motsoeneng
Axed CEO of the SABC
RECORD-BEATING PROFITS
20%
Samsung Electronics reported operating profit of
20% year-on-year for the third quarter, to $15.5bn,
a record for the company, according to ft.com. Its
previous quarterly record, of $14bn, was recorded
in the first quarter of the year. Song Myung-sup, an
analyst at HI Investment & Securities, has however
warned that Samsung’s earnings were “projected
to fall due to a decline in the price of memory chips
as a result of China’s rapid expansion of capacity
as well as low seasonal demand”, reported ft.com.
“Samsung’s earnings have been driven by a single
product: semiconductors. What could be a new
growth driver? Nothing for the moment,” Song was
quoted as saying.
finweek 8 November 2018
11
in brief in the news
By David McKay
Can this technology improve
local mining productivity?
Photo: Archive
Digitalising mining is not the easiest of tasks, but there is a company that is trying to change that.
f media presentation in BSC’s Sandton offices.
ormer Gold Fields CEO Ian Cockerill was scathing at
a recent mining conference regarding the reticence
What’s different about it, however, is the role it plays in a
of the SA mining sector to embrace new technology
convergence of different technologies: the so-called Internet
through the years. For too long, it had done its
of Things, in hi-fidelity visualisations, and in computational
work “in the dark”, only finding out the results of its efforts
mathematics. The BSC acronym is there for a reason: Bondi
a month later and therefore being unable to respond to
& Co are boffins of note.
problems with much effect.
In essence, what BSC is hoping to do with digital
It was “a dinosaur”, he said.
twinning is show mining (and other) companies how to
Ian
Cockerill
That’s as damning as it comes.
improve productivity by better understanding how the sum is
Former CEO of
To be fair to SA mining, however, much of its gold and
driven by the parts. In its most granular manifestation, BSC
Gold Fields
some of its platinum mining is located deep underground; it
can model in real-time how the operation and performance
is also highly labour-intensive. Therefore, digitalising
of, say, a mine’s yellow machinery contributes towards
mining activities is not the easiest of tasks; not when
earnings before interest, tax, depreciation and
When one says “twinning”,
what’s
actually
happening
is
that
a
compared to open pit mining, where monitoring and
amortisation (ebitda), or are not contributing to ebitda.
computational
model,
that
can
be
visibility is much easier.
So, when one says “twinning”, what’s actually
displayed as a
Just ask Gold Fields. Try as it might, the company
happening is that a computational model, that can
cannot seem to extract a decent margin from its
be displayed as a 3D-diagram of a mine, is being
South Deep mine, west of Johannesburg. That
recreated with the performance of its constituent
is despite rounds and rounds of re-engineering
parts laid bare.
initiatives, shift changes, and import of costly
It’s a micro-managers’ dream.
diagram of a mine, is being
recreated
with
the
performance
of
consultants.
What’s interesting about the technology is that it
its constituent parts laid bare.
In this regard, deep-level underground mining, for
refines time-honoured precepts about mining. One
which SA is famed, is somewhat outside the orbit of
is the dominance of “volume and grade”, essentially a
the much-vaunted “fourth industrial revolution” in
reference to the crucial aspects of profitability of any
which companies like Business Science Corporation
mine. Bondi also dismisses the notion of “average cost
(BSC) are hoping to assist.
per tonne”.
BSC is a subset of Cyest Corporation, a private
“There’s only value loss in the rule of averages,” says
technology company founded by Elton Bondi about two
Bondi who thinks digital twinning can show that the
decades ago, and which he claims has produced a profit
“smoothing” effects of average grade glosses over where
from day one. One tends to believe that: Bondi comes across
pockets of value can be extracted.
as a stickler for detail. It might also be helpful to know that
It also shifts the debate somewhat away from what
he’s a capped Protea pilot specialising in display aerobatics.
people mean by productivity, which traditionally always
That’s not like lawn bowls: one critical mistake and you used
revolves around mobilising a complement of employees.
Elton Bondi
Founder of Cyest
to be a capped Protea pilot specialising in display aerobatics.
There are limits to the technology, though. Where
Corporation
The area where BSC hopes to work with the mining
technology is badly needed in SA mining is in modifying
industry is in the application of digital twinning. This is not
human behaviour to improve safety. That’s hard for digital
new technology so much as new application of the concept.
twinning to achieve as human beings are unpredictable,
“It’s been around quite a long time,” says Bondi during a
contrary and quite frequently act in ways that are unsafe. ■
editorial@finweek.co.za
Photo: pilotspost.com/Archive
3D-
12
finweek 8 November 2018
www.fin24.com/finweek
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market
place
>> Killer Trade: Telkom, TFG p.15
>> Invest DIY: When a company delists p.16
>> Technical Study: Concerns mount as S&P500 drops p.17
>> Simon Says: Clicks, Combined Motor Holdings, Coronation, Dis-Chem,
Famous Brands, gaming industry, JSE, Pick n Pay Stores, Vivo Energy p.18
>> Investment: Understanding the costs of your investment product p.20
>> Invest DIY: Keep calm and face the bear p.21
BUY
CALGRO M3
SELL
HOLD
By Simon Brown
I am getting out, decisively
I sold the majority of my Calgro M3* holding
in December 2015 in the days after the firing
of then finance minister Nhlanhla Nene. But
I erred in that I only sold some 80% of my
holding.
This was a major error, not because the price
has now collapsed, but because as investors we
need to be decisive and I was not. Rather, I was
trying to have the best of both worlds, lock in
profits and hold on hoping for more.
The latest results for Calgro M3 have a lot
of moving parts, with new IFRS rules hurting.
Last trade ideas
But there is a lot more that is also hurting the
stock. While the land it owns is worth some
950c/share, the group’s solvency and liquidity
is looking bleak, debt covenants are close or
already in breach and illegal land invasions are
costing them time and money.
This stock will probably soar again, and I may
rebuy at higher prices, but for now I am being
decisive rather than dithering, as I do not see
the trigger that will see it moving higher. ■
SELL
Invicta
25 October issue
BUY
Bowler Metcalf
11 October issue
HOLD
Metrofile
27 September issue
SELL
MTN
13 September issue
*The writer owns Calgro M3, but will be exiting as soon as this issue
hits the stands.
SHOPRITE HOLDINGS
BUY
SELL
HOLD
By Moxima Gama
Last trade ideas
In a short-term bear channel
After reporting relatively flat sales for the three
measured in rand. The Angolan kwanza and
months to end-September, Shoprite’s share
Zambian kwacha have depreciated by 76.3%
price gave in by 4.6% to 17 450c/share (at the
and 21% respectively against the US dollar since
time of writing on 29 October), extending its
the beginning of 2018. The group’s hedging
losses to the lower slope of its short-term bear
strategy is said to have softened the blow.
channel.
How to trade it:
In an operational update, the company said it
Shoprite has been ranging between 19 800c/
had experienced “product availability challenges
share and 17 700c/share within its bear channel.
stemming from the group’s largest distribution
Late October’s news saw it trade through key
centre in Gauteng, which accounts for 53% of
support at 17 700c/share on intra-day trade
total centralised food distribution”
but managed to close above that
The group’s core South
for its supermarkets in SA.
level. Shoprite would have to trade
African supermarket
This anomaly has resulted
above 19 800c/share to end this
business grew sales by
in a significant loss of sales
consolidation and retest the upper
opportunities, inevitably
slope of its channel at 21 450c/
benefitting competitors, CEO
share. A move above 22 360c/
Pieter Engelbrecht said in the
share would place it in medium-term
while the rest of Africa
update. Turnover has only grown
bullish territory with potential gains
operations suffered an 8.6%
0.4% from the corresponding
to 25 540c/share at first, and then
decline, measured in rand.
period in 2017 due to 0.1%
to the all-time high at 28 190c/share.
internal food deflation, strikes and
Alternatively, continued downside
rand strength against other African countries.
through 17 700c/share could see Shoprite
The group’s core South African supermarket
topple further to either the 15 000c/share-level
business grew sales by 1.7% while the rest of
or key support at 12 400c/share. ■
Africa operations suffered an 8.6% decline,
editorial@finweek.co.za
HOLD
Datatec Ltd
25 October issue
CAUTION
Capitec
11 October issue
BUY
Sibanye-Stillwater
27 September issue
BUY
Stadio Holdings
13 September issue
1.7%
14
finweek 8 November 2018
www.fin24.com/finweek
marketplace killer trade
By Moxima Gama
TELKOM LTD
Positive breakout?
t elkom, the semiprivatised information
and communications
technology (ICT) services
provider, has over 3.5m telephone
access lines and over 1m internet
ports servicing business, residential
and payphone customers. Telkom
is 39% state-owned and currently
operates in more than 38 countries
across the African continent.
Telkom’s share price excelled from
2013, when current CEO Sipho
Maseko was appointed, after
revisiting a prior low at 1 130c/share,
and tested a high at 8 580c/share in
2015. In 2013, Telkom also disposed
of its 50% stake in Vodacom.
Upon arrival, Maseko implemented
an intensive, well-anticipated
turnaround plan aimed at cutting
R1bn in costs per year.
52-week range:
TELKOM
R41.61 - R58.28
9.19
Price/earnings ratio:
8.81%
1-year total return:
R27.4bn
Market capitalisation:
Earnings per share:
R5.85
Dividend yield:
8.41%
Average volume over 30 days:
1 541 056
SOURCE: IRESS
SOURCE: TradingView
Outlook: After forming a lower
top at 8 250c/share in May 2017,
Telkom lost some of its gains
towards support at 4 160c/share,
as the tech and telecom sector
struggled in current economic
conditions.
On the charts: Currently rangebound between 4 160c and
5 825c/share, Telkom is trading in
a symmetrical triangle.
Go long: A move above 5 825c/
share would confirm a positive
breakout of the triangle – thus
triggering a buy signal. The shortto medium-term target of this
pattern breakout would be at
7 815c/share. Signs of a bullish
breakout would be pending if the
three-week relative-strength index
(3W RSI) continues to trade above
the upper slope of its own triangle
in November. Positions could be
increased above 6 885c/share.
Go short: A negative breakout of the
triangle would be confirmed below
4 600c/share, with the downside
target situated at 2 610c/share. ■
TFG
Correction might end
t FG has a portfolio of
28 fashion retail brands
across various lifestyle
and merchandise categories, including the brands
Foschini, Markham, Exact and
@home. Many South African
retailers have been struggling in
recent years as consumers have
tightened their belts on credit
spending, but this retailer seems
to be largely weathering the
current economic storm.
In September, Dough Murray
retired after 11 years as CEO
of the company. Anthony
Thunström, former chief financial
officer at the company, has taken
over as CEO. Under Murray’s
leadership, the company has
grown from 1 332 stores to over
4 000.
Outlook: From a low of 7 450c/
share in 2011, TFG tested a new
high at 24 080c/share in March
this year. When connecting the
@finweek
finweek
52-week range:
TFG
R312.55 - R240.80
Price/earnings ratio:
7.16
1-year total return:
24.33%
Market capitalisation:
R37.9bn
Earnings per share:
R22.38
Dividend yield:
4.65%
Average volume over 30 days:
1 554 605
SOURCE: IRESS
SOURCE: TradingView
previous high at 20 180c/share,
the share price is trading in a
wide bull channel.
On the charts: TFG has pulled
back after testing a new high at
24 080c/share and is currently a
few points away from the lower
slope of its bull channel.
Go long: A falling wedge is
currently in the making as TFG
corrects within the major bull
channel. A positive breakout
would only be confirmed above
finweekmagazine
17 580c/share, with potential
upside back to the 24 080c/
share all-time high in the shortto medium-term. Firm support
held above 15 365c/share,
including the 3W RSI breaching
the resistance trendline of its
bear trend, would be signs that
a positive breakout is probable.
Go short: Downside through
15 635c/share would extend
current downside to either the
lower slope of the wedge or
towards the 12 820c/share level –
where it should hold.
The lower slope of the bull
channel would be breached below
12 340c/share and downside to
10 205c/share could ensue. ■
editorial@finweek.co.za
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.
finweek 8 November 2018
15
marketplace invest DIY
By Simon Brown
STOCKS
Dealing with delistings
An increasing number of small- and mid-cap stocks are announcing their intentions to delist. What does this mean
for investors holding these shares?
w
Shutterstock
e are seeing a spate of smalland mid-cap stocks delisting,
or at least announcing
intentions to delist. These
include Clover, Verimark and Howden Africa.
In all three cases, at the time of writing (22
October), the companies had issued Sens
announcements to that effect, but no details
in terms of prices at which the delistings
would happen.
What this tells us is that
there are some really decent
quality small- and mid-cap
stocks trading at cheap
valuations. These cheap
and quality stocks are
certainly known, and
the delisting surge is
not unexpected. And I
think we will see a lot more
delistings coming our way.
In reality, this is how a
stock market works. When quality
is cheap, we as investors are buyers. The
difference with delistings is that the buyers
want the entire company and plan to take it off
the JSE to be privately held.
What this trend also indicates is that we
are likely close to a bottom in the small- and
mid-cap space. But this statement comes with
a caveat: “Close to a bottom” does not mean we
are at the bottom. And just because we are at,
or close to, a bottom, does not mean the sector
will start roaring higher any time soon.
I have written before that, typically, large
stocks run higher and when their valuations get
really stretched, investors start looking at smalland mid-cap stocks, eventually sending their
prices higher.
For investors in the small- and mid-cap
universe, this spate of delistings is not good
news as it forces us out of some quality stocks
at discounted valuations, and reduces the size
of the investable universe. In time we will start
to see a listing boom again, but this typically
happens when overall valuations are stretched
as the sellers (who are listing the stocks) get
better prices.
The process of delisting
With a delisting, there is a process that has
16
finweek 8 November 2018
to be followed and that starts with the initial
cautionary. Companies then need to announce
the proposed price at which the delisting will
happen and then shareholders will get to vote.
Importantly, the proposed price will be linked to
the share price in the month or three before the
announcement. Net asset value will have no
bearing on the delisting price.
The process requires an independent
board to consider if the proposal is fair
– most often this independent
board does just that.
Existing shareholders
are then able to vote on
the proposed delisting. If
enough vote against the
proposal, the delisting is
either void or needs court
approval, depending on the
percentage of shareholders
who voted against the deal.
Most often the delisting
gets the required votes, especially
as the price of the delisting is usually at a
premium to the existing share price before the
announcement. So shareholders are able to
make a quick 20% or so, albeit the longer term
potential profits may have been much greater.
Assuming the vote passes, shareholders
will then be paid out into their trading
accounts with details of the relevant dates
being announced on Sens.
Keeping the back door open?
Sometimes shareholders are offered the
option to remain invested in the company
as an unlisted entity. I always reject this
option. Unlisted shares are extremely
illiquid, with no real price discovery. They are
almost impossible to sell (unless at bargain
basement prices).
Furthermore, being listed adds an extra
layer of protection thanks to the JSE listing
requirements. So even if offered the option to
remain invested, I would take the money.
Therefore, while this spate of delistings
might be no fun for investors – as it reduces our
universe of quality and forces us out of some
gems if the vote is passed – you are entitled to
vote. So, share your view by voting. ■
editorial@finweek.co.za
Sometimes
shareholders
are offered the
option to remain
invested in the
company as an
unlisted entity.
I always reject
this option.
www.fin24.com/finweek
marketplace technical study
By Lucas de Lange
JSE
The bear market puzzles everyone
Investors worry about S&P500 as it drops below its long-term uptrend.
i t’s understandable that there are many
discussions about the bear market
that’s currently being experienced on
the JSE and elsewhere.
With only 16% of the 100 largest
shares on the JSE as measured by
market cap above their 200-day
exponential moving averages (EMAs),
the JSE’s All Share Index at the time
of writing 19.1% below and the Top40
about 21% below their highs over the
past year, there can be no doubt about
how dismal 2018 has been.
A good example of the bad news that
investors have to digest is apparent from
a special report in The Economist. The
writer predicts, after an in-depth analysis,
that it will be more difficult to fight the
world recession that’s underway than the
previous one.
The world is unprepared for when the
current upswing in the US – the longest
in its history – will reach its end. When
this recession will hit the world is of
course uncertain, but what’s clear is that
the current weak share markets across
the world reflect investors’ worry over the
US’s stricter monetary policy and weaker
growth prospects, among other things.
But while commentary has been
mostly pessimistic, with many references
to Wall Street – the world’s leading
market, where the S&P500 has dropped
below a long-term trendline – there are
also those who point out that good value
is becoming available.
Research undertaken by organisations
such as the US’s Foundation for the
Study of Cycles shows that opportunities
for buying investments that grow by as
much as thousands of percentage points
become available to investors and can
be found far more easily in times such as
these – especially a large potential winner
or two among neglected small caps.
According to the study, there are
several indicators when searching for
these shares, including:
■ The quality of the management is
extremely important.
■ There should be strong growth in
profits during difficult times on the
share market.
@finweek
finweek
■ Strong and growing cash flow is very
important.
■ Invest in a few of these high-potential
shares. The capital that you invest need
not be much. (For example, you could
buy Capitec for less than R30 ten years
ago and today it’s trading close to
R1 000.)
■ Growing dividends are important
because they attract stable, patient
long-term investors.
■ The liquidity of smaller companies
is usually limited. Build your position
gradually, especially during market
slumps.
■ Don’t expect very large declines during
downturns. The smart money will fairly
soon start supporting the share price,
which should be evident on a price/
volume graph.
It’s an unusual share – Harmony –
which appears at the top of the list of
the strongest shares. It’s one of the most
volatile issues on the JSE and it’s popular
among speculators. The group has been
buying up old mines over the years
and made money through clever cost
control. What does, however, make it very
interesting is that Harmony and a partner,
Newcrest Mining, want to develop a large
new mine, Golpu, in Papua New Guinea. It
will cost an estimated $1bn to exploit the
massive gold and copper deposit, and the
million-dollar question is how Harmony
intends financing its share. African
Rainbow Minerals is a major shareholder
(13%) in Harmony.
The weakest shares are made up
of mostly the usual suspects, but it is a
disappointment that the heavyweight,
Naspers*, is lying some 19% below its
long-term EMA as a result of the pressure
experienced by Tencent.
Among the shares that have broken
through, Anglo American is the most
interesting. It’s lying in buy territory close
to its 200-day EMA and is maintaining a
firm uptrend. ■
editorial@finweek.co.za
Lucas de Lange is a former editor of finweek and an
author of two books on investment.
*finweek is a publication of Media24, a subsidiary of
Naspers.
finweekmagazine
WEAKEST SHARES**
COMPANY
STEINHOFF
GROUP 5
CHOPPIES
BLUE LABEL
ASPEN
GRINDROD
MEDICLINIC
PIONEER FOODS
CORONATION
REBOSIS
ASTRAL
TIGER BRANDS
FORTRESS B
MASSMART
RHODES
MTN GROUP
AB-INBEV
NASPERS N
MPACT
IMPERIAL
RESILIENT
BARLOWORLD
SHOPRITE
STANDARD BANK
VODACOM
SA CORPORATE
WOOLWORTHS
NETCARE
RMI HOLDINGS
REMGRO
PPC
HYPROP
TFG
NAMPAK
RICHEMONT
GROWTHPOINT
RAUBEX
ADCOCK INGRAM
ABSA GROUP
AVI
BIDVEST
INVESTEC PLC
NEDBANK
SAPPI
SPAR
SANLAM
REDEFINE
MMI HOLDINGS
LIFE HEALTHCARE
NEPI ROCKCASTLE
TRUWORTHS
MONDI PLC
GLENCORE
DISCOVERY
MONDI LTD
BIDCORP
LIBERTY
TSOGO SUN
BAT
PSG
DIS-CHEM
% BELOW200-DAY
EXPONENTIAL MA
-78.6
-69.4
-66.7
-49.5
-41.1
-34.7
-31.8
-28.4
-28
-23
-22.3
-22
-22
-22
-20
-20
-19.6
-18.6
-17.5
-16.4
-15
-14.3
-14
-14.1
-14
-13.2
-13
-13
-13
-12.5
-12.4
-12.1
-11.8
-11.2
-11.1
-11
-11
-10.5
-10.2
-10.2
-10
-9.5
-9.4
-9.4
-9.3
-9
-9
-8.6
-8.5
-8.3
-8.1
-8
-7.4
-7.3
-7.3
-7.2
-7.1
-6.7
-6.5
-6.4
-6.1
WEAKEST SHARES**
% BELOW200-DAY
EXPONENTIAL MA
RCL
-5.4
PEPKOR
-5.4
GOLDFIELDS
-5.3
KUMBA IRON ORE
-4.7
NORTHAM
-4.7
CLICKS
-4.3
RMB HOLDINGS
-4.3
SUN INTERNATIONAL
-4.2
SANTAM
-4.1
ROYAL BAFOKENG PLAT
-4.1
MR PRICE
-3.7
LONMIN
-3.1
PICK N PAY
-3.1
SASOL
-3
SIBANYE-STILLWATER
-2.6
IMPLATS
-2.6
FIRSTRAND
-2.6
MERAFE
-2.5
KAP INDUSTRIAL
-2.1
BHP
-1.5
ASSORE
-1.4
JSE
-0.94
EMIRA
-0.2
SOUTH32
-0.05
COMPANY
BREAKING THROUGH**
COMPANY
THARISA
ANGLO AMERICAN
VUKILE
OCEANA
WBHO
% ABOVE 200-DAY
EXPONENTIAL MA
2.6
2.3
1.8
1.1
0.3
STRONGEST SHARES**
% ABOVE 200-DAY
EXPONENTIAL MA
HARMONY
21.2
ANGLOGOLD ASHANTI
20.1
AMPLATS
13.4
EXXARO
10.9
PAN AFRICAN
5.4
TRANSACTION CAPITAL
5.4
TELKOM
4.8
SUPER GROUP
3.8
CAPITEC
3.7
AFRICAN RAINBOW
3.1
FORTRESS A
3
THARISA
2.6
ANGLO AMERICAN
2.3
VUKILE
1.8
OCEANA
1.1
WBHO
0.3
COMPANY
**Based on the 100 biggest market caps
finweek 8 November 2018
17
marketplace Simon says
By Simon Brown
PICK N PAY STORES
Operating
margin remains
a concern
Pick n Pay half-year results for the 26 weeks
to 26 August benefited greatly from last year’s
voluntary retrenchment programme. Even
removing this from the equation, the group saw
same-store growth after inflation increase by
3.5%, suggesting that it is taking market share
from competitors. This is the first market share
increase in a long time, but my concern remains
the operating margin (trading profit, as they
call it) that continues to be stuck below 2%.
This is my key metric for food retailers and until
Pick n Pay can get it moving to above 2%, and
ultimately to around 3%, the share remains off
my investable list.
VIVO ENERGY
Photo: Gallo Images
Not buying
just yet
Vivo issued a trading update with two
important pieces of information. It concluded
the Engen deal, but without the Democratic
Republic of Congo part of the business (this
was the sticking point for the deal). This gives
Vivo an additional 225 branded service stations
in eight new African countries (and Kenya
where it already operates). But no news on the
Morocco issues regarding regulation. Vivo did
state that it’s seeing margin pressure there, but
the market is waiting for the Moroccan king to
announce on the issue. Until the king does, the
company has serious uncertainty in its largest
market. So, even with the price down at around
2 250c/share, I am waiting rather than buying.
18
finweek 8 November 2018
Simon’s
stock tips
Founder and director of investment
website JustOneLap.com, Simon
Brown, is finweek’s resident expert
on the stock markets. In this column
he provides insight into recent
market developments.
DIS-CHEM
A bit pricey
A solid set of half-year results (for the period to
31 August) from Dis-Chem Pharmacies. It saw
first-half headline earnings per share (HEPS)
up 10.5% on the back of same-store growth of
3.5% and after inflation real growth of 2.3%.
The single exit price (SEP) increase effective
1 March 2018 was set at only 1.26%, which
hurt growth as this had an impact on about
a third of its retail sales. However, with HEPS
of 51.7c, and assuming it can be doubled to
103c for the full year, that’s a forward price-toearnings ratio (P/E) of some 27 times – and
expensive. It’s roughly the same P/E of Clicks
– my preferred of the two. Management did
state that August and September sales had
seen improvements, suggesting consumer
confidence is slowly returning. This could help
boost the full-year HEPS, but I still suggest
waiting for things to get cheaper if you want to
own Dis-Chem.
Dis-Chem Pharmacies saw first-half HEPS up
10.5%
on the back of same-store growth of 3.5%
and after inflation real growth
of 2.3% per share.
FAMOUS BRANDS
Not thrilling,
but decent
In a process unique to the UK, Famous Brands*
is placing Gourmet Burger Kitchen (GBK) into
“company voluntary arrangement”. It is like our
local business rescue, but seems to be more
focused on rental agreements in that GBK will
now attempt to get landlords to reduce rentals
on under-pressure stores, or they can walk
away from the rental agreement. This is good
news, but not of the sort that should make
shareholders any happier about the deal. Firstly,
I suspect that Famous Brands would have
tried to sell GBK and could not find a buyer at
a price it liked. Furthermore, it shows what a
mess the purchase was. It does not solve the
bigger issue, which is that the UK is massively
over-traded with fancy burgers – I have seen
reports suggesting as many as 150 different
gourmet burger brands currently operate in the
UK. Results for the six months ending August
show just how bad the GBK problem is, with the
core business showing operating profit before
GBK issues up 3.9% – not thrilling but decent
considering the tough conditions.
CORONATION
Still a worldclass operation
Coronation’s assets under management (AUM)
continue to slide – down to R587bn for the
end of September, compared to R614bn in the
corresponding period in 2017. This represents a
drop of some 4.4%, while the local market was
largely flat over the period. Coronation’s AUM
should at a minimum be tracking the market
moves, and ideally growing as it outperforms
and gets new inflows. But it remains a worldclass operation and, at the current price of
around 4 500c, the dividend yield is almost
10%. Even if this drops by say 20%, the yield
will still be 8%, which is a great price to be paid
to hold while shareholders wait for Coronation
to get profits going again. The profits may not
be as booming as before because large AUM
makes outperformance harder and competition
on fees is fierce. But when markets start rising
again, Coronation will start doing better.
www.fin24.com/finweek
marketplace Simon says
GAMING INDUSTRY
CLICKS
It is only
going to get
bigger
Photos: Shutterstock/Gallo Images/company report
Red Dead Redemption 2 (RDR2) was
released on 26 October. It is the latest game
from Rockstar Studios (makers of Grand
Theft Auto). First weekend sales for RDR2
are expected to be around $500m, placing
the game in the same league as a major movie
release. The difference here is the long tail
effect of sales, as these major A-list games
continue to generate sizeable revenue for
years to come. Other game studios include
Activision Blizzard and Nintendo. Topping
the pile is Tencent, in which Naspers**
owns a significant stake. Tencent has some
troubles, with Chinese authorities restricting
new games due to concerns of the impact
on children playing them for hours on end
every day. But this will be sorted in time. The
growth in gaming, and hence game sales,
is due to the kids of the 1980s who started
gaming on computers. They are now adults
with disposable income and many are still
gamers. This industry is only going to get
larger, especially with improved technology
making for incredible gaming experiences
(and yes, I am hooked on RDR2).
Changes to the
Top40
The JSE announced some index changes,
with the Top40 losing Gold Fields and gaining
Reinet Investments. No changes to Indi25,
Resi10 or Fini15, but the MidCap lost a
number of stocks – most notably Blue Label
and EOH, reducing its tech component.
Keep an eye on
leverage and
results
Clicks results for the year to end-August
again show that it is by far the best operating
company on the JSE, with turnover up 9.1%;
HEPS up by 15.1%; and the dividend up by
18%. This is textbook operational leverage
from a top management team. David Kneale,
who’s been CEO since 2005, leaves at the
end of the year. He is to be replaced by chief
operating officer Vikesh Ramsunder, who
was in charge of Clicks’ pharmaceutical
division, UDP, when it implemented its
distribution strategy. By all accounts he is
an excellent replacement. But the departure
of an excellent CEO always raises questions
about whether the success was due to them,
or rather the team they built around them.
Clicks shareholders are hoping it is the latter,
especially seeing as the share still trades on
a lofty P/E of 28 times, down from the heady
high-30s of April this year. The current market
is not forgiving, and any earnings miss would
be very nasty for the share price. However, for
those holding: Don’t panic, but do keep an
eye on that leverage and the results.
The stock now
trades on both a P/E and
dividend yield of around
seven and is
offering great value.
@finweek
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JSE
CMH
Offering great
value
A tough set of half-year results from
Combined Motor Holdings (CMH), with
revenue up 8.8%, but HEPS up only 0.2%
at 128.7c. The half-year dividend was
unchanged at 61c. Tough vehicle pricing
is seeing prices for second-hand vehicles
dropping, and this impacts trade-in values.
Hence, many customers are keeping cars
longer. CMH is also in the rental-car market,
where the value of the fleet is lower. Therefore,
it’s reducing rates and also keeping vehicles
for longer. For the full year, management
stated that a zero HEPS growth would be
deemed to have “performed well”. The stock
itself is down almost 30% since the highs
of earlier this year – my House View article
(Going full throttle, 10 May 2018) from back
then suggested a buy was horridly mistimed.
But the stock now trades on both a P/E and
dividend yield of around seven and is offering
great value. It may even be a potential target
for a delisting. ■
editorial@finweek.co.za
*The writer owns shares in Famous Brands.
**finweek is a publication of Media24, a subsidiary of Naspers.
finweek 8 November 2018
19
marketplace investment
By Schalk Louw
LINKED INVESTMENT SERVICE PROVIDERS
Know what you are paying for
When choosing investment products, it is important to keep in mind that in most cases there are costs attached to
every individual layer of the overall product.
Shutterstock
i have made several references to the Matryoshka, or Russian nesting
doll, in the past because I find it to be such a fitting analogy to describe
investment products and the costs attached to them. As its name
suggests, it is a set of hollow wooden dolls arranged from small to large,
with each larger doll nesting a smaller one.
No different to these dolls, different investment
products also fit into each other, and although their
packaging may look very attractive, in most
cases there are costs attached to each of
those individual layers. In other words, the
more “dolls”, the less your returns.
This is one of the reasons why
you need to be sure that you have
chosen the right product when the
time comes. A Linked Investment
Services Provider (LISP) functions a
lot like the Matryoshka nesting dolls. It
offers access to a range of investment
products and funds kept under one roof.
Before LISPs, if you wanted to invest
your capital in Allan Gray, Coronation and
PSG’s funds, for example, you had to make
three separate payments to each of those
funds. If you decided three years later that you
would like to exchange Allan Gray and Coronation for
Investec and Prudential funds, you first had to withdraw all your
capital from Allan Gray and Coronation and then redeposit it in your
Investec and Prudential funds of choice.
The introduction of LISPs really simplified this process. By
VALUE OF YOUR INVESTMENTS AFTER 10 YEARS AT A 10% ANNUAL GROWTH
RATE ON DIFFERENT LISPS (BASED ON STANDARD PUBLISHED FEES)
INITIAL INVESTMENT
LISP A
LISP B
LISP C
LISP D
LISP E
LISP F
LISP G
LISP H
LISP I
Average
Without costs
Minimum
Maximum
From minimum to maximum
What it cost you
R250 000
R599 349
R615 045
R618 567
R621 824
R615 326
R621 824
R615 326
R615 326
R616 621
R615 468
R648 436
R599 349
R621 824
3.7%
8.2%
R500 000
R1 214 581
R1 230 091
R1 237 135
R1 243 648
R1 230 653
R1 243 648
R1 230 653
R1 230 653
R1 233 242
R1 232 700
R1 296 871
R1 214 581
R1 243 648
2.4%
6.8%
R1 000 000
R2 461 306
R2 460 181
R2 474 270
R2 487 295
R2 461 306
R2 487 295
R2 461 306
R2 461 306
R2 466 484
R2 468 972
R2 593 742
R2 460 181
R2 487 295
1.1%
5.4%
R2 500 000
R6 250 957
R6 229 601
R6 211 713
R6 218 238
R6 218 238
R6 247 678
R6 231 307
R6 231 307
R6 202 589
R6 226 848
R6 484 356
R6 202 589
R6 250 957
0.8%
4.5%
R5 000 000
R12 567 659
R12 579 125
R12 501 913
R12 541 324
R12 534 747
R12 590 744
R12 580 846
R12 580 846
R12 578 207
R12 561 712
R12 968 712
R12 501 913
R12 590 744
0.7%
3.7%
SOURCE: Compiled by PSG Wealth Old Oak
20
finweek 8 November 2018
investing your capital in a LISP, you can divide your capital between
funds from different providers, all in one place. Even adjustments are
made easy – by completing one form, you can rebalance your entire
portfolio. You can also invest in an array of products, like investment
plans, retirement annuities, endowments, preservation funds and
living annuities by making use of a single LISP, in the funds
of your choice.
Although LISPs have become cheaper and more
uniform over the years, doing your homework
properly remains extremely important when
attempting to select the right one. Fees vary
at different investment sizes for the various
platforms – so do not assume it is a “onesize-fits-all” choice.
We decided to review the standard
fees levied on investment plans (external
funds) on different investment amounts
from different LISPs (as published on
most provider websites) and we learnt the
following:
1. The published fees are not necessarily the
fees you pay. You may actually end up paying less,
depending on several factors.
2. LISP A may have a lower annual fee structure than
LISP B, but if the same underlying investments have a higher
annual fee class on the one than on the other platform, you may end
up paying a higher fee if you only focus on the fee of the LISP.
3. There is not necessarily a link between the number of funds
available on a particular LISP and the platform costs.
A part of a percentage point here or there may not sound like a
lot, but that is not necessarily the case – because foregone returns
compound over time.
As mentioned, the figures may not be completely accurate as
actual experiences can vary. But it does show that each investor
should take care to understand what will apply in their specific
case. This caveat applies equally to large investors, because the fee
structure across LISPs vary at higher levels too.
Over time, a difference in fees amount to different returns earned
and the outcome can impact on your bottom line – as the table shows.
That said, there definitely is a lot more to choosing the right
investment on the right platform, and costs alone should not dictate
your decision. LISPs offer other benefits too and, when all is said and
done, you must be completely comfortable with your provider and
satisfied with the service they provide. You may well believe a part of
a percentage point is worth it to you if it buys you a better experience
and more choice down the line.
The point is that when you choose to place your dolls inside one
another, you should understand what the total cost picture is, and how
it is likely to influence your total investment return in the end. ■
editorial@finweek.co.za
Schalk Louw is a portfolio manager at PSG Wealth.
www.fin24.com/finweek
marketplace invest DIY
By Simon Brown
MARKETS
How to react to a bear
Experiencing your first bear market? Panicking? That won’t help you much. Investment expert Simon Brown has
experienced falling markets before and provides tips to guide you through a bear.
a
market is that it has not been driven by
s I write this, a week or so
a crisis. As such, it’s very unlikely that
ahead of you reading it, our
we’ll see another 40% sell-off. Crises
local Top40 index is off 20%
are mostly driven by out-of-control
from the intra-day highs of
debt and, aside from governments
mid-November 2017*. That is officially
around the world, we’re not seeing
a bear market, which is measured
excessive corporate or personal debt
as a 20% drawdown from a high. If
levels. Moreover, government debt is
you only started investing post the
manageable as they control the printing
global market meltdown of 2008/09,
presses. Not a great solution, but it works.
welcome to your first bear market.
That said, I am also not saying the
Don’t panic.
bear is over. We could go lower, or perhaps
Falling markets never feel nice –
experience another sideways period of
your investments are losing value and
going nowhere slowly – as we’ve seen
you’re scared to put new money into
for much of the last five years. I suspect
the market in case things fall still lower.
the driver here is going to be US markets
And, if enough people feel this way, the
that are still in a bull phase, even after the
buyers largely disappear and markets
recent sell-off. If those markets continue
head even lower.
to sell off, it would very likely result in us
The reality is that market sell-offs
heading lower.
are usually a common event. But the
So, what’s an investor to do?
last decade since the credit crisis has
The same as always:
not been a normal
Generally, a market will experience
Continue with your
market – fed by
a 10% drawdown every couple of
exchange-traded fund
record-low interest
years, with a 10% to 15% drawdown
(ETF) purchases and
rates (negative in
every five years, and a
buy the quality shares,
some quarters) and
making sure you leave
massive quantitative
the dogs alone. If you’re
easing (government
worried the quality may
buying of bonds to
drawdown
every
five
to
ten
years.
get still cheaper – and
flood markets with
it may – you can place
cash). Generally, a
some cheeky bids below current levels.
market will experience a 10% drawdown
Our market is very cheap on almost any
every couple of years, with a 10% to 15%
valuation metric, but, as always, I am
drawdown every five years, and a +20%
pretty much fully invested. I have some
drawdown every five to ten years.
buy orders in on stocks I like and, as I
The really big hitters – as we saw
have previously written, I am avoiding
in 2008/09, with global markets off
small- and mid-cap stocks.
between 40% and 50% – are rarer
So, sit back and take in your first bear
events, with only two in the last 100 years
market. Remember the details so you can
(the previous was 1929).
regale your grandkids one day when they
So, what we’re seeing play out in
ask about the great bear of 2018. Except,
our local, and other global, markets
they probably won’t be asking about the
is something that should be fairly
2018 bear because on long-term charts
common, albeit not for the last decade.
we can hardly even see these bears.
Newbies to the market have never seen
Instead, you should relax and remember
anything like it – and are panicking in
bear markets happen, but they also pass
some cases. But, as I always say, while
in time. (Also see p.22.)
panicking is sometimes useful, it’s only
*By the time I had finished writing
really useful in a crisis – and a gentle
the column the market was green. ■
bear market is not a crisis.
Important to note about this bear
editorial@finweek.co.za
Falling markets
never feel nice – your
investments are losing
value and you’re scared
to put new money into
the market in case
things fall still lower.
Shutterstock
+20%
@finweek
finweek
finweekmagazine
finweek 8 November 2018
21
cover story stock picks
By Petri Redelinghuys
HOW TO PICK
STOCKS IN A
LACKLUSTRE
MARKET
Shutterstock
Bear markets and recessionary times in fact offer great buy
opportunities for investors. But it is important to pick stocks
that will withstand the bad times. Trader Petri Redelinghuys
explains his methodology to find local winners.
22
finweek 8 November 2018
www.fin24.com/finweek
cover story stock picks
i t is no secret that the South African economy is in
trouble. After a brief bout of Ramaphoria, markets
once again realised that we had had ten years of
Zuma – and now four years of sideways market
action with no real return.
This could no longer be ignored as SA has decaying
economic conditions and wilting confidence, both
domestically and from the international investment
community.
SA has a monumental task before it and the changes
needed within governmental structures and in the
broader socio-economic landscape will take a lot of effort
and a lot of time to affect. It may feel like time passes
quickly, but the reality is that things change slowly.
Optimism is not ill-founded. But we must stay
cognisant of the current state of our economy and how
the current economic backdrop can either perpetuate
current market themes or perhaps ignite new ones.
THEME 1: Times of uncertainty
The theme dominating the SA investment landscape
at present is probably that of uncertainty. No doubt
something that many are tired of hearing about by now,
as financial media has made countless references to
uncertainty being the driver behind the poor market
performance locally.
But to contextualise: Investors base their decisions
to either invest directly into an economy or via financial
markets on a set of long-term objectives unique to them.
They have an almost infinite number of investment
options from which they can choose and therefore
endeavour to choose the investment that they
believe will best balance their appetite for risk
with their expectation for return.
@finweek
finweek
finweekmagazine
Going through five finance ministers in six years
does not exactly communicate a message of stability
and low risk.
When things like the leadership of arguably one
of the most important ministries in a country can
change so abruptly, it becomes difficult to forecast
what conditions are going to be five or ten years from
now. Therefore, investors are reliant on the recent
past as a frame of reference. Thus far that frame of
reference indicates that the leadership structures in
our government are unstable and unpredictable.
Even though we now have a very strong and credible
finance minister in the form of Tito Mboweni, given
the recent track record we cannot at all be certain that
he is going to still be around in a few years from now.
Add to that the rhetoric around land expropriation
without compensation; failing state-owned
enterprises in constant need of taxpayer-funded
bail-outs; growing discontent towards government
from the public; our ailing economy; excessively high
unemployment; and all the various external fears
and shocks caused by the pull-back in international
markets… Ladies and gentlemen, we have a recipe
for uncertainty about the future. Put more simply, we
have a lot of risk and no way of knowing whether that
risk will reward investors in accordance with their
expectations for returns.
This theme has had a major influence on our
economy over the last two years. This is best
reflected in the decline in foreign direct investment in
SA since 2016.
THEME 2: Recession time
The next major theme is that of decelerating GDP
growth. SA’s GDP growth forecast has been cut from
1.5% for 2018 to 0.7%, with the economy shrinking
a seasonally adjusted annualised 0.7% in the second
quarter, following a 2.6% contraction in the first quarter.
According to economist Mike Schüssler, and the
BankservAfrica Economic Transaction Index (BETI)
September report, GDP could well have picked
up somewhat in August – maybe even
enough to have put an end to the
technical recession.
But he warns that the uptick
in the BETI was mainly due to
backdated “salary increases for
civil servants in July and August,
and the late salary adjustments
of Eskom employees and some
municipal workers. We may still see
delayed backdated payments occur
finweek 8 November 2018
23
cover story stock picks
in September, which will add to economic transaction
improvements.”
He warns that “one or even two months of data
are hardly ever an indication of a change in trend.
The delayed salary increases have certainly played
a positive role but, once these are out of the system,
the underlying downward trend may continue.”
The BETI measures economic transactions
among bank accounts in SA and is a very reliable
indicator for the level of economic activity with a very
high correlation to GDP.
Schüssler’s report might therefore indicate a
short-term reprieve from the contracting GDP, but
the message is clear: Don’t hold your breath.
cost our economy many government jobs, as well as
even lower levels of overall service delivery.
Thankfully, Ramaphosa is being very proactive
about bringing reforms to government and attracting
direct investment into our economy. Also, our new
finance minister seems to be committed to not
increasing government’s spending limit. This could
help SA fight back against the forces of a slowing
economy and an ever-increasing budget deficit.
THEME 4: Investor confidence
The confidence that ratings agencies have in SA’s ability
to turn the ship around has had a major influence on our
Tito Mboweni
economy and contributes to the theme of uncertainty.
Finance minister
Both Standard & Poor’s and Fitch ratings agencies have
downgraded SA government debt to sub-investment
THEME 3: Government debt
Over the last decade, SA’s budget
grade, or junk status.
deficit has averaged 4.3% of GDP
For now, Moody’s Investors Service
Even
though
we
now
have
a
very
and came in at 4.6% of GDP last
has been SA’s saving grace as they
year. This year it is forecast to be 4%
still rate our government debt one
strong
and
credible
finance
minister
(revised from 3.6%) and is expected
notch above junk. This means that our
to rise to 4.2% in 2019/20, after
in the form of Tito Mboweni, given government bonds are still included
which it should stabilise at 4% in the
in major global bond indices and are
the recent track record we cannot at therefore still being held in major global
years that follow.
This budget shortfall needs to
bond funds.
all be certain that he is going to still
Although Moody’s has expressed
be funded somehow, which means
that government needs to borrow
be around in a few years from now. that it considered the medium-term
money from capital markets. Over
budget policy statement, delivered by
the last decade, government debtMboweni in October, as credit negative,
to-GDP has nearly doubled to 53.1% of GDP last year,
it has not made any adjustments to SA’s credit
with the expectation that it will stabilise at 59.6% by
rating and is probably unlikely to do so until after the
2023/24.
general election next year.
Therefore, debt payments are becoming a larger
Politicians tend to beat all sorts of drums to
portion of government spending (it’s the thirdget elected into office, but once there, their – and
fastest growing expense the SA government has).
humour me here – “promise to delivery ratio” is rather
low. Therefore, we are unlikely to have a clear plan on
Further, the rising yields of 10-year government
how land expropriation without compensation will be
bonds is a sign that investors are becoming less
implemented, for example, until after the election. On
confident in SA’s ability to repay its long-term debt
that basis, it is equally unlikely that we will see rating
obligations and are thus selling their bonds. It follows
agencies make any changes to their outlook on the
that if this trend continues, the cost of finance could
Mike Schüssler
economy until “the pudding is served”.
increase to an unaffordable level over the same
Economist
period that the government debt-to-GDP ratio is
expected to reach nearly 60%.
THEME 5: A bear phase in developed markets
Our new finance minister has warned that if
Tightening monetary policy in developed economies
government debt-to-GDP exceeds 60%, SA would
like the US and EU is not only removing liquidity from
potentially have to approach the International
global markets and driving the flow of investment
Monetary Fund (IMF) in search of funding the
away from emerging markets into developed
country. The IMF is likely to impose all sorts of
markets, but is also probably the main antagonist
austerity measures as a condition to extending
behind the global market correction. The impact a
finance, which would pretty much guarantee lower
larger-scale global correction could have on already
levels of government spending. That would probably
underperforming emerging market economies should
24
finweek 8 November 2018
www.fin24.com/finweek
cover story stock picks
SOUTH AFRICAN GOVERNMENT DEBT-TO-GDP
SOUTH AFRICAN FOREIGN DIRECT INVESTMENT
Rbn
2 150
2 100
55%
2 101
2 000
1 973
1 961
1 936
1 900
1 873
1 842
1 850
1 830
38.2
34.7
35%
1 850
1 863
30%
31.3
27.8
25%
Jul 2016
Jan 2017
Jul 2017
Jan 2018
Jul 2018
not be underestimated.
It would not be surprising to see developed
markets enter a bear market, or even a recession, over
the next 6 to 18 months. If that does in fact happen,
the likelihood that our economy and market follows a
further downward trend is extremely high.
The investment thesis
Each of us must sit down and consider whether these
themes are more likely to persist or dissipate over
the medium term. If you are of the view that they will
dissipate, then you’d probably look to buy the shares you
want now as they are currently available at a discount. If,
however, you believe that these themes will persist, then
you have two choices: Invest in non-cyclical defensive
stocks, or invest in long-term value stocks.
As a general warning: Even though there is value
to be found on the JSE now, share prices could come
down more if these themes persist. The likelihood of
buying at the bottom is rather low and you might need
to exercise patience before you can reap your reward.
Non-cyclical, defensive stocks
Non-cyclical stocks, or defense stocks, are stocks
that are in economic sectors that are generally
not affected by the cyclical nature of markets.
In other words, these companies are in sectors
that are generally not too affected by changes in
consumers’ disposable income. The primary sectors
considered to be defensive are: consumer staples
such as food retailers and producers; “sin stocks”
such as alcohol and tobacco companies; healthcare
and pharmaceutical companies; utilities such as
electricity and telecommunication providers; and
then, of course, “safe haven” commodities such as
gold, copper, timber and maize.
When looking for shares in defensive sectors, we must
be prudent to only buy those that have a solid investment
@finweek
44.1
41
40%
1 916
53.1
47
45%
1 950
1 800
Jan 2016
49.3
50%
2 050
51.6
finweek
finweekmagazine
2008
2010
2012
2014
2016
2018
case. It is a bit of a process to find these stocks, but luckily
technology has made it somewhat easier.
You could start by making use of the stock screener
available for free on www.investing.com to scan for
stocks that are in the consumer/non-cyclical sector, or
any of the other traditionally defensive sectors.
Once you have a list of shares, you are then
able to filter them further so that you can isolate
those shares that match whatever fundamental or
technical criteria you might specify. From there, you
are able to study each of the stocks on the list and
decide whether to invest or not.
A good start is to scan for companies that have
a positive dividend growth rate, a price-to-earnings
ratio (P/E) of less than 16, and a total debt-to-equity
ratio of less than 51%. From there, further filtering for
liquidity, and doing some research on the companies
themselves, could help to compile a list of potentially
investable stocks.
I HAVE COMPILED A LIST OF COMPANIES
FOUND IN THIS MANNER:
1. Astral Foods
P/E: 5.57
Dividend yield: 9.45%
Dividend growth rate: 33.84%
Debt-to-equity: 1.03%
Astral Foods is a major chicken and agricultural feeds
producer. During the last financial year, it sold more
than 230 000 tonnes of chicken and over 703 000
tonnes of maize. Fifty-nine percent of that maize was
sold internally to the company’s chicken producing
division. Thus, it is vertically integrated and capable
of sustaining its chicken production from its own
agricultural feed production.
finweek 8 November 2018
25
3. Telkom
Chicken also happens to be the primary source of
meat protein for most South Africans and is also by
far the cheapest. A strong recommendation has been
made to zero-rate VAT on chicken and if that were
to happen, it would no doubt have a tremendously
positive impact for chicken producers.
The share price has been under a lot of pressure
in recent times, although the latest trading
statement indicates that full-year headline earnings
per share (HEPS) will reflect an increase of between
90% and 100%.
Astral is not only a defensive stock, but a value
stock as well.
P/E: 9.3
Dividend yield: 6.5%
Dividend growth rate: 18.2%
Debt-to-equity: 34.9%
Telkom has pulled off a remarkable turnaround
over the last five years. It has restructured itself by
acquiring BCX (an ICT services company), availed
its infrastructure via Open Serve and outsourced
maintenance and management of its assets through a
wholly-owned entity called Gyro.
The next step for Telkom would be to start unlocking
value from its new data products and growing its
mobile market share. Over the last five years, the
company has proven itself able to adapt and improve
on a consistent basis.
2. Tiger Brands
P/E: 13.23
Dividend yield: 4.2%
Dividend growth rate: 4.7%
Debt-to-equity: 7.8%
4. Vodacom
Tiger Brands operates in the consumer staples space,
with brands such as Oros, Koo, Tastic, Albany, King
Korn, Purity, Enterprise, Jelly Tots, All Gold, Beacon,
Black Cat and more.
The share price was recently hit hard, as the
company was responsible for an outbreak of
listeriosis. It appears that the fallout from that
outbreak has now been contained as Tiger Brands
reopened the factory in Germiston that was
responsible, after rigorous assessments by the
department of health.
TIGER BRANDS
52-week range:
RR239.82 - R478.06
Price/earnings ratio:
13.23
1-year total return:
-29.79%
Market capitalisation:
R50bn
Earnings per share:
R19.87
Cents
50 000
45 000
40 000
35 000
Dividend yield:
Average volume over 30 days:
30 000
25 000
Nov ’17
26
P/E: 13.5
Dividend yield: 6.6%
Dividend growth rate: 1.7%
Debt-to-equity: 50.1%
4.01%
836 867
SOURCE: IRESS
Jan ’18
Mar ’18
May ’18
finweek 8 November 2018
Jul ’18
Sep ’18
Nov ’18
Vodacom has operations throughout Southern Africa,
with its largest market being SA itself. During the 2018
financial year, it added 7m new customers and grew its
revenue by 6.3% to R86.4bn. Sixty-three percent of
Vodacom’s revenue is earned in SA, while the remaining
36% is earned from other countries in the Southern
African region.
Like other wireless telecommunications companies,
revenue from traditional voice calling is decreasing,
while revenue earned from data services (including fibre
internet, etc.) is increasing.
An exciting add-on to Vodacom is M-Pesa, which
last year helped 11.7m customers (an increase of
30.4%) process transactions worth R1.3tr, resulting in
over R1.9bn worth of revenue for Vodacom.
Vodacom only just barely makes the cut from a value
perspective, although it does look like a well-positioned
defensive share.
www.fin24.com/finweek
cover story stock picks
As investors, we must remember that bear markets and recessions are huge opportunities for us
to buy into great companies at great prices and attain great returns over the long term.
SA CORPORATE REAL ESTATE
52-week range:
Price/earnings ratio:
Cents
550
1-year total return:
Market capitalisation:
500
Earnings per share:
Dividend yield:
450
400
Average volume over 30 days:
350
Nov ’17
Jan ’18
Mar ’18
May ’18
Jul ’18
Sep ’18
Nov ’18
VALUE STOCKS
When searching for shares that can be classed as
value stocks, you can use the same fundamental
and/or technical criteria you used to filter out the
better stocks in the non-cyclical/defensive sectors.
Expanding on those criteria could also be done if
required. This time, though, the search is done across
the whole market and not just the non-cyclical/
defensive sectors.
1. Standard Bank
Normal share:
P/E: 10
Dividend yield: 5.7%
Dividend growth rate: 15%
Debt-to-equity: 14.1%
Banks in general have been under a huge amount of
pressure recently, and if the themes above continue
to play out, banks will likely remain under pressure for
some time to come. Although, at present, banking
stocks come with a clear warning label, some of them
are starting to show some value.
The Standard Bank preference share, however,
offers an opportunity to get into a much lower risk
version of the share with similar fundamental values.
The difference is that you are guaranteed a 6.5c/
share dividend, twice a year. With the preference
share trading below R1 a share, this represents more
than 13% dividend yield (15.29% D/Y at R0.85 per
share). If investing for dividends is your goal,
this is great value.
@finweek
finweek
finweekmagazine
R366 - R550
9.19
-8.33%
R9.92bn
43c
11.26%
4 135 936
SOURCE: IRESS
2. SA Corporate Real Estate
P/E: 9.19
Dividend yield: 11.3%
Dividend growth rate: 8.1%
Debt-to-equity: 45.7%
Of the property stocks that make the list, SA Corporate
Real Estate offers the highest dividend yield at 11.34%,
making it very attractive.
Between 2012 and 2017, the company
successfully affected a turnaround strategy
and converted itself into a corporate real estate
investment trust. It has also successfully diversified
its property portfolio, as it now owns properties in the
industrial, retail, commercial, residential and storage
sectors in SA and boasted a vacancy rate of only
4.5% during the previous financial year.
Finding your own winners
The stocks discussed above are only a handful of shares
that match a very narrow set of criteria. There are many
more companies out there that are offering different
forms of value for investors who have a long-term
investment horizon.
Investors will need to do some work to look for
them, which will take effort and time, but if the themes
discussed above persist, the work done to find the longterm value or defensive stocks should pay off in a few
years. It is not easy to predict what is going to happen,
but searching for value has never been to anyone’s
detriment. Things are volatile and fragile out there.
Taking the time to find quality shares might not pay off
immediately, but over time, holding quality will stand
you in good stead.
As investors, we must remember that bear markets
and recessions are huge opportunities for us to buy into
great companies at great prices and attain great returns
over the long term. The trick is to find companies that
are likely to still be around in 20 or 50 years from now,
and that are trading at prices that are attractive enough
to buy, even in the bad times. ■
editorial@finweek.co.za
Petri Redelinghuys is a trader and the founder of Herenya Capital Advisors.
finweek 8 November 2018
27
YOUR GUIDE TO
MEDICAL AID AND
INSURANCE COSTS
By Jana Jacobs
Protecting your health
and buying insurance
products for life’s
unexpected events
can become expensive
and complex. finweek
provides handy
pointers that will
help you ask the right
questions before you
decide to change,
cancel or upgrade any
of these products.
Gallo/Getty Images
page 30
28
finweek 8 November 2018
www.fin24.com/finweek
IF IT’S NOT BONITAS
IT’S NOT MEDICAL AID
SWITCH TO REAL MEDICAL AID I BONITAS.CO.ZA
focus on medical aid & insurance costs
n
othing in life is certain, except death
and taxes, is the oft-quoted (or
paraphrased) line originally written
by Benjamin Franklin in 1789.
In between paying taxes and the finality
of shuffling off this mortal coil, life will hit
most of us with a host of uncertainties. And
it’s exactly these uncertainties that we try
to avoid through, for example, taking out
insurance products or medical aid – often at
what feels like astronomical costs.
“Keeping a budget feasible can be
complicated,” warns head of research
and development at Discovery Health,
Deon Kotzé. This is particularly true
“when it comes to the assessment of
overall insurance arrangements (including
life insurance and motor and household
insurance) relative to other priorities.”
finweek spoke to some industry experts
about weighing up your priorities and the
costs associated with them when it comes
to your medical aid and insurance coverage.
Phtos: Supplied
MEDICAL AID
Arguably one of the most important
aspects of your life that needs to be
covered is your and your family’s health. In
South Africa, the cost of private healthcare
– for those in a position to afford it – is a
non-negotiable line item in the monthly
budget. At present, about 8.8m South
Africans are in a position to afford private
healthcare, according to Jillian Larkan,
head of health consulting at GTC. But
budgets are being stretched to the limit
in the current economic climate – and
medical aid doesn’t come cheap.
Consumers that are already feeling the
effects of a 1% VAT increase and runaway
fuel prices will likely feel the pressure of
having to meet their monthly expenditure
requirements. So, as consumers review
their medical aid contributions for 2019,
now is as good a time as any to take a
holistic view of your overall life coverage to
make sure you are not going to fall short
financially. (See sidebar on p.32.)
30
finweek 8 November 2018
Calculating the costs
Advising consumers on how much of
your income to put towards medical
aid is difficult, says Larkan, but “for the
general South African on medical aid, I
would say up to 10% of your salary, for the
whole family… This is a huge expense for
many households, and remains a grudge
purchase, with many people reaching
the end of the year having not been
hospitalised, feeling as though they have
wasted their money for another year.”
Larkan’s advice for selecting cover is
to choose a plan which suits your lifestyle
right now. “Cover what is required. Don’t
try to take out a plan which covers every
eventuality which might happen to you.
These are expensive and you will most likely
not require all of the benefits available.”
A hospital plan, for example, is suitable
for a single, healthy, younger individual
“for as long as the member continues to
take care of themselves, eats healthy and
follows an active lifestyle, while at the
same time remaining single. I would say
somewhere between 45 and 49 is the time
when [the level of cover] will require more
attention, and the single member may need
to consider upgrading their out-of-hospital
cover to take into account the increase
in spend in the latter years of their life.
The upgrade which the member would or
could consider may be to a savings plan,
or all the way to the top of the scale, being
a comprehensive plan,” says Larkan. (See
graph on p.33.)
Tony Singleton, CEO of Turnberry Risk
Management Solutions, explains that
medical aid contributions need to form part
of your overall financial planning. “You get
what you pay for,” says Singleton. “If you
are taking a low-cost medical aid option, for
whatever reason, the chances are that you
are going to be exposed to some additional
costs. For example, a hospital plan covers
in-hospital expenses and typically comes
cheaper than other options. But you are
going to be exposed to the costs of all your
Deon Kotzé
Head of research and
development at Discovery
Health
Tony Singleton
CEO of Turnberry Risk
Management Solutions
At present
8.8m
South Africans are in a
position to afford
private healthcare.
www.fin24.com/finweek
focus on medical aid & insurance costs
Towards the end of the calendar year, medical
schemes offer members the opportunity to upgrade
to plans with greater benefits.
Bafihlile Mokoena
Communication specialist:
public relations & corporate
social investment at Bestmed
If you are looking to reassess your
coverage, now is a good time. Towards
the end of the calendar year, medical
schemes offer members the opportunity
to upgrade to plans with greater benefits,
an opportunity that doesn’t typically exist
at any other time during the year, says
Discovery’s Kotzé.
If you do decide to take up the
opportunity to upgrade, you will not be
subject to waiting periods, adds Larkan.
Mind the gap
According to Mokoena, gap cover is
designed to pay the shortfall between
Photo: Ndalo Media
GP visits and other incidental costs.”
Singleton reiterates that you don’t
want to be forced into making a financial
decision when you are dealing with your or
a family member’s health. You don’t want
to be put into a situation where you need
to look at taking a personal loan or cashing
in an investment to cover medical costs.
In this vein, it is essential to assess
your health status and choose a medical
aid option that will make provision for
your and your family’s healthcare needs,
says Bafihlile Mokoena, communication
specialist: public relations & corporate
social investment at Bestmed.
focus on medical aid & insurance costs
WHY IS
MEDICAL
AID
SO
EXPENSIVE?
Shutterstock/Supplied
“The cost of private healthcare in
South Africa is reported to be the
highest in the world, with medical
aid increases driven by medical
aid and inflation,” says Bafihlile
Mokoena, communication specialist:
public relations & corporate social
investment at Bestmed.
Tony Singleton, CEO of
Turnberry Risk Management
Solutions, says that some of the key
drivers of medical inflation at this
moment include:
1. The 1% VAT increase and its
knock-on effect throughout the
medical industry
2. Shortages of specialist doctors
3. New medical appliances and
technologies coming at high cost
to hospitals and specialists
4. Increase in the costs of medical
supplies and pharmaceuticals
5. Increase in doctors’ indemnity
insurance costs
“In South Africa, the problem is
further aggravated by the rand-dollar
exchange rate,” he adds.
According to Shreekanth Sing,
technical legal adviser at PSG
Wealth, medical aid schemes are
expected to increase premiums
for 2019 by an average of between
8% and 10%, compared to inflation
of 4.9%. This was in line with
Discovery Health – SA’s largest open
medical aid scheme – announcing
between 8.9% and 9.9% increases,
and Bestmed announcing an
increase in its premiums of 8.9%. ■
32
finweek 8 November 2018
what your medical scheme pays and what
service providers charge.
“There are so many instances which are
limited by the medical aid networks and
costs due by members for using service
providers outside of these networks that
members are left out of pocket on many
occasions,” explains Larkan. “Members
then revert to their brokers, wondering
why they were sold products which
purport to cover 100%, only to find they
misunderstood the concept and have 100%
of scheme rate covered, and not 100% of
costs covered.”
To illustrate, Singleton explains that
your medical aid plan might, for example,
provide you with in-hospital cover, but
would require that you need to go to a
designated service provider (DSP) that
is part of the medical scheme’s network.
“If you go to the DSP, the scheme will pay
100% of the scheme’s rate, but if you do
not go to a DSP, your medical practitioner
Shreekanth Sing
Technical legal adviser
at PSG Wealth
SHOULD WELLNESS
PROGRAMMES PLAY A
ROLE IN YOUR CHOICE
OF MEDICAL AID?
The Medical Schemes Act of 1998 prohibits the
provision of services other than that
of medical aid, says Bafihlile
Mokoena, communication
specialist: public relations
& corporate social
investment at Bestmed.
In other words, wellness
programmes are not
administered by medical
schemes. Simply put, by
joining a medical aid, you
don’t automatically become part
of a wellness programme – you join it
separately at a monthly fee.
For example, in the case of Discovery Health
Medical Scheme, members can join Vitality,
Discovery’s (not the scheme’s) wellness
programme. “It seems obvious, but people often
overlook the fact that by looking after their
health, they can reduce their healthcare
costs in the long term,” says head
of research & development at
Discovery Health, Deon Kotzé.
Although loyalty
programmes can encourage
healthy living, being a member
will not reduce your monthly
medical aid contributions. As
Shreekanth Sing, technical legal
adviser at PSG Wealth, points out,
loyalty programmes can add many
benefits with regards to lifestyle, but “start
with medical cover to ensure you have the best
plan you can afford, keeping in mind that paying
for a loyalty programme so that you can have
cheap flights won’t help you if your medical cover
isn’t enough.” ■
www.fin24.com/finweek
focus on medical aid & insurance costs
Although loyalty programmes can encourage healthy
living, being a member of such a programme will not
reduce your monthly medical aid contributions.
PMB EXPENDITURE AND CHANGE IN BENEFICIARIES BY AGE BAND
2.4%
2 990
2.7%
2.8%
0.5%
1.5% 1.1%
0.8%
-1.7%
900
3.1%
1.2%
2 490
500
4.5%
-2.3%
5.7%
990
5.3%
7.3%
5.3% 8.4% 100
85+
70-74
65-69
60-64
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
5-9
0
1-4
(10)
Under 1
490
80-85
1 490
4.5%
-0.1%
1 990
75-79
PMB Expenditure ppbm (R)
3 490
No. of beneficiaries (1 000)
will typically charge three or four times
that rate.”
Kotzé adds that gap cover is not a
medical scheme product. “It is an insurance
policy that is sold separately from medical
schemes, and provides the policyholder and
their family with defined cover for medical
expenses that are not covered in full by
their medical scheme.”
The most common expense shortfalls
relate to hospital admission, he says.
According to Larkan and Mokoena,
you should consider a top-up/gap policy
immediately after joining a medical aid as
a support structure for in-hospital medical
expense shortfalls to avoid being left out of
pocket. Many of these policies, says Larkan,
“provide benefits such as enhancements on
biological drug benefits, first-time cancer
diagnosis lump sums, emergency ward,
casualty room and trauma counselling
benefits.”
AGE
Beneficiaries 2016
Beneficiaries 2015
PMBs 2016
PMBs 2015
Average PMBs 2016
Average PMBs 2015
Source: Council for Medical Schemes Annual Report 2016/2017
Choose health
Six reasons why a healthy lifestyle could be rewarding with Momentum’s health solutions ...
Provider Choice
Health Platform
Momentum App+
HealthReturns+
HealthSaver+
Multiply+
Saving members up to
40% on their medical aid
Extending day-to-day cover
to new heights
Cutting edge technology at
your fingertips
Let your lifestyle pay for
your medical expenses
The easiest way to provide
for additional healthcare
expenses
More than just another
wellness and rewards
programme
+ You can choose to make use of additional products available from Momentum Group, a division of MMI Group Limited
(Momentum), to seamlessly enhance your medical aid. These voluntary complementary products range from a world-class
wellness and rewards programme, Multiply, to the innovative HealthReturns solution. These complementary products are
not medical scheme benefits. Momentum is not a medical scheme, and is a separate entity to Momentum Health. You can
be a member of Momentum Health without taking any of the complementary products that Momentum offers.
momentum.co.za
Momentum is part of MMI Group Limited, an authorised financial services (FSP6406) and
registered credit provider (NCRCP173). Reg no 1904/002186/06
focus on medical aid & insurance costs
“Obtaining life cover is likely to be cheaper when you
are younger and healthier, compared to the cost of
doing so later on in life.”
Your private healthcare and NHI
While it has been suggested that the
implementation of the National Health
Insurance (NHI) could result in stabilising
healthcare costs, there has been concern
about government’s ability to efficiently
implement NHI. The important question for
many consumers, however, is whether they
will still have the financial responsibility of
private medical healthcare once the NHI
has been implemented.
The short answer: yes.
According to Larkan, the department
of health has made it clear that private
healthcare will continue to be required, as a
top-up to the benefits which it provides in
the public sector.
“I believe there will continue to be a
place for private healthcare in South Africa,
just like in many other developing countries
around the world, at least until such time
as all private healthcare members are
satisfied with the level and quality of care,
and benefit available in the public system is
at least equal to or exceeds that available in
the private sector.”
Shreekanth Sing, technical legal
adviser at PSG Wealth, agrees that
medical schemes will continue after the
introduction of NHI. On whether they would
be required “would greatly depend on two
aspects: how the final implemented version
of NHI would look and what your personal
circumstances would be.”
LIFE INSURANCE
Over and above taking care of your health
and medical expenses you may face, it is
also important to consider that there are
certain events that may affect your ability
to earn an income and meet your financial
obligations.
Photo supplied
It’s worth starting young
“When buying risk cover, and especially
when you’re young and healthy and very
insurable, you would want to maximise
cover on offer if you have the affordability
34
finweek 8 November 2018
Kobus Kleyn
Certified financial planner
at Liberty
– even if it is more than what your
needs analysis indicates, as it is so easy
to become uninsurable or have health
problems which would mean health
loadings or exclusions,” says Kobus Kleyn,
certified financial planner at Liberty.
Sing agrees, adding that “obtaining
life cover is likely to be cheaper when you
are younger and healthier, compared to
the cost of doing so later on in life (this is
based on the risk and likelihood of mortality
assessment – your risk of death increases
the older you become).”
Kleyn does point out that once you
have settled on the product and cover,
it is critical “to be wide awake to what
is referred to as premium patterns and
escalations”. Depending on your objectives,
he explains that the manner in which
your policy will increase annually due to
Different types of
LIFE INSURANCE
Shreekanth Sing, technical legal adviser at PSG Wealth, provides a brief overview of the
general life cover options that will protect you should the unforeseen occur.
Disability cover
Provides you with a lump-sum payment if
you become permanently disabled and are
unable to work. You can use the lump-sum
payment to help you cover your living
expenses and to pay off outstanding debt.
You decide how much you would like the
lump sum to be and how long you want to
be covered.
Income disability cover
Provides you with a monthly income when
you are unable to work as a result of illness
or injury – your injury or illness need not
be permanent. Various waiting periods
are available. You start receiving income
after the waiting period and will continue
to receive payments for as long as you are
unable to work. However, cover ceases at
retirement.
Critical illness cover (also known as
dread disease cover)
Provides you with a lump-sum amount if
you are diagnosed with any of the specified
severe illnesses (such as cancer, a stroke,
a heart attack etc.). The specified illnesses
vary between insurers. Again, this lump sum
can be used to settle outstanding debts or
to pay for any additional costs of medical
treatment or rehabilitation not covered by
your medical aid. ■
www.fin24.com/finweek
focus on medical aid & insurance costs
“Shop around before you consider reducing cover…
Many consumers may be overpaying for insurance which
they could replace at a significant monthly saving.”
benefit increases could end up making
your policy unaffordable – and you
may not need those benefits. “Be very
careful and make sure there are flexible
options.”
Making sure you stay covered
Both Sing and Kleyn emphasise the
importance of annual financial reviews
on your long-term financial plans,
including life cover. “This does not mean
you need to adjust or amend benefits
annually, but it could just confirm that
there are no obvious benefit shortfalls,”
says Kleyn.
“In my opinion, it is not about how
often, but rather with consideration to
life-changing events like career changes,
matrimonial changes, addition or loss of
dependents, promotions etc. If you do
not have annual reviews, then I would
reckon at least every five years would
require a good look at the suitability of
the cover in place,” according to Kleyn.
CAR AND HOME INSURANCE
As loathe as many consumers are to
spend money on protecting the material
things in their lives, it’s important to
ensure your car and home are insured.
Photo supplied
Shop around
When budgetary constraints are
experienced, consumers can be
tempted to slash insurance costs. But
Natasha Kawulesar, head of client
relations at OUTsurance, advises that
you should rather first “shop around
before you consider reducing cover…
Many consumers may be overpaying for
insurance which they could replace at a
significant monthly saving.”
When looking to buy short-term
insurance, it’s understandable that
consumers will place emphasis on the
premium charged, but there are other
important considerations, according
to Kawulesar. “While we agree that it
36
finweek 8 November 2018
HOME IS
WHERE THE
MONEY IS
Natasha Kawulesar, head of
client relations at OUTsurance,
provides quickfire clarity to
some of the coverage you need
to consider when it comes to
your home.
What should you include in
home contents insurance?
These are all the movable
items in your home, including
jewellery. It is advisable to
specify items that you take out
of the house to ensure they are
covered.
Specifying items
This results in a separate
individual premium being
determined for that item.
However, the cover will be
far more comprehensive.
Individually specified items are
covered anywhere in the world,
whereas items in household
contents are only covered
against loss or damage while
they are at home.
What is covered under
building insurance?
The structure and all fixed
property, like built-in
cupboards, for example. ■
Natasha Kawulesar
Head of client relations at
OUTsurance
doesn’t make sense to pay more than
you should for quality cover, consumers
must consider the product benefits such
as excess structures, no-claims bonuses,
roadside assistance and, importantly, the
insurer’s reputation for handling claims.”
Your risk premium
As with medical aid and life insurance,
you need to be sure that your shortterm insurance coverage matches your
needs and that you adjust your insurance
accordingly.
When it comes to the regularity
of valuing your house and contents
insurance, this is very dependent on
each individual’s aversion to risk, says
Kawulesar. “Some consumers may want
this done annually, which is a good
checkpoint. Not being adequately insured
exposes you to risk and, in the event of
a total loss, will mean you are unable to
replace all your assets, which may impact
your standard of living post-loss.”
It’s important to be very well-versed
on your policy, and to ensure you
understand exactly what is covered and
what isn’t. For example, with building
insurance, there are exclusions such as a
lack of maintenance of a property, says
Kawulesar. ■
editorial@finweek.co.za
www.fin24.com/finweek
advertorial Bestmed
An average of 8.9% increase in
Bestmed’s 2019 member contributions
Generally, the medical industry has experienced material rising costs. This affected members immensely, while putting
pressure on the industry as a whole. But Bestmed will continue to endeavour to keep increases to a minimum.
s
outh Africa’s fourth-largest open medical scheme, Bestmed
■ Preventative care: for screened beneficiaries, 3 dietician consultations
Medical Scheme, announced an average contribution increase
and 3 biokineticist consultations per annum.
of 8.9% for 2019 at its product launch events held in all major
■ HPV vaccinations: HPV vaccination implemented on options
regions in October.
previously without this benefit.
Bestmed has also recently been voted as one of the top three
■ Spinal prosthesis merge: combination of spinal prosthesis and artificial
schemes across the industry in the prestigious Ask Afrika Orange Index
disk limit increases.
survey, the largest and most widely referenced customer satisfaction
■ Dental and oral surgery: beneficiaries aged 7 and younger – extraction
benchmark survey done in South Africa.
and restoration benefits at day hospitals.
Pieter van Zyl, acting CEO of Bestmed, explained that this year’s
■ A new diabetes management programme will be introduced to the
increase of 8.9% is on par with the current medical inflation corridor, with
benefit of all members.
four of the scheme’s product offerings recently named as the “best” in the
“We continuously review our biggest single claims and noted an
market, according to the results of the Grant Thornton Capital Survey.
increase in premature births, with 4 out of the 10 biggest value claims
“This past year, we have again experienced material rising
related to premature births. The trauma associated with premature
costs in the medical industry, and this affected members
births, or complications at birth, are of real concern and we will
immensely, while putting pressure on the industry as
continue to do everything possible to provide peace of mind
a whole. We endeavour to keep our increases to a
to members who find themselves in such an unfortunate
minimum, bearing in mind our members’ means,
position. In an attempt to reduce the number of
without compromising access to quality healthcare.
traumatic premature births, Bestmed will introduce a
Caring for the healthcare needs of approximately
carefully designed ante-natal programme to ensure
196 000 lives entrusted to us, coupled with
mothers maintain optimal health before and during
excellent service, enables Bestmed to effectively
pregnancy,” according to Van Zyl.
deliver to members’ expectations,” says Van Zyl.
“In addition, Bestmed will launch its new and
The latest amendment to the Value-Added Tax (VAT)
improved wellness programme, which includes additional
Act, stipulating the increase in the VAT rate from 14% to
assessments that will benefit members of all ages. These
15%, was implemented on 1 April 2018. As of this date,
assessments are aimed at identifying health risk areas of
Pieter van Zyl
the costs of service providers such as doctors, specialists
the entire family and will not just focus on adults. By areas’
Acting CEO of Bestmed
and hospitals, and all medicines and consumables billed to
assessment of babies and children, parents will be able to
medical schemes have increased by 1%.
take note of potential health risks and Bestmed will assist with sound
Bestmed’s decision to not pass on the increased VAT burden to its
management of any risks identified.”
members with a premium increase for the remainder of the year, meant
that the scheme incurred higher-than-planned healthcare costs for the
The assessments include inter alia the following:
2018 financial year. “However, we continued to manage our financial
■ Antenatal and post-natal assessment of mother and baby
obligations at no disadvantage to our members,” says Van Zyl.
■ Assessment of growth and developmental milestones achieved
The medical scheme industry continues to make a significant
■ Healthy infant, baby and toddler feeding programmes and
contribution to providing access to quality healthcare to South Africans.
nutritional assessments
As South Africa’s largest self-administered scheme, Bestmed is able to
■ Sound immunisation programmes
keep its administrative costs to a minimum. This ensures that more than
Families will receive a detailed report that indicates their health
90% of income received from members’ contributions are paid towards
status and/or their identified health risks with suitable interventions
medical scheme benefits.
recommended to address the findings if deemed necessary.
Furthermore, the newly developed broker and member apps,
which form part of Bestmed’s digitalisation strategy, are ready to be
A summary of key benefit changes on specific benefit options
downloaded. These apps contain effective features that have been
for 2019:
synchronised with the features of its new administration system, whereby
■ A 50% frame benefit increase for member value at a preferred provider
Bestmed is now starting to note efficiencies and better response times.
negotiator (PPN).
This will be a guaranteed positive experience for brokers and members.
■ Additional maternity benefits with 2 × 2D ultrasounds, antenatal iron
“Bestmed continues to prioritise the health status of its members
and folic acid tablets, and post-natal consultation.
through its personalised and customer-focused services to all members
■ Day-to-day dentistry improvements: 10% increase in out-of-hospital
aligned with its brand promise: Personally Yours,” Van Zyl concluded. ■
basic and specialised dentistry limits.
@finweek
finweek
finweekmagazine
finweek 8 November 2018
37
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on the money motoring
By Glenda Williams
A machine meant to be
Photos supplied
Like all highly-strung thoroughbreds, the Maserati Ghibli GranSport can be demure one moment and excitable the next.
The forceful silhouette of the Maserati Ghibli GranSport; a
sloping coupé-esque roofline, powerful haunches, adaptive
LED headlights and distinctive “shark nose” grille.
t here is something to be said for
playing loud music and ensuring
that the exhaust voice adds to
those notes – more so when you
are a driving an Italian sports car. It
amplifies the sense of occasion.
The Maserati Ghibli GranSport’s
throaty exhaust snarl is integral to
that sense of occasion and the Italian
marque’s personality; an authentic sound
harking back to Maserati’s racing DNA.
40
finweek 8 November 2018
The Ghibli straddles two
worlds. It’s primarily a sports
car. But as a five-seater, it
has all the elements of a
luxury family car.
Sporting Maserati’s famous trident
badge and named after a North African
wind, the Ghibli was first unveiled in 1966 at
the Turin Motor Show.
For its 2018 relaunch, the luxury Italian
five-seater sports sedan has undergone
subtle restyling, abandoned hydraulic
assisted steering for electric power steering,
and introduced an array of new hi-tech
features.
The high-powered coupé-like sports car
www.fin24.com/finweek
on the money motoring
driven
shares its core architecture – chassis, suspension
layout, V6 engines and eight-speed ZF automatic
transmission – with the Italian marque’s flagship, the
Maserati Quattroporte, but is 293mm shorter and
50kg lighter.
Three Ghibli models, all built in Turin, Italy, are on
offer; two petrol models – the Ghibli and Ghibli S –
and the Ghibli diesel. All come with twin-turbo, threelitre V6 engines. The petrol engines are manufactured
by Ferrari in Maranello, Italy.
Maserati offers the Ghibli in two trim options: the
race-inspired GranSport and the classically elegant
GranLusso. Recognisable by their discreetly differing
exterior features as well as their distinct stylish
interiors, the GranSport is immediately identifiable by
its ‘shark nose’ profile.
finweek took to the roads in the GranSport base
model, the 350 horsepower Ghibli.
External view
The Ghibli GranSport is a bit of a wolf in sheep’s
clothing until the exhaust rumble is heard. This is
when heads really start to snap around.
Dominating the front-end design of this low-slung
and powerful-looking luxury sports sedan are steelyeyed LED headlights and a black three-dimensional
grille bearing the Maserati trident.
Potent air intakes, blood-red brake calipers, 20-inch
wheels, powerful haunches, sloping coupé-like roofline
and dual chrome exhausts on either side of the wide
rear bumper add to the forceful silhouette.
The Ghibli GranSport’s cockpit features stitched leather seats
embossed with Maserati’s famous trident badge, leather sport
steering wheel and sporty foot pedals.
TESTED:
Maserati Ghibli
GranSport 350
Engine:
Twin-turbo
3.0-litre V6
Power/Torque:
257kW/500Nm
Top speed:
267km/h
0-100km:
5.5 seconds
Transmission:
ZF 8-speed
automatic
Consumption
(claimed combined):
8.91 litres/100km
CO2 emissions
(claimed combined):
207g/km.
Luggage capacity:
500 litres
Fuel tank:
80 litres
Warranty/
service plan:
3-year warranty
(extendable to 7)/
100 000km;
5-year/100 000km
service plan
Price:
R1 765 350.88 (incl.
VAT and CO2-tax)
Distinctive, sporty cockpit
The interior, with its sporty GranSport trim, is
beautifully appointed. It is an uncluttered cockpit
sporting a combination of old-world elegance and
racing-inspired dynamism as well as user-friendly
instrumentation.
First to catch the eye is rich black leather with red
stitching and embossed red tridents on the antiwhiplash headrests. Then there is the charm of the
analogue clock mounted on the wood-trimmed and
high-gloss black dashboard and the Ghibli’s sporty
chrome pedals.
The touchscreen dominates the centre console
and offers all the infotainment features one would
expect from a luxury sports car, including Apple
CarPlay and Android Auto and an 8-speaker Harman
Kardon sound system.
Sinking into the leather sports seats positions you
in front of a large, albeit sporty, leather steering wheel,
with equally large aluminium paddle shifters.
The sport seat, while comfortable, is somewhat
less figure-hugging for smaller proportioned drivers
– particularly felt when negotiating curves at pace.
And the indicators, located behind the shifters, are
difficult to reach for those with small hands and
shorter fingers.
The Ghibli straddles two worlds. It’s primarily a
sports car. But as a five-seater, it has all the elements
of a luxury family car.
It is roomy for the driver and front passenger, but
rear passenger legroom might be less commodious
than expected. The Ghibli boasts a gargantuan boot
with enough room to comfortably accommodate an
adult, something one finweek colleague can attest to.
Maserati motion
The race-bred Ghibli is a fabulous car to drive.
Athletic and spirited like a typical thoroughbred, it
is refined but not flawless. It is this lack of soulless
perfection that imbues the Ghibli with personality.
Unsurprisingly, given its V6 engine, it is quick; not
blisteringly so courtesy of its 1 810kg kerb weight, but
very quick nonetheless. And it is 267km/hour capable.
Engaging the sport button changes the
personality of the car. It starts with the exhaust
soundtrack, the low rumble intensifying into a
roar. The suspension becomes firmer, steering
becomes weightier and the throttle opens up to
make accelerating a more blazing affair. Helped in
part by the downforce from the front spoiler, the
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41
on the money motoring
The Ghibli GranSport’s blood-red brake
calipers and 20-inch alloy wheels.
Dual chrome
exhausts that
allow for Maserati’s
signature exhaust
note are set on either
side of the new, now
more aerodynamic,
wide bumper.
The Ghibli’s highway assist (HAS) feature allows for
rear-wheel-drive Ghibli is surefooted on the straight
autonomous driving on a highway. The HAS feature,
and snappy out of the corners.
which combines the use of a radar sensor and camera,
It may be planted on good surfaces, but it is less
keeps the Ghibli in its lane, maintains the speed set
so on blemished surfaces – noticeably in sport mode.
for the cruise control, and keeps its distance from the
The latter also affects the comfort level of the ride to
vehicle ahead. Operating from 30km/h to 145km/h,
some degree. Both these issues, though, are easily
the car stops and goes as highway traffic dictates.
addressed with various dampening systems.
The lane-keeping feature of HAS is somewhat
The high-performance Ghibli offers five driving
‘interfering’ though – perhaps because the feature
modes; auto normal, auto sport, manual normal,
is so intent on keeping you dead centre of the lane
manual sport and ICE (increased control and
that a slight deviation from that brings a less
efficiency). Equating to the “Eco mode”
than smooth movement back to the centre.
of peers, the Ghibli’s ICE driving mode
If
personality
and
Apart from the advanced driving
allows for a more economical and sedate
assistance
features which add to the Ghibli’s
mode of driving, as well as better control
excitement trumps refined
safety technology, the Ghibli commands
in all weather conditions.
perfection, then you’ve
a 5-star EURO NCAP safety rating. It is
Most carmakers have switched to
equipped with seven airbags, adaptive LED
electric power steering for the added
met
your
match.
headlights with glare-free high beam assist,
benefits (like increased fuel efficiency)
and tyre pressure monitoring system.
that come with this technology. So too
The car also features integrated vehicle
now has Maserati. While I lament the
control (IVC), a system that prevents rather than
loss of the superb communication that comes with
corrects loss of car control, and the Maserati stability
hydraulic assisted steering, the Ghibli’s new electric
program (MSP), which can deploy a host of safety and
power steering provides good feedback with a decent
performance systems to maintain handling and grip.
amount of grip and turning force perceptible through
One is reminded of its origins when you drive this
the wheel. Steering, too, is direct.
race-bred car. It starts on entering, is amplified by the
The Ghibli’s ZF eight-speed automatic shifting
exhaust voice and further imbued when piloting this
system is fluid and effortless while manual shifting is
high-performance machine. It’s not perfect. And that
a quicker and sharper affair, adding spice to the drive
gives it soul and charisma.
and exhaust note, especially in manual sport mode.
Nothing about this car is pedestrian. If personality
This is a machine meant to be driven rather than
and excitement trumps refined perfection, then
one designed to drive for you, but the Ghibli still
you’ve met your match. Unmistakably Italian and
comes with all the latest semi-autonomous driving
infused with the passion, history and uniqueness
features expected of luxury cars.
so characteristic of Italian-built cars, the Ghibli is an
Driving assistance package features include active
intoxicating drive. ■
lane keeping and blind spot assist, forward collision
warning and a 360-degree surround view camera.
editorial@finweek.co.za
42
finweek 8 November 2018
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on the money technology
By Lloyd Gedye
TELEVISION BROADCASTING
If things had gone to plan…
Twelve years and R10bn later, we are still no closer to migrating South Africa’s television signals from analogue to
digital. What appears to be clear, though, is that local consumers will be stuck with the same old choices.
Shutterstock
i f things had gone to plan, South Africans would have been enjoying because it was fighting over this matter – something that is now
digital terrestrial television (DTT) since late 2011. If things had gone totally irrelevant. A lot of lawyers made money, government wasted
to plan, South Africa’s television landscape would look quite different money and we are back to square one.
It also means that the dream of an interoperable set-top box is
today to the one we are currently faced with.
now dead.
But things did not go to plan.
At the height of the set-top box encryption debate, many
It is 2018, and we are still no clearer on how government actually
stakeholders that I interviewed spoke about the future of South
plans to migrate the country’s television signals from analogue to
African television, where homes had one set-top box into which
digital. All we’ve had is delays and delays and delays.
they could place smartcards from various broadcasters.
As if these delays were not insult enough to the South African
The dream essentially meant that broadcasters had to compete
television consumer, government announced in October that they
are changing track again. The never-ending DTT saga just keeps on on content, not on platform. The future of television was not going
to be a choice between DStv, OpenView or StarSat. It would involve
– 12 years and more than R10bn later.
decisions about the specific content from every broadcaster that
For those who missed the last 12 years of intense lobbying,
you as a consumer wanted to purchase.
litigation and indecision, South Africa is attempting to
It was a vision that spoke to an empowered consumer,
migrate its television signal from analogue to digital.
one that was not stuck between a handful of bad
It’s a process that has been hotly contested, with
choices, but one that was open to the possibilities of
allegations of underhanded tactics surfacing
content available.
against many of the parties involved.
That dream is now dead.
The reason for the migration is that digital
When broadcasters have exclusive use of the
television uses a lot less spectrum than
means of delivery for their content, there can’t be real
analogue television. Therefore spectrum,
competition. This is because they are not competing
which is a scarce and valuable resource, will be
just on content, but on content and platform.
freed up for other uses like broadband services.
It’s a situation that is not all that dissimilar from recent
With the continuous delays, it is no wonder
calls by telecommunication companies during
then that mobile giants like MTN and
the Competition Commission’s market inquiry
Vodacom are jumping up and down
It
was
a
vision
that
hearings into the cost of data in South Africa.
clamouring for spectrum.
The telcos want the wholesale market on MTN
Government’s DTT migration plan had
spoke to an empowered
and Vodacom’s mobile networks to be opened up
included the provision of 5m free set-top
boxes to low-income consumers. This was consumer, one that wasn’t to competition. They say that if they can compete
against MTN and Vodacom – on-selling
to ensure that those poorer households
stuck between a handful fairly
capacity on the mobile giants’ networks – this will
were not disconnected when the analogue
bring data prices down.
television signal was finally turned off.
of bad choices.
The proposal is again not dissimilar to the
structural separation that happened to Telkom in 2013. By
Encryption loses relevance
all accounts the separation of Telkom has created a fiercely
However, communications minister Nomvula Mokonyane
competitive ADSL broadband market.
announced a “revised delivery model” for DTT in October, stating
So why not the same for the mobile data market? Why not the
that government will no longer procure set-top boxes. Instead, it will
same for the television market?
offer vouchers to consumers to redeem at commercial retailers.
As to whether an interoperable set-top box would have delivered
The department of communications is now calling the new
a television sector that looks to serve consumers with myriad
model a “market-based approach”, where government does not
affordable quality content choices, we can only speculate.
stipulate the set-top box consumers choose.
What we know at this stage, is that consumers will get a
This effectively means that all those years that the television
voucher. With the voucher, they’ll be able to purchase a decoder of
sector and government spent fighting over whether the DTT settheir choice, but it will be a set-top box that locks them in to one
top boxes will have encryption included in them or not, have been
television service provider. For now, it looks like we are going to be
rendered redundant.
stuck with the same old choices. ■
Keep in mind that South Africa missed the International
Telecoms Union’s (ITU) global June 2015 deadline for migration,
editorial@finweek.co.za
@finweek
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finweekmagazine
finweek 8 November 2018
43
on the money management
By Amanda Visser
How micro-management
impacts on business
Although there are certain instances where micro-management is required, it has to be with a short-term perspective in
mind. Otherwise it can stifle a team and hinder performance in the long run.
Photos: Supplied
t When there is a new project, or new team members,
he hovering human helicopter, better known as the
a manager also needs to micro-manage for some time.
office micro-manager. They hover over everyone,
“In this instance the micro-managing is to train the staff
staying involved in all day-to-day activities.
and empower them until they know how to do the work
Although there are certain instances where microand feel comfortable to carry on independently.”
management is required, it has to be with a short-term
When a crisis occurs, a manager will often intervene
perspective in mind. If it becomes long term, it can
because of his expertise and experience. There might be
have devastating consequences for the business, and
no time for training and empowerment within the crisis.
particularly for the employees who are subjected to it.
However, a hands-on manager will go back to the team
We have all heard managers say they are “handswhen the crisis has been averted to train them to deal
on” when the rest of their teams experience it as
with this kind of crisis.
micro-management. However, the real hands-on
manager realises the need to delegate, and trains
Marlet Tromp
Executive and
But some continue hovering . . .
their staff continuously to empower them to work
business coach
Tromp says micro-managers are often perfectionists,
efficiently and independently, says Marlet Tromp,
self-reliant and do not want to part with the power
executive and business coach.
their position gives them. They want
“A hands-on manager gives meaningful
feedback, takes time to understand his
“In this instance the micro- acknowledgement for work well done and do
not want to share it with their subordinates.
staff, delegates accordingly and allows
“Their focus is on themselves and not on
innovation within certain frameworks,”
managing is to train the staff
developing their staff,” she says. There can
Tromp says.
and
empower
them
until
also be underlying anxiety, which makes it
On the other hand, the helicopter
difficult to trust the staff and relinquish their
manager wants to control everything the
they
know
how
to
do
the
control. Their fear is that they might look bad.
staff does, closely observes every step,
Some are also more task-oriented than
gives no freedom or room to be innovative
work and feel comfortable to
people-focused. This inhibits self-motivation.
and tends to give negative feedback.
carry on independently.”
The inability to link the correct person with the
“Micro-managers tend to have
correct job and to oversee the process is one
unrealistic expectations of their staff,
of the reasons managers do not want to let go. They fall
which they have not necessarily communicated. These
into the micro-managing trap.
managers battle to let go, want to control everything
and battle to trust their staff. Their staff does not grow
and becomes stagnant and unresponsive.”
The effect of micro-management
Ivy says many managers who are guilty of long-term
When it’s good to hover
“debilitating micro-management” are oblivious to
In some limited circumstances, especially after
the destructive effects they are having on an entire
hiring a young employee who may need temporary
organisation.
micro-management until they settle in and become
“At its best, micro-management impedes evolution.
familiarised with their role, it could actually help to build
At its worst, it causes the entire organisation to decay
Holly Ivy
morale, says Holly Ivy, digital platforms and marketing
from the inside out.”
Digital platforms and
manager at Systems2. The goal must be to help
Top of the list of the harmful side-effects of micromarketing manager
at
Systems2
employees become independent, she writes in an article
management, however, is stifling innovation. “Sadly,
published on LinkedIn.
under the rule of a micro-manager, employees quickly
Tromp says when a team battles to self-motivate,
become stagnant when they cannot come up with new
or there are certain worries within the team they
ideas or procedures of their own.”
cannot address themselves, then a hands-on manager
Another destructive effect of micro-management
will intervene. He will address the worries of the
is the hindrance of workflow. It creates a “wait-to-beemployees for them until they can continue their work
told” culture. Employees begin asking themselves why
independently.
they should work ahead of time if the micro-manager is
44
finweek 8 November 2018
www.fin24.com/finweek
on the money quiz & crossword
Principles for the
micro-managed:
Do:
■
■
■
Everything you can to gain the micro-manager’s trust.
Know what motivates and worries your boss and try to
assuage their concerns.
Provide regular and detailed updates so your boss is
apprised of your progress.
Don’t:
■
■
■
Label anyone who exercises a degree of control as a
micro-manager.
Defy the micro-manager — that often triggers the
behaviour you are trying to avoid.
Try to tell a boss that they are overly controlling, unless
you know they may be open to hearing it.
Source: Amy Gallo – Harvard Business Review
Congratulations to Donna Page, who won the book prize in
a recent quiz. This edition’s quiz will be available online via
fin24.com/finweek from 5 November.
1. The owner of premier football club
Leicester City and four other people were
killed in a helicopter crash in October.
Where did the crash occur?
2. True or false? A pipe bomb targeting
Robert de Niro was sent to the actor’s
production office in New York.
3. Name the new president of Brazil.
1. Physically remove yourself from the team after tasking
an assignment.
2. Manage expectations, not tasks.
3. Seek input in how people want to be treated.
4. Trust your team.
5. Set aside your personal desire to win.
6. Give the team more responsibility than you are
comfortable with.
Source: Forbes Coaches Council
■ Grand Theft Auto
■ Shadow of the Tomb Raider
■ Red Dead Redemption
8. Which country was the first in the world to
allow all adult women to vote?
4. True or false? Human urine has been used ■ Canada
to create environmentally friendly bricks by ■ New Zealand
university students in the UK.
■ Sweden
5. Name the capital city of Chad.
9. What is the current rate of inflation in
South Africa?
6. Who is the incoming CEO of Clicks?
7. On 26 October, Rockstar Studios released
How to stop being
the helicopter:
a new game, with first-weekend sales
expected to be around $500m. What is the
game’s name?
10. In the context of a medical aid scheme,
what does the abbreviation PMB stand for?
CRYPTIC CROSSWORD
NO 720JD
ACROSS
DOWN
1 Old doctor in the beginning (6)
4 See 9
9 & 4 Dickens story starting with cobbling rivalry
for a dragonfly (6,7,6)
10 Crooned a tune in return for a drink in Spain (7)
11 Old king in earlier trouble (5)
12 Like a birdie? Yes, but Scot starts with a five (5)
14 Silence means, "Right, be quiet" (5)
18 Play monotomously from end to end in America,
beginning in Maine (5)
19 Fan of married shenanigans (7)
21 Selfish element I put up with, by the sound
of it (13)
22 Finish up with fruit (6)
23 Churchgoer not first in practice (6)
1 Sort of strange or rum, even kitsch (6)
2 Candid message in a bottle? (2,4,7)
3 Drone is empty at start of
reconnaissance (5)
5 Harangue listener at party (7)
6 Exercising in limbo (5,1,7)
7 George II has gone to mix drink (6)
8 He produces commercials, first person
in Germany to do so (5)
13 Not be worthy to be an officer (7)
15 Terms you heard constituted a
poor bargain (6)
16 Has boy the right of passage? (5)
17 Determined Down clue first (6)
20 I am increasingly into silk (5)
going to change everything in any event.
“What you are really saying to your staff when you
micro-manage is that you do not trust them. This in
turn will mean they do not trust you . . . leading to less
and less feedback and fewer shared ideas,” writes Ivy.
Questions managers should ask themselves:
■
■
■
■
Are you unable to delegate?
Is your staff turnover high?
Have you been told you are a micro-manager?
Do you believe you are smarter, faster and more
skilled than those who work for you?
How to deal with the micro-manager
Tromp says it is necessary to be honest with oneself
and one’s own performance. It also helps to understand
the way the boss operates and what they need. It is
crucial to remain factual and objective in your dealings
with the boss, and when you made a mistake, own up
to it and suggest solutions to fix it. It really helps to keep
one’s emotions in check and not to assume you know
what a micro-manager wants. Rather do a fact check
and try to be one step ahead.
“Always, protect your own credibility,” says Tromp.
And for those who have the helicopter hovering over
them – try not to shoot them down. Remember to
tread lightly. ■
editorial@finweek.co.za
@finweek
finweek
Solution to Crossword NO 719JD
ACROSS: 1 Well I never; 7 & 22 Mad dog; 8 Northwards; 11 Labrador; 12 Amex; 14 Taster;
15 Stereo; 17 Agog; 18 Assessed; 21 Immaterial; 22 See 7; 23 Corsetiere
DOWN: 1 Wentletrap; 2 Lord Bishop; 3 In heaven; 4 E major; 5 Eddy; 6 See 20; 9 Impressive;
10 Oxford Blue; 13 Steepest; 16 Essays; 19 Ambo; 20 & 6 Con man
finweekmagazine
finweek 8 November 2018
45
Piker
On margin
When words fail you
This issue’s Zulu word is isilungu.
Isilungu is the language/customs/ways
of white people.
However, even though it can mean
any European language, it has come to
be associated with English. The root word
is umlungu – white person.
Hhayi, guys, isilungu is a
treacherous language that betrays us
all the time. I really don’t trust myself
when speaking isilungu.
I was recently at a friend’s beautiful
wedding and we spoke isiZulu, isiXhosa,
Sesotho, Setswana and other indigenous
languages with reckless abandon. I think
isilungu was watching us do this and
plotted its revenge because in the days
that followed isilungu just would not
play nice with me. The words just would
not come out. And those that did come
out were gibberish. I think I even bit off
a portion of my tongue trying to form
isilungu words.
If you go long periods of time
without speaking isilungu, it becomes
tricky getting back on it. It just won’t
let you. I have seen colleagues of
mine who are fluent in isilungu injure
themselves in January trying to get
back into isilungu mode. You see, when
the African tongue spends a lot of
time speaking African languages, like it
does in Dizemba, your ability to speak
isilungu suffers.
I think non-native isilungu speakers
should not be required to speak isilungu
at work or school until after Monday
lunchtime. And coming out of the
festive season, we should be given until
Valentine’s Day to adjust. Jumping
right back into isilungu is a real danger
to us. It is so bad. There are times
when you see someone is planning on
speaking isilungu and you are tempted
to jump across the table to stop them
before they maim themselves. Isilungu
is that dangerous.
This is also why I have respect for
friends of mine who are in interracial
relationships. Their commitment
to speaking isilungu all the time is
supernatural.
By the way, umlungu is not derogatory.
It is just the word for white person.
– Melusi’s #everydayzulu by Melusi Tshabalala
Verbatim
Willing buyer willing sfebe @dr_nxledi
South African culture is getting your
driver’s license and then learning how
to drive afterwards.
Chester Missing @chestermissing
There’s a leadership battle going on in
the IFP. 1. Holy crap, the IFP actually
has other leaders. Who knew? 2. U
joined the IFP because u want to lead
it one day? That’s some next level
long game u playing.
Gavin Pounds @GavinLbs
A watched plot never thickens.
Antony Altbeker @antonyaltbeker
POLITICAL SCIENCE POSER: Is
several meetings with one Gupta
better or worse than one meeting with
several Guptas?
Kylie janam @hummusandpizza
“Cult classic, not bestseller,” I whisper
to myself nervously as my tweet gets
approximately two faves.
Dan Goor @djgoor
Just asked my 7-year-old if I could be
the person who chooses the hangman
word and she said, “No. You already
had your childhood.”
Ryan Reynolds @VancityReynolds
Gin is just vodka after its wish
was granted.
“The function of economic
forecasting is to make
astrology look respectable.”
- John Kenneth Galbraith, American
economist (1908 – 2006)
46
finweek 8 November 2018
www.fin24.com/finweek
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