Finweek 10.09.2021

MINING FUND FOCUS INVEST DIY

THE UN CLIMATE IS OFFSHORE FUND TIPS TO MANAGE
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from the editor contents

JACO VISSER Opinion

l ud opposition was voiced during the past couple of weeks following the 5 Insuring like it’s the future
overnment’s publication of a green paper (basically a pre-policy document to test
e waters) calling for mandatory social security deductions from all taxpayers. In brief
The 89-page document, released on 18 August, calls for the creation of a National
Social Security Fund with employer and employee contributions ranging between 6 News in numbers
8% and 12% of earnings up to an earnings ceiling of R276 000 per year. The public 8 ‘Pulling all stops’ on climate change
would’ve had until 10 December to voice their views on this. However, the outcry 9 Value over volume?
against the proposal was so loud that the minister of social development, Lindiwe 10 A review of SA’s venture capital and
Zulu, pulled it by the end of the month.
But is a universal social security “tax” or contribution new? In Namibia, for private equity classes
example, employees and employers contribute a total of 1.8% of earnings with a
minimum monthly contribution of N$2.70 and a maximum of N$81 each to the Marketplace
Social Security Commission. This entity – which can be equated to a mix between
the functions of the Unemployment Insurance Fund and the Compensation Fund – 11 Fund in Focus: PortfolioMetrix BCI
pays maternity, disability, death, funeral cover and even study bursaries and loans to SA Equity Fund
Namibians (according to the commission’s requirements).
In the UK, National Insurance is levied on all employed people earning more than 12 House View: Merafe Resources,
£184 per week and all self-employed people making an annual profit exceeding Sibanye-Stillwater
£6 515. These contributions to National Insurance entitle contributors to the state
pension, jobseeker’s allowance, maternity allowance and bereavement support. For 13 Killer Trade: Shoprite
those in employment, the contribution rate is 12% on a monthly income between 14 Invest DIY: How to use net asset
£797 and £4 189 (R15 905 and R83 597) and 2% on earnings above £4 189 per
month. The new state pension, introduced in April 2016, pays a weekly amount of value when considering stocks
£179.60 (£778 or R15 526 per month) to eligible retirees (who have contributed for 15 Investment: Relativity in the
at least 10 years to National Insurance or have credits to their benefit).
Back home now. Minister Zulu’s proposal – which could have seen the investment world
consolidation of the UIF, Compensation Fund and Road Accident Fund into a single 16 Share View: Pandemics, politics,
entity – drew more than 17 000 inputs from South Africans in less than two weeks.
Almost all of them against the proposal. conspiracy theories – what’s next?
The question is why? My two cents’ worth explanation would be that ordinary 17 Invest DIY: Managing real-world
South Africans are distrustful of the government and its priorities. When a
government proposes a society-wide modification, it needs the buy-in of the people market fears
it governs. It cannot rule from the top down. Those days in SA are long over where a 18 Simon Says: ARB Holdings, coal
concentrated “power class” dictates to its citizens, from whence it draws its power,
what is “good for them”. Add to that the miserable fact that out of 60.1m people in SA miners, Curro, Massmart, Metair,
only 14.9m are employed (of which 10.2m in the formal sector where SARS can know Naspers, Purple Group, Sasol,
about earnings that could be taxed), the backlash should not have come as a surprise. Sibanye-Stillwater
These figures are from the latest Stats SA data on unemployment. 20 Investment: PMI data: An early
Thus, it boils down to priorities. Some 34.5m South Africans are aged between warning
20 and 64 years, according to Stats SA’s latest mid-year population estimate. We can
think of these as the true working-age population. (I honestly don’t understand or Fund Focus
agree why those between 15 and 18 are also classified as working age.) Of these, less
than a third are employed. This should be any caring and responsible government’s 21 Looking for returns as offshore
main priority: How do we get 19.6m South Africans into jobs? And rather soon. assets become expensive
I would venture to say that the proposed National Social Security Fund and even
the National Health Insurance are not bad ideas and could benefit the people of this Cover
country. But it needs to be affordable. The contributors to these two social security
systems need to be as many as possible. Isn’t that the whole idea with insurance? A 30 There’s (always) money in food
large pool of contributors? And the only way we can reach affordability is if another
19.6m people enter employment. On the money
The ways in which the government can achieve rapid job creation are well-
documented, debated, pleaded and proposed in this country. All that is now needed 38 Spotlight: A great story to tell
is reprioritisation and a sense of caring for those without an income to fulfil their and 40 Business: The future of accounting:
their loved ones’ most basic needs. ■
co-habitation with bots
4 finweek 10 September 2021 42 Motoring: More than a little electric
44 Personal Finance: Balance your

lifestyle with a retirement portfolio
46 Piker, quiz and crossword

www.fin24.com/finweek

opinion

By Johan Fourie

TECHNOLOGY

Insuring like it’s the future

t The shift to digital has fast-tracked both the demand for and supply of new kinds of insurance services.
he days of a man in an oversized, dreary grey suit, instant cashback each month when you drive under
sitting at his desk in a smoke-filled office selling 300km. During level-5 lockdown people’s time on the road
stock-standard insurance policies are long gone. decreased by 74% and driving between 00:00 and 05:00

Insurance is now the sexiest industry on the block. – which historically is considered dangerous – dropped by

Just ask those who head up the Naspers* Foundry, which a further 81%. We want our members to benefit without

in early August announced another investment in the putting the onus or risk on them to report when they are

insurtech space: R120m into Naked, an AI-driven insurance driving and when not.”

firm. This follows a R34m investment into Ctrl, a digital Venter agrees that lockdown has caused many

short-term insurance advice platform, in July. consumers to question their static insurance premiums.

The excitement makes sense. Insurance is generally “Many insurers responded in a ‘clunky’ manner by trying to

a fast-growing sector as people in developing countries accommodate changing driving behaviours into existing

accumulate assets like houses and cars. The shift to digital, products with customers estimating and recording driving

buttressed by lockdown measures, and new technologies distances. The client experience was not great and some

like machine learning have accelerated both the demand for insurers got their pricing wrong.”

and supply of new kinds of insurance services. Unhappy customers can only mean one thing: greater

But there are also major headwinds. The SA economy opportunities for competition. Says Venter: “Lockdown

is struggling. The unwillingness of many insurers to pay for also allowed many businesses which did not traditionally

Covid-19-related damages has tainted the industry. I asked sell insurance to look for new ways to generate secondary

Pieter Venter, CEO and co-founder of Ctrl, to make the Pieter Venter revenue streams. We opened up new opportunities for these
case for investing in the insurance industry in SA. CEO and co- businesses as well. Ctrl’s platform contains all the processes
founder of Ctrl and workflows needed to start a brokerage from scratch
“Two of three vehicles on SA roads are uninsured. The

growth potential is thus enormous. Not only that, we start and setup time is minimal, thereby lowering the barriers to

off a high base; it is already a relatively large market at entry and opening the door for these businesses to enter the

around R150bn per year. Technology and innovation allow “Two of three vehicles on insurance intermediary market.”
new winners to emerge, not just in terms of new products, SA roads are uninsured. This seems almost too easy. One of the reasons why
but also in the way that insurance is distributed and sold. The growth potential is thus
Why now? I think that people are more aware of risk. Since enormous. Not only that, we the caricature of the insurance man is so pervasive, is the
red tape and regulation associated with the industry. I ask

the perils of not being insured are so much more glaring start off a high base; it is Venter what they have done to overcome the regulatory

in times of uncertainty, it may at minimum cushion the already a relatively large challenges that stifle so many insurtech start-ups.
market at around
industry from a more serious downturn in the economy.” “The regulatory challenges are real, but the way we
R150bn look at it is that once you overcome these challenges, they
Pineapple is also making waves in the SA insurtech become a moat around your business since it will be hard
space. Launched in mid-2018 with a focus on car

insurance, the company closed a Series A round at R80m per year.” for others to replicate.”

in July. According to CEO and co-founder Marnus van Innovation is not something typically associated with

Heerden, Covid-19 has indeed had a profound effect on insurance, but with an open-minded regulator a lot more

their business. seems possible. Is insurtech ready for blockchain?

“Covid-19 has affected us in three ways: consumer “We believe the decentralised space shares many

confidence, consumer behaviour changes and the common principles with Pineapple,” explains Van Heerden.

macroeconomic environment. Although a depressed “When it comes to a ‘blockchain insurer’, currently we

economic environment and consumer confidence does don’t see the ability for a completely decentralised

cause a decline in sales activity, we are fortunate that, and blockchain-based solution to appropriately service

being a digital-centric business, the consumer behaviour local short-term insurance needs. The main barriers are

changes resulting from Covid-19 have benefitted us. regulatory boundaries, computational affordability and

Our services and products are only a few taps away and Marnus van Heerden consumer appetite.”
available 24/7 from the comfort of your couch. We initially CEO and co-founder With names like Pineapple, Ctrl and Naked, a younger
expected the big shift to e-commerce in SA to happen
of Pineapple generation, equipped with digital technologies, is crushing

around 2023, but we believe this timeline has accelerated my outdated image of insurance men. That creative

with people being forced to transact online and hence destruction can only be good for the consumer – and the

gaining comfort much faster. SA economy at large. ■

Photos: Supplied “Another impact from Covid-19 we have seen is the [email protected]

reduction in driving, especially during lockdown periods. * finweek is a publication of Media24, a subsidiary of Naspers.

Pineapple’s car insurance product automatically includes Johan Fourie is professor in economics at Stellenbosch University and author of
our ‘Drive Less, Get Blessed’ benefit, which provides Our Long Walk to Economic Freedom (Tafelberg, 2021).

@finweek finweek finweekmagazine finweek 10 September 2021 5

in brief >> Mining: UN’s climate report calls miners to action p8
>> Chris Griffith on what the future might hold for Gold Fields p.9
>> Investment: Should investors take a chance on venture capital

and private equity? p.10

EDITORIAL & SALES “A NECESSARY STEP TO
SAFEGUARD
Acting Editor Jaco Visser Managing Editor MARKET INTEGRITY
Zerelda Esterhuizen Journalists and Contributors ANDTHE INTEREST
Simon Brown, Jacques Claassen, Amy OF ISSUERS.”
Degenhardt, Johan Fourie, Moxima Gama, Schalk
Louw, David McKay, Timothy Rangongo, Peet –The Financial Sector Conduct Authority (FSCA) commissioner, Unathi
Serfontein, Johan Steyn, Melusi Tshabalala, Kamlana, justified the FSCA’s suspension of ZAR X’s exchange licence as
Glenda Williams Sub-Editor Katrien Smit Layout a necessary step to protect the broader investing public. ZAR X is SA’s first
Artists David Kyslinger, Beku Mbotoli, Mini Zwane alternative exchange, operating since February 2017. The FSCA cited non-
Advertising Paul Goddard 082 650 9231/paul@ compliance with the Financial Markets Act and regulations relating to an
fivetwelve.co.za, Tanya Finch 082 961 9429/ exchange’s liquidity and capital adequacy requirements as grounds for the
[email protected], Nina Frank 084 434 suspension. The exchange licence will be cancelled if the non-compliance is not
7776/ [email protected] Publisher Sandra rectified within three months. ZAR X lodged an appeal against the decision.
Ladas [email protected] General
Manager Dev Naidoo Production Angela Silver “[Woolworths’ focus] absolutely
[email protected] remains playing with the cards
we’ve got.”
Published by New Media, a division of Media24 (Pty)
Ltd Johannesburg Office: Ground floor, Media Park, 69 – Woolworths Group CEO Roy Bagattini put to bed a widespread proposition
Kingsway Avenue, Auckland Park, 2092 Postal Address: by fund managers and analysts for the retailer to separately list its food division.
PO Box 784698, Sandton, Johannesburg, 2146 Tel: +27 A July research report by analysts Rod Salmon and Chris Gilmour at Salmour
(0)11 713 9601 Head Office: 8th floor, Media24 Centre, 40 Research recommended demerging and forming a separate listed entity that
Heerengracht, Cape Town 8001 Postal Address: PO Box 440, would result in a higher operating margin and unique position protected by higher
Green Point, Cape Town, 8051 Tel: Tel: +27 (0) 21 406 2002 barriers to entry. Bagattini told Business Times the group will continue consistently
Email: [email protected] growing the food business ahead of the market as it has done in past years.

Printed by CTP Printers, Cape Town and Distributed by “THE TRUTH IS, THIS DID UNFOLD
On The Dot Website: http://www.fin24.com/finweek MORE QUICKLY THAN WE HAD
Overseas Subscribers: +27 21 405 1905/7 ANTICIPATED.”

ENQUIRIES – US President Joe Biden said the events in Afghanistan are proof that no
amount of military force would have delivered a stable, united and secure country.
SUBSCRIBERS Fax SHOPS The White House appeared to be caught off-guard by the Taliban’s rapid advance
087-353-1305 0864-575-918 0861-888-989 and capture of the Afghan capital, Kabul. Responding to criticism that the US
[email protected] [email protected] should have started evacuations sooner, Biden said in a televised press conference
some Afghans hadn’t wanted to leave earlier in hope that it would not be
Share your thoughts with us on: necessary and that the Afghan government discouraged a mass exodus.

@finweek finweek finweekmagazine www.fin24.com/finweek

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6 finweek 10 September 2021

THE DOUBLE TAKE BY RICO
GOOD
GLOBAL WEALTH
The agriculture export performance
results for the first and second quarters $250tr
of 2021 reflect the resilience of the sector
amid ongoing Covid-19-related challenges Global financial wealth reached an all-time
across the planet, according to Paul high of $250tr in 2020 as household savings
Makube, senior agricultural economist rose and markets showed unexpected
at FNB Agri-Business. He said the sector resilience in the face of the protracted Covid-
managed to move a large quantity of 19 pandemic, according to Boston Consulting
produce to the rest of the world with the Group’s Global Wealth 2021 report. Africa,
second quarter of 2021 recording a trade and South Africa, also enjoyed increased
surplus of $1.5bn, which is 40% ahead of financial wealth – particularly for ultra-high-
the same period in 2020. This follows a net-worth individuals (individuals whose
36% year-on-year spike in total agriculture personal wealth exceeds $100m) and the
exports in the second quarter of 2021 at middle class.
$3.2bn, bringing the total half-year 2021
export value to $6.1bn, which is 30% INSURANCE CLAIMS DUE TO UNREST
higher year-on-year.
95%
THE
BAD The direct impact and lasting effect of the
unrest in July could reduce SA’s GDP growth
The Automobile Association (AA) UNITTRUST ASSETS UNDER MANAGEMENT by 0.8 percentage points in 2021, according
lambasted proposed route extensions to forecasts by PwC economists. The hard-
to the Gautrain as they will perpetuate R3tr hit KwaZulu-Natal and Gauteng economies
a system which caters for the minority represent half of the country’s GDP. Sasria
of Gauteng citizens who don’t need it, The local Collective Investment Schemes (CIS) said it has registered over 95% of all related
instead of the mass market which does. industry reported net outflows of R18bn for the insurance claims, which are currently being
The AA said the so-called “Patronage second quarter of 2021 following the closure of attended to. It estimates that the total number
Guarantee” is a mechanism whereby the SA’s biggest money market fund, the R80bn Absa of claims would reach between R19bn and
Gautrain operator is compensated for money market fund. Meanwhile, CIS assets under R20bn, once the phases of quantifying claims
sub-par ridership levels, meaning they management are approaching the R3tr threshold, and the finalisation of the work done by loss
can rely on the provincial government as according to Sunette Mulder, senior policy advisor adjustors are completed.
a funder of last resort regardless of how at the Association for Savings and Investment
well or badly their business fares. “It’s a South Africa. At 30 June 2021, the CIS industry * finweek is a publication of Media24, a subsidiary of Naspers.
disgraceful and outrageous agreement managed assets of R2.9tr, representing growth of
which has cost taxpayers close on R12bn close to R2tr in less than 10 years.
since 2012 just because not enough
people see value in using the Gautrain,”
said the AA.

Photo: Rhodes University THE REDUCED INDEX CONCENTRATION
UGLY
6.3%
SA’s headline unemployment rate hit
a record high of 34.4% in the second On 17 August, R145bn of equities were
quarter from 32.6% in the first three traded on the JSE, which caused significant
months as businesses shed staff due delays in processing on some systems, with
to the devastating economic impact of full dealing starting aft 14:30 the next day.
Covid-19. According to an expanded Trading surpassed a previous record of R71bn
definition of unemployment that includes from December 2017. The bourse struggled
people discouraged from seeking work, to process transactions in the previous
44.4% of the labour force was without session as investors adjusted their holdings
work in the second quarter, from 43.2% in Naspers*. The stock fell 8.1% on surging
in the first. That equates to 11.9m people volumes as money managers adjusted
unemployed. Job losses in the second their portfolios following the company’s
quarter were mainly in finance, which share swap deal with Prosus. Naspers now
shed 278 000 jobs, while community accounts for 6.3% of the FTSE/JSE Africa All
and social services lost 166 000 jobs and Share Index compared with 12% on
manufacturing lost 83 000 jobs. 17 August, reported Bloomberg.

@finweek finweek finweekmagazine finweek 10 September 2021 7

in brief in the news

By David McKay

MINING

‘Pulling all stops’ on climate change

The UN’s recent report on the impact of human beings on planetwide temperatures is a call to action for miners.

t he view of mining executives polled secretary-general of the United Nations. “This Mark Bristow July Ndlovu
by finweek is that a discussion about report must sound the death knell for coal and CEO of Barrick Gold CEO of Thungela Resources
reducing greenhouse gas emissions fossil fuels before they destroy our planet,”
Photos: Shutterstock | Supplied can’t exclude the rights of people in Guterres was quoted as saying. “If we think beyond this ‘winner-loser’
poorer economies, especially in Africa. debate on fossil fuel, it will call for an agnostic
“Scientists are looking at just one The report comes about two months technology solution.” Ndlovu believes that
component,” says Mark Bristow, CEO of before the UN Climate Change Conference could spell good news forThungela Resources
Barrick Gold, one of the world’s largest gold (COP26) scheduled for 31 October. Both the as it sets about sourcing financials for the
producers. “But are we going to deny the report and conference are likely to sensitise extension of certain projects, as well as
development of mankind? If you do, you the market yet further regarding the efforts of continuing to attract shareholders to the
will compound the problem,” he said in an mining firms to cut emissions; coal producers register.
interview with finweek in August. Climate in particular.
change is humanity’s most profound challenge “Technology is a limiting challenge,” says
but a lack of development in undeveloped “I expect [the report] to raise the Bristow, who adds that the world can’t be run
economies will also cost lives. ante,” says July Ndlovu, CEO of Thungela just on solar and wind power. “Hydrogen is
Climate change has long been an emotive Resources, of the pressure on coal miners the ultimate renewable power but it requires a
topic in the mining sector, as it has broadly to scale back and ultimately shut their real commitment to technology and thought.
in society; probably ever since the Paris businesses. “But is the report raising new And in this regard, we have to keep our
Agreement of 2016 that committed some issues? Probably not,” he added. options open. We can’t go down rabbit holes,”
of the world’s most industrialised economies he says.
to containing global warming to 2°C above Ndlovu was commenting on the day
pre-industrial levels. But the debate kicked up the firm reported stand-out debut interim Chris Griffith, CEO of Gold Fields, thinks “all
a notch following the publication on 9 August results amid a major recovery in the thermal levers have to be pulled” to avoid the current
of a report by the UN’s Intergovernmental coal price. The reason for the price recovery trajectory of far in excess of 2°C warming in
Panel on Climate Change, described as is that the world is concerned about supply. a context where world population is to grow
“epochal”. According to Ndlovu, coal supply is a critical by 2%. “You’ve got to use less electricity with
The essence of the report is that it pillar for many developing economies, SA in the majority of fossil fuels eliminated. And
firmly blamed the planet’s rising average particular. This can’t be ignored in the global you need technology in order to store fuel and
temperatures on humans, and that without warming debate. technology to use hydrogen.” ■
drastic measures, an average increase in the [email protected]
temperature of 1.5°C was inevitable within “I want to look beyond the headlines.
two decades – beyond the stretch target set One of the things they say in the report ... is
in the Paris Agreement. The report has been that for us to get to either net zero or below
interpreted as a “last chance saloon” moment 1.5°C, we have to invest in carbon removal
for the world. technologies. What that is beginning to call
The document is “a code red for humanity”, for – for the first time – is a pathway that
said Bloomberg News, citing António Guterres, focuses on technologies that can mitigate
global warming. That can include renewable
energy technologies, but equally it includes
mitigation technologies such as carbon
removal,” he says.

8 finweek 10 September 2021 www.fin24.com/finweek

in brief in the news

By David McKay

MINING

Value over volume?

f Chris Griffith, the CEO of Gold Fields, talks about the firm’s production and future.
ormer Gold Fields CEO Nick Holland “With the jurisdictions we have got, and
won plaudits prior to his retirement where we are growing, and having created
announcement in August 2020 value of 2.7m ounces ... to let that slip off

for having invested in new gold the other side of the hill doesn’t feel like the

production, especially at a time when the right long-term solution,” he says.

gold price was relatively low. What’s not planned, however, is the

Establishing a base of about 2m ounces takeover of companies, which would appear

in gold annually for 10 years was ahead of to rule out a bid for the other half of Ghana

the gold industry curve, especially as the assets held in joint venture with Toronto-

sector has been reticent to invest in new listed Asanko Gold. “We’ve been good at

gold resources, analysts said.To some buying assets rather than companies,” he

extent, this assessment was reflected in says. Gold Fields’ Australian mines will be

Gold Fields’ share price, which gained 43% operating for 20 years even though they

compared to a slim 3.5% gain for rival had a life of less than 10 years when they

AngloGold Ashanti over the course of 2020. were first bought.

Today, however, that’s not enough. Griffith is ambitious by nature so it’s

Chris Griffith, Gold Fields CEO, is keen no surprise the high-water mark of 2.7m

to arrest the decline in the ounces is one he wants to maintain

firm’s production from a for Gold Fields. Given his

peak of 2.7m ounces in former role as CEO of Anglo Chris Griffith
CEO of Gold Fields
2024. He hopes to American Platinum, the
Whilst Griffith is
achieve this through market also speculated keen to talk about
chasing “value over
a combination of he could push Gold volume” – a common
mining principle – his
acquisitions and Fields into metal interest in avoiding a
slide in production off
organic growth. The diversification. That is historically high levels
for Gold Fields sounds
plans are strategic not on the radar now. a bit like keeping up
appearances, however?
at this stage. “At the moment

Whilst Griffith there’s no focus on

is keen to talk about other commodities. It

chasing “value over doesn’t mean we’ll never

volume” – a common do it, but it’s not what

mining principle – his the market or shareholders

interest in avoiding a slide in want,” he said in response to an

production off historically high levels for analyst question. It’s an interesting way of

Gold Fields sounds a bit like keeping up describing the strategy because it’s framed

appearances, however? as if the market responded to the question

Griffith responds that the key to of diversification, possibly by Griffith himself.

maintaining a share price premium is Gold Fields is also sticking with South

first and foremost having quality assets, Deep instead of selling it, as had been

management credibility, and a quality in the speculated. The theory is that South Deep,

jurisdiction of the asset. (Griffith observes a mine bought in 2006 for R22bn, was

that though it’s only 10% of production, Holland’s pet project and that Griffith

the company’s SA mine South Deep tends would be tempted to sell it, partly to

still to attract a discount.) Beyond that, dispense with the jurisdictional albatross

Photos: Shutterstock | Gallo/Getty Images however, size does seem to matter, he says. that is SA.

“There is some correlation to size as “It has all the hallmarks of a Gold Fields

long as you’ve got those other things in franchise asset,” said Griffith. It’s a logical

place,” Griffith said in an interview with conclusion: South Deep has now made

finweek shortly after the group reported money for the last two years, and it’s safer

its interim numbers. “If you’ve just got size to keep the mine ticking over rather than

but have some other challenges, then you risk someone else capitalising on Gold

don’t get to ‘base two’ of how investment Fields’ work of the last 15 years. ■

analysts rate the share,” he says. [email protected]

@finweek finweek finweekmagazine finweek 10 September 2021 9

in brief in the news

By Timothy Rangongo

INVESTMENT

A review of SA’s venture capital and
private equity classes

w Should investors take a chance on these classes? national Andrew Barnes in 2015, educational tech startup Go1 was
hile public markets were decimated by the knock- established with a mission to unlock people’s potential through a love
on effects of the Covid-19 pandemic in 2020, of learning. How? By helping connect learners and businesses with
the same cannot be said for private markets, content publishers in a single subscription.
particularly the venture capital and private equity
asset subclasses. Private market asset classes continued to perform The edtech platform essentially collates existing learning material

well globally, outpacing most measures of comparable public market from leading global educational institutions into a central digital library,

performance.The strength and speed of the rebound suggest making corporate training simple for employees and employers.

resilience and continued momentum as investors looked to In six years, Go1 increased its user base by more than 300%

private markets for higher potential returns in a sustained year-over-year, and now support more than 1 700 customers

low-yield environment. worldwide, according to co-founder and CEO Barnes.While

In 2019, the South African Venture Capital and Private Go1 has reached over 3.5m learners, he says that “internally

Equity Association (SAVCA) said 69 early-stage fund we talk about a vision of reaching 1bn learners”.

managers had invested R1.23bn into new and start-up “Looking ahead, this investment will unlock capacity for

stage SA businesses. In 2020, one would have assumed this Tanya van Lill us to accelerate product development for our merchants and
figure to have declined as deals dried up due to pressures CEO of SAVCA continue on our growth trajectory in SA and beyond,” said
brought on by the pandemic. Instead, another record year Katlego Maphai, CEO ofYoco, in a statement following the

was concluded. SAVCA’s 2020 venture capital survey showed announcement of the R1.2bn raised.

that 74 SA early-stage fund managers had invested R1.39bn It brought the total funds raised by the company to date

into 122 entities through 167 investment rounds, amidst a to $107m. Over the next two years,Yoco plans to expand into

turbulent economic climate. other African countries and the Middle East and reach 1m

The top five sectors that received the most investment, merchants in the next four years.

based on number of investments, were software, fintech, Also in the same month, Johannesburg-based insurance

business products and services, consumer products and start-up Pineapple announced that it had closed its Series

services, and health, according to Tanya van Lill, CEO of A funding round with R80m secured from investors. In a

SAVCA. She tells finweek that SAVCA members indicated Katlego Maphai statement, co-founder Ndabenhle Ngulube attributed the
that the bigger part of 2020 was used to support their CEO of Yoco round’s success to the app’s growth in 2021.
existing private equity portfolios and ensure companies
“We did not expect to grow by 200% in the first six months

weather the crisis, and that deal activity only picked up again of this year, but it goes to show that customer insurance

in the latter part of the year. “Whereas the venture capital purchase behaviour is starting to shift online and that

industry invested in businesses that were most probably more customers are becoming more astute as to the online ratings of

agile or experienced exponential growth as a result of the insurance providers and not settling for second-best,” he said.

pandemic and changing consumer behaviours.” Venture capital and private equity outlook

Notable deals For venture capital and private equity to continue investing

Van Lill says in the private equity space there has been and adding value, they need to be able to raise funds, says Van

a lot more deals and co-investments related to digital Ketso Gordhan Lill. “It is currently very difficult to raise funds given the current
infrastructure and related industries, given how the pandemic CEO at SA SME Fund economic environment in SA.
amplified the vulnerabilities and lack of investment in critical
“Investors expect financial returns, with some also looking

digital infrastructure. to achieve certain impact metrics. However, in order to

In the venture capital space, we saw investments into Brown and achieve good financial returns and attract investors (both local and

Ayo (lifestyle hair brand), Koa Academy (an online school), Kandua international), we need a stable political environment, policy certainty

(marketplace for home services), and Ctrl (digital insurance), all in the and GDP growth.”

month of July. However, the most recent notable deals that proffered She says that SA also needs a vibrant exit environment so that

a glimmer of hope for local SMEs were by favourites such as Yoco investors can realise returns and find it attractive to reinvest in the

which raised $83m in Series C funding; and Go1, which raised $200m economy.

in Series D funding. “There is room for improvement in terms of the country needing

Photos: Supplied “This shows that there are a lot of opportunities and new more women-controlled teams and funds. Having said that, our

innovations coming to the market from our own entrepreneurs,” says attitude towards diversity is improving and we need to recognise that,”

Van Lill. says Ketso Gordhan, CEO at SA SME Fund. ■

Founded by SA entrepreneur Melvyn Lubega and Australian [email protected]

10 finweek 10 September 2021 www.fin24.com/finweek

market >> House View: Merafe Resources, Sibanye-Stillwater p.12
place >> Killer Trade: Shoprite p.13
>> Invest DIY: What’s the purpose of net asset value? p.14
>> Investment: Looking at asset classes relative to each other p.15
>> Share View: mRNA technology could become a life-saver p.16
>> Invest DIY: How to manage fear p.17
>> Simon Says: ARB Holdings, coal miners, Curro, Massmart, Metair, Naspers, Purple Group,

Sasol, Sibanye-Stillwater p.18
>> Investment: PMI data: an early warning system p.20

FUND IN FOCUS: PORTFOLIOMETRIX BCI SA EQUITY FUND By Timothy Rangongo

A focus on specialist skillsets

The PortfolioMetrix BCI SA Equity Fund is a domestic general equity fund that aims to secure high long-term capital growth.

FUND INFORMATION Fund manager insights:

Benchmark: FTSE/JSE CAPI SWIX The PortfolioMetrix BCI SA Equity Fund seeks out attractively-valued shares of
companies listed on the JSE that could achieve strong investment growth over the
Fund managers: PortfolioMetrix Asset Management long run.The portfolio may also invest in participatory interests and other forms
of participation in portfolios of collective investment schemes, as it has with the
Fund classification: South African – Equity – General Coronation, Fairtree, 36ONE and Satrix funds, which feature in its top 10 holdings.

Total investment charge: 1.85% “We believe that the specialist will outperform the generalist over time,” says
Brendan de Jongh, head of research at PortfolioMetrix, on the allocation to external
Fund size: R6.4bn collective investment schemes in the portfolio. “We therefore prefer seeking out
specialist skillsets within asset classes and building portfolios with these skillsets
Minimum lump sum/ None/R15 excl. VAT on all direct investor accounts with [rather] than trying to perform all functions in-house. We think this strategy is
subsequent investment: balances of less than R100 000 pragmatic and should result in superior risk-adjusted performance over time.”

Contact details: 011 568 3400/[email protected] While the fund has enjoyed strong absolute and relative performance year-to-date
and over longer time periods, De Jongh emphasises that it is important to understand
TOP 10 HOLDINGS AS AT 31 JULY 2021: 19.1% what has driven these returns as the need to examine outperformance is just as
18.9% important as analysing underperformance.The fund’s biggest concern in constructing
1 Coronation Top 20 10% portfolios is that of concentrated risk and the probability of success. “We have had a
2 Fairtree Equity Prescient 7.5% market that has been driven by strong commodity returns which is cyclical in nature.
3 36ONE BCI SA Equity 4.2% On the other hand, you have domestically focused companies that seem very cheap but
4 Satrix Mid-Cap Index 2.9% face a difficult operating environment.”
5 Naspers* 2.8%
6 Anglo American 2.1% The management of risks between these two themes has been a challenge,
7 FirstRand 1.7% according to De Jongh.The fund employs a multi-managed strategy that is biased
8 MTN 1.7% towards active management in the South African market. “Diversification of fund
9 Impala Platinum 70.9% strategy, differing views and positioning produces a portfolio that manages these risks
10 Standard Bank and can still outperform after costs,” he says.

TOTAL Prosus recently announced all conditions for its offer to buy Naspers shares
* finweek is a publication of Media24, a subsidiary of Naspers. had been met and that a deal to set up a cross-holding structure between the two
companies will proceed. PortfolioMetrix says the complexity of the cross-shareholding
PERFORMANCE (ANNUALISED AFTER FEES) between Prosus and Naspers is not ideal and, like most investors, they shy away from
complexity. “Although the transaction will not result in immediate value unlock, we are
as at 31 July 2021: of the opinion that the transaction is a step in the right direction and offers opportunity
for further transactions to alleviate the embedded discounts.”
■ PortfolioMetrix BCI SA Equity Fund ■ Benchmark
The fund did not engage in any material repositioning of the Naspers holding in the
30 portfolio due to this.

29.91% Why finweek would consider adding it:

25 The fund offers full exposure to shares listed in South Africa. JSE shares are also
trading at a 50% discount to the MSCI World Index and are at their lowest relative
27.08% rating in almost two decades. Given this, much negativity is already priced into the
market and provides a good starting point for potential prospective returns, according
20 to De Jongh. ■
[email protected]
15

10

5 7.29%
4.91%
0
1 year Since inception in November 2014

@finweek finweek finweekmagazine finweek 10 September 2021 11

marketplace house view

MERAFE RESOURCES BUY SELL HOLD By Simon Brown

Solid results Last trade ideas

Merafe Resources has had a wild listing, peaking at over 400c BUY Murray & Roberts
in 2008. Ensuing load-shedding and collapsing demand 20 August issue
subsequently sent the stock lower to under 100c where it has
struggled along for the last couple of years with the occasional BUY Cashbuild
move towards 200c.The only asset is a minority holding, via 6 August issue
Merafe Ferrochrome and Mining, with Glencore in what is the
world’s largest ferrochrome miner. HOLD Satrix China ETF
23 July issue
Recent results were very strong but what really caught my
attention was a 66% increase in production as prices soar. But SELL JSE
what stood out even more was inventories at R1.4bn and cash of 9 July issue
almost R800m.This totals R2.2bn with the current market cap, at
a 97c share price, standing at R2.4bn.

The market has never really liked the minority stake as it
means they have no control. Ferrochrome demand has rocketed
as the alloy is used in steel production, which may wane over time.

This is not news, however, so one is waiting for a trigger to send
the price higher, most likely increased demand or reduced global
production, especially out of China due to power reform policies. ■

SIBANYE-STILLWATER BUY SELL HOLD By Moxima Gama

Correction on the cards? Last trade ideas

Sibanye-Stillwater is the world’s largest primary producer of BUY MTN
platinum, the second-largest primary producer of palladium and a 20 August issue
top-tier gold producer, ranking third globally on a gold-equivalent
basis, as well as a significant producer of rhodium and other BUY Truworths
platinum group metals (PGMs) and associated minerals such as 6 August issue
chrome.The group recently declared an R8.54bn interim dividend
for the six months to end-June after another record financial SELL Transaction Capital
performance.Thanks to improved operational performance 23 July issue
paired with exceptionally strong precious metals prices, the group
profit was doubled to R24.32bn compared with R9.73bn in the SELL BHP
same period a year earlier – also surpassing the previous high of 9 July issue
R20.89bn in the second half of 2020. Headline earnings per share
Photos: meraferesources.co.za | Archive surged 141% year-on-year to 835c. All this has allowed Sibanye to Headline earnings per
declare an interim dividend of 292c/share. share surged

On the charts Sibanye exceeded its all-time high at 7 250c/ 141%
share and formed a new high at 7 665c/share in March. But year-on-year to 835c.
after that, the share started to form falling tops which have now All this has allowed Sibanye
resulted in a breakout of its current uptrend.This is triggering to declare an interim dividend
a caution signal, potentially insinuating that the share price is
exhausted and may embark on a correction. of 292c/share.
How to trade it:
Sibanye is currently teetering on a key support level at 5 845c/
share. If the information above triggers upside, but the share
fails to trade above 6 480c/share or even 7 000c/share, then
reduce long positions and sell completely below 5 845c/share.
A correction may then commence towards 4 450c/share and
breaching that level could see the share fall further to 3 150c.

Alternatively, Sibanye would have to trade above 7 665c/share
to initiate a new bull phase to new highs. Failing which, it could
consolidate on the top side before falling. ■
[email protected]

12 finweek 10 September 2021 www.fin24.com/finweek

marketplace killer trade

By Moxima Gama

SHOPRITE

Looking to recoup its losseshopriteis Africa’slargestgrocery

retailer, operating 2 840 outlets in 15

s  countries across Africa and the Indian
SHOPRITE (WEEKLY CHART)

Ocean Islands. Its brands include

Checkers, Checkers Hyper, Usave, Hungry Lion,

OK Furniture, OK Power Express, OK Furniture

Dreams and House & Home. It has secondary

listings on both the Namibian and Zambian

stock exchanges.

Share price history to rebuild and restock 89 stores so far. 52-week range: SOURCE: MetaStock Pro (Reuters)
Price/earnings ratio:
After correcting for three years between 2013 On the charts 1-year total return: R109.89 - R184.57
and 2016, Shoprite’s share price extended Market capitalisation: 22.5
its long-term bull trend to an all-time high at Shoprite’s share price traded through the Earnings per share: 67%
28 190c/share in March 2018 – this was despite support trendline of its bear trend and is Dividend yield:
the resignation of former CEO Whitey Basson in maintaining a steady uptrend. A recent Average volume over 30 days: R108.7bn
December 2017. announcement that sparked further optimism R8.14
was the group’s plan to withdraw from Uganda 2.27%
However, after announcing its first drop in and Madagascar markets after announcing
earnings in 2018 since 1998, which was the an 8.1% increase in total merchandise sales 1 369 732
year when Shoprite acquired OK Bazaars for R1 from continuing operations to R168bn for the
from SA Breweries, the share price embarked 53 weeks ended 4 July 2021.The company SOURCE: BLOOMBERG
on a prolonged downward slide. “We’ve been has already exited its Nigerian business of 15
to war,” is how the new CEO Pieter Engelbrecht years in which it had a hefty $30bn worth of share. Now that Shoprite has surpassed that
described trading conditions behind their first investments and is looking to close its Kenyan target, further gains may be in the offing.
drop in earnings in 20 years, aggravated by stores next year. Currency devaluations, lower Another buying opportunity was presented
armed robberies, record fuel prices, chronic commodity prices and high inflation have above 16 375c/share, but because the three-
unemployment, industrial action and the first negatively impacted household disposable week relative strength index (3W RSI) is
VAT hike in South Africa in 25 years.The group’s incomes and has weighed on its earnings over extremely overbought, we should anticipate
profits were further knocked by a hefty adverse the past years. a near-term pullback. If support holds at
effect of low inflation and the devaluation of 16 385c/share, go long or increase positions,
the Angolan currency by 50% – Angola was the What to anticipate as gains could extend further to resistance at
group’s star performer outside SA, generating 25 250c/share. Breaching that level could see
about 60% growth earnings. Shoprite’s share Shoprite’s share price is recovering its previous Shoprite’s share price revisit its all-time high
price plummeted to a low at 9 500c/share. losses and if the current uptrend should persist, at 28 190c/share.
the share price could retest its all-time high at Go short: If the share price corrects from
Current outlook 28 190c/share in the medium to long term. its mega-overbought position and trades
through the support trendline of its current
Shoprite’s share price managed to recover after How to trade it: uptrend, a negative breakout confirmed below
retaining firm support at 9 500c/share and 15 170c/share would mark a bearish change in
traded out of its bear trend in August 2020. Go long: In August last year, I had sentiment. Downside to 12 455c/share could
Despite announcing a R100m loss in turnover recommended a long position on Shoprite ensue, in which case, refrain from going long. ■
because of the Covid-19 pandemic, shareholders when it confirmed a positive breakout of its [email protected]
seemed undeterred as the share price took on a long-term bear trend above 12 975c/share
bullish direction.This direction was driven higher – the first target was situated at 16 755c/ Moxima Gama is an independent stock market analyst at The
on the back of Shoprite reporting a jump in half- Money Hub.
year group profit and increased domestic market
share in SA after scaling back on its continental
expansion. Its star performer was its upmarket
Checkers chain, which had been investing
vigorously in its same-day-delivery online
grocery service and expanding its new-format
stores to challengeWoolworths. Not even the
lootings that took place in July, during which
200 stores across the group fell victim, veered
the share price off its current bull trend. Shoprite
worked tirelessly to reopen stores – managing

@finweek finweek finweekmagazine finweek 10 September 2021 13

marketplace invest DIY

By Simon Brown

INVESTMENT

How to use net asset value
when considering stocks

o A company’s NAV might be a trap. There’s more to this valuation metric.
n a recent JSE online down over time as we saw with Sasol’s
event I attended, several misadventure at Lake Charles.
investment experts
But it is this paying more than

were giving stock picks NAV that has got many investors

when the topic of net asset value scratching their heads. The answer is

(NAV) came up in relation to how all simple: when buying a company as

the stocks being picked were trading an investment you’re not buying it

above their NAV. As I often refer to for the breakup value, you’re buying it

NAV in my columns, I thought it would for the future profits. Therefore, RoE

be worth going into detail. is an important ratio: what profits do

Firstly, what is NAV? It is a metric the NAV generate? The breakup value

derived from the balance sheet and only matters if things go wrong, and

essentially entails subtracting all the company goes bust.

liabilities from all assets. This is also This is the challenge for those

the equity value we use in ratios such looking to buy stocks below NAV,

as return on equity (RoE). Hence, it is considering them to be offering great

the breakup value of the company. value. The logic is sound, but the

NAV is also a function of a holding experience is often not. Is it value or

company whereby it is the value of all a value trap? I remember more than

their assets less any liabilities, often once finding a stock below NAV and

the tax on profits or debt. jumping in only for the value to never

I have written recently about how unlock. In the case of Argent that

holding companies typically trade discount to NAV is unlocking, but it

at a discount to their NAV but that has been a decade-long wait. But it is this paying
more than NAV that
currently we’re seeing larger discounts There is also tangible NAV has got many investors

than normal. For example, Remgro (TNAV), which is my preferred NAV. scratching their
heads. The answer is
traditionally traded at a 15% to 20% This excludes intangible assets and simple: when buying

discount to their NAV but recently it hence it is hard to sell assets such a company as an
investment you’re not
has been trading at a 40% discount. as goodwill. So TNAV is much purer buying it for the breakup
value, you’re buying it
One of the easier parts of a holding but can still lead to value traps. The for the future profits.

company’s NAV is if the holdings are Don Group traded below the value of

listed and one can use that listed price their properties, never mind NAV, but

to calculate the NAV. When assets are always struggled and was eventually

unlisted things can get tricky. delisted well below the TNAV value.

When looking at a single company, Lastly, different industries trade at

the valuation of unlisted assets is different premiums to NAV. Banks are

the challenge. Sometimes it is just usually around 1.5 times NAV (called

inventories and then easy to calculate, book value in banker speak) but

albeit are they valued at cost or retail currently most of them trade below

price? Ideally it should be at cost their book values. Do they offer value?

as the sale may not happen or may Property stocks peaked at around a

happen at a discount to the usual 35% premium to NAV but are now

selling price. trading at around a 35% discount to

There is also the issue of goodwill. NAV and the longer-term average is a

When a company buys another, premium of between 10% and 15%.

they’ll pay above the NAV of the So, to conclude, paying above NAV

Photo: Shutterstock target company and that extra value for a quality company is fine; and be

is added to the balance sheet as an careful with a discount to NAV as it

asset – goodwill. If the purchase goes may be a trap. ■

awry, then they can write that goodwill [email protected]

14 finweek 10 September 2021 www.fin24.com/finweek

marketplace investment

By Schalk Louw

PORTFOLIO CONSTRUCTION

Relativity in the investment world

r Which asset classes boast the best value relative to others?
elativity in the investment world is as important as it 1.8 FTSE/JSE ALL SHARE INDEX EARNINGSYIELD
is in the real world. Let’s use the Covid-19 pandemic RELATIVE TO OTHER ASSETCLASSES
as an example: South Africa and Italy both have a
RELATIVELY CHEAP
population of around 60m people. We know that

Italy was one of the hardest hit countries in the world at 1.6

the onset of the pandemic, and up to the end of 2020 they 1.4
lost an average of 185 people per day to Covid-19. South 1.2
Africa was hit just as hard but lost relatively fewer people to

Covid-19 with an average of 100 deaths per day up to the 1
end of 2020. Italy was more successful with their vaccination

programme this year, however, and up to and including 0.8

16 August 2021 (according to the WHO), 31.4m people have 0.6 RELATIVELY EXPENSIVE
been fully vaccinated.

Here, SA was relatively slower with the roll-out of its 0.4
vaccination programme and over the same period, only
3.7m people were fully vaccinated. While Italy’s Covid-19- Aug ’06 Aug ’07 Aug ’08 Aug ’09 Aug ’10 Aug ’11 Aug ’12 Aug ’13 Aug ’14 Aug ’15 Aug ’16 Aug ’17 Aug ’18 Aug ’19 Aug ’20

SOURCE: PSG Old Oak & Iress

related deaths declined from an average of 181 per day at

the beginning of this year to 47 per day over the past three yield (over the past 15 years) is trading at 93% (0.93 times)

months, SA’s death toll rose to an average of 215 per day for compared to the average earnings of the remaining four

the whole of 2021 so far, with this figure now on the rise at a asset classes (money market, property shares, local bonds

current average of 239 per day over the past three months. and offshore investments).

It’s therefore clear that the second and third waves have hit At the current 155% ratio, it’s showing us that local shares’

SA much harder than it hit Italy, and I would argue that is returns are still trading relatively cheaply against the other

largely due to Italy’s successful vaccine programme. asset classes, and that it hasn’t been this relatively cheap in

I’m well aware that there are variables such as seasons, the last 15 years. Of course, this includes the 2008 correction.

virus mutations and demographic profiles which will have an Now, this doesn’t mean that you should invest all of your

effect on these figures, but this just shows why the relativity capital in this one asset class, but rather that you should be

principle (and seeing the bigger picture) is so important careful to not exclude it from your portfolio entirely.

when making comparisons. Following the past almost two years’ interest

The same relativity principles can be applied rate cuts, the money market has offered relatively

in the investment world where they are just as little value. Offshore investments, especially in

versatile. It can be used to tell you more about developed countries, was a good place to be these

where we stand marketwise, and even though past few years. But because this model mainly

it’s mostly based on historical data, it can also looks at relative returns, I want to urge investors

tell you how cheap or expensive a particular to approach offshore investments with great

share, currency, commodity, bond or sector is caution, simply because this model doesn’t really

relative to another. look at foreign exchange.The relativity indicator

Studies have shown that more than 90% of is showing us that this asset class is now offering

good long-term investment results are achieved relatively less value and this may mean that you

through proper asset allocation, and only 10% through should consider rebalancing to ensure that you remain

good sector and market timing. A balanced portfolio well within your personal risk profile.

can be divided into five main asset classes: the money The relativity indicator is showing us that you should still

market, local bonds, property shares, local shares and offshore be cautious when considering investing in the SA property

investments. For ease of reference, I have allocated 60% of sector. The SA bond sector is looking similar to SA shares –

offshore investments to a World Equity Index and 40% to a very attractive. This is mainly due to SA’s downgrade to junk

World Government Bond Index. Diversification remains an status last year.

investor’s best defence against risk and that’s why it’s so In conclusion, our investment environment remains

important to not focus on just one of these asset classes. challenging. But you can manage your own portfolio,

Photo: Shutterstock All five of these asset classes have historical returns. provided you firstly look at proper portfolio diversification and

By comparing these returns with one another you can secondly, by limiting overweight positions in assets that are

get a good indication of how cheap or expensive they are offering you relatively less value compared to others. ■

compared with one another. If we use shares as an example, [email protected]

you will see that this asset class’ historical average earnings Schalk Louw is a portfolio manager at PSG Wealth Old Oak.

@finweek finweek finweekmagazine finweek 10 September 2021 15

marketplace share view

By Peet Serfontein

ANALYSIS

Pandemics, politics, conspiracy
theories – what’s next?

w Could mRNA technology open the door for the treatment of other diseases?
hile the Covid-19 pandemic LONCAR CANCER IMMUNOTHERAPY ETF ($) 52-week range: $23.99 - $35.81
has spread aggressively
and quickly over the whole – 40.00
world, society has also – 38.00
– 36.00 Year-to-date return: -3.64%
–– 34.00
32.00
– 30.00
– 28.00 1-year total return: 14.5%
– 26.00
seen the evolution and spread of other “viral” 3-month return: 0.12%

phenomena, including the dissemination of – 24.00
– 22.50
– 21.00
fake news, information conspiracy theories – 19.50 Expense ratio: 0.79%
and general mass suspicions about what is ––
truly happening. We all know that the world is 18.50 Indicated dividend yield: 0.94%
no longer the same as it was a few years ago. 17.50
Things have changed and will possibly keep – 16.50
– 15.50
–– 14.70
–– 13.90 Assets under management: $44.4m
13.10
12.40
– 11.75
SOURCE: BLOOMBERG

on changing. 2016 Jun 2017 Jun 2018 Jun 2019 Jun 2020 Jun 2021 Jun 2022
The spreading of fake and/or misleading SOURCE: TradingView

information is nothing new. It’s been going target a specific virus. The first successful But when must you buy?
on for aeons. The information ecosystem of

today has, however, drastically changed the cross-infection of mRNA, which was packaged So, if the future results of the mRNA

way fake news and misleading information in a liposomal nanoparticle in a cell, was technology are positive, this type of technology

are disseminated and interpreted. Social published as far back as 1989. can only have positive results for possibly the

media platforms and digital technologies The use of RNA in vaccines has led treatment of diseases such as cancer.

have facilitated the sharing of news and to considerable misinformation on social The graph is the medium-term (weekly)

information quite considerably. media, which incorrectly alleges that the graph of CNCR’s share price. Please note that

Within these online environments, fake introduction of RNA can change a person’s it’s a logarithmic scale.

news and information tend to raise more DNA. I am not an expert in this area, but we The ETF remains below its 200-day

interest than news about the truth. But will eventually uncover the side effects of moving average. So, if you buy, remember that

here the cat is among the pigeons. Often the vaccines – if there are any. the long-term trend of the ETF is already in a

one must understand why you are not being This is why the cancer immunotherapy bear phase, should you go against the general

told the truth. When the going gets tough ETF caught my eye. Its code is CNCR, and trend. Keep your exposure low and apply a very

in the world, you can be sure that there will it’s listed on the Chicago Board Options disciplined stop-loss.

be a concerted effort to simply relate what Exchange (CBOE). A descending wedge pattern is currently

everybody wants to hear. What makes the ETF an attractive unfolding (see the black trendlines that are
This currently forms the basis of the investment option? trending towards one another). Such a pattern
usually plays out as a bull price action. The
debate on whether people want to be

vaccinated or not. It remains a personal This ETF consists of a basket of companies purpose of the pattern is indicated by the blue

choice, owing to your right to human dignity. that have developed therapy to treat cancer arrow lines, which are in the region of $36.

One of the vaccines that is central to all by utilising the body’s own immune system. Should the ETF get close to this level, I would

the hype is Pfizer and BioNTech’s It’s therefore similar to the mRNA suggest that you reduce your exposure.

mRNA-based vaccine. technology. I will be more comfortable once the price

This type of vaccine uses Immunotherapy is a action has broken out of the pattern. This level

a replication of a disease to transformation field in the is in the region of $30.

create a so-called message, biotech space that could have a Should the price break through below

namely messenger RNA fundamental impact on cancer $25, one can expect the ETF to decline

(mRNA), to elicit an immune treatment. By developing further. Regard this level as a stop-loss to

reaction. This vaccine immunotherapies that are more protect capital.

therefore stimulates an efficacious and that can lead to a These types of investments could

adaptable immune reaction better quality of life than medicine possibly be long term by nature, so watch

that “teaches” the body to currently available, immunotherapy out for news of any developments regarding

Photo: Shutterstock identify similar harmful cells and then companies can make a difference for the mRNA vaccines. ■

destroying them. The purpose of this type of courageous patients battling cancer. This ETF [email protected]

vaccine is therefore to stimulate the adaptable aims to support this important work and the Peet Serfontein is an independent market analyst and
strategist at Unum Capital.
immune system to create antibodies that positive impact that it will have on society.

16 finweek 10 September 2021 www.fin24.com/finweek

marketplace invest DIY

By Simon Brown

INVESTMENT

Managing real-world market fears

It can be hard to focus on your investment fundamentals when a stock or sector runs hard. This fear is manageable.

Photo: Shutterstock f ear is a stark reality in the markets for There had been no new production in The other very easy
most investors. We fear the markets almost a decade meaning demand was way to manage this fear is
for two key reasons: fear of missing picking up and an undersupply was pushing old-fashioned diversification.
out (fomo) and fear of being wrong. commodities higher. That saw the stocks Here, I like a core holding of
They have some common traits between rise on improved earnings. We fear we exchange-traded funds (ETFs)
them but in many cases are separate and have missed the run, but we can do the with a careful selection of
have different solutions for helping to research and decide whether there is more 10 to 15 individual stocks.
remove the fear. upside or not. From the lows of 2016, the
I have written many times about fomo, resource index added almost 50% in 2016. The other very easy way to manage this
either directly or implicitly. We see a stock We then saw some weakness in the first fear is old-fashioned diversification. Here,
running higher and we worry that there is half of 2017 but since then the index has I like a core holding of exchange-traded
money being made and we’re not making more than doubled. We had real underlying funds (ETFs) with a careful selection of
any of it. Our gut response is then to jump fundamentals driving prices higher and 10 to 15 individual stocks. This gives wide
in without really knowing what’s causing the plenty of time to research and react. diversification thanks to the ETFs and the
run nor how we plan to get out. Often the range of stocks. If one of those stocks goes
fear causes us to enter too late. So, fomo is about knowing which scenario bad or nowhere, the portfolio risk is small,
The key here is to pause a moment and it is and acting accordingly. and we have others to make the serious
ask yourself whether this is just fomo. If profits. Remember that the downside risk of
it is, then sure, get involved, but also be With the fear of being wrong we worry a stock is always only 100% (when it goes
ready to get out quickly. Game Stop in the that we’ve found a stock we love that is bust) whereas the upside is unlimited.
US and Quantum Foods locally are two trading at very attractive valuations and
examples of this, albeit with different forces some of us will jump in and wait for the The last point, of course, is that writing
that set the stocks running. Neither had a returns to roll in, but many of us start to or reading about this is easy. But managing
true underlying fundamental reason for the doubt ourselves and want to see the price real-world fear is harder. Knowing where
run higher and this is the point – a lack of moving first. Then it does, and we worry the fear stems from is the first step in
fundamental reason alerts you to the fact we’ve missed the run (fomo again). overcoming that fear. ■
that this is all hype, and you need to be [email protected]
within reach of the sell button. But a quality stock will run for years
The other situation is when a stock and potentially gain hundreds of percent in
is running because fundamentals are price as we’ve seen with commodities. So,
improving. For example, when commodity waiting and then buying when the move
stocks started moving higher in 2016. starts is a perfectly good strategy. Sure, you
Here we could interrogate the reasons. miss the first bit of the gains, but as I have
written before, every ten-bagger stock (one
that goes up 10 times in price) first must be
a one-bagger.

@finweek finweek finweekmagazine finweek 10 September 2021 17

marketplace Simon says

By Simon Brown

MASSMART Simon’s PURPLE GROUP
stock tips
Offloading Serialong now
and buying Founder and director of investment significant
website JustOneLap.com, Simon shareholder
Massmart announced it’s in negotiations to Brown, is finweek’s resident expert
buy a controlling stake in OneCart, thereby on the stock markets. In this column Back in September 2018, the Serialong
giving indications as to its longer-term Trust led by Bonang Mohale made a R25m
strategy. Parent company Walmart competes he provides insight into recent loan to Purple Group*. The terms were
toe-to-toe with Amazon in the US, and market developments. that 30% of the interest was paid while
they have a majority stake in Indian Flipkart the balance was capitalised and could
which Walmart acquired control of in 2018. SIBANYE-STILLWATER be converted into Purple Group shares
Clearly Massmart is focusing on online retail before the end of August 2021 at a price
locally and Walmart will be able to provide Solid results of 22.87c, being the 30-day average price
strong tech and insights which, coupled with ahead of the loan being issued. Serialong
OneCart, could see the company become a Sibanye-Stillwater* published half-year has elected to convert the loan to shares
meaningful player in the still fledgling online results through 30 June on 26 August which and as a result now holds 11.46% of Purple
retail space in South Africa. were as strong as expected. The company Group. This is a huge profit as the R25m is
declared a dividend of 292c per share (on now worth R189m and makes Serialong,
Staying with Massmart, the company has an annualised basis that’s a dividend yield along with Firefly (who bought almost half
thrown in the towel on some lower-margin of around 10%) while headline earnings of founder Mark Barnes’ shares back in
businesses as it is selling Cambridge Food, per share (HEPS) at 843c places the stock June), two new significant shareholders in
Rhino and Massfresh to Shoprite*. The deal on a forward P/E of under four times. I the business.
is worth R1.4bn, which Massmart will use to would have liked a higher dividend payout,
pay down debt and which Shoprite can easily but the company bought back R5bn of NASPERS
afford. For Shoprite, they can plug these loss- corporate bonds after the financial period
making businesses into their distribution and end and continued a R9.6bn share buyback Swap done
should be able to generate profits quickly. In programme. The company remains my and dusted
time, Shoprite will likely rebrand the chains preferred PGM stock and at current prices it
to the existing Shoprite brands. The deal is extremely cheap, even as PGM prices have The Naspers** and Prosus share swap has
also includes 43 adjacent liquor stores. The moved a bit lower. been concluded and was oversubscribed.That
stores’ total turnover for the 2020 calendar means the full 49% of Naspers shares were
year was almost R11bn. Assuming it’ll cost as The deal is worth swapped for new Prosus shares.This broke
much as R600m to get to break-even on the the JSE as it meant massive sales by passive
acquisition (likely less) and if Shoprite can get R1.4bn holders at the close on Tuesday 17 August.
operating margins of some 4%, they’ll make which Massmart will use to pay The value of shares traded at almost R150bn
around R440m, meaning Shoprite is buying down debt and which Shoprite can was double the previous daily record and the
on a price-to-earnings (P/E) ratio of just over easily afford. exchange couldn’t process the transaction in
three times. This is a great deal for Shoprite. time, resulting in the exchange only opening
at 14:30 the following day.The plan here was
to reduce Naspers’ index concentration on
SA indices, and this has worked to a degree.
Naspers constituted 17.14% and Prosus under
2% of the FTSE/JSE Top40 at the end of June
and is now 7.93% and 8.93% respectively
and together down from almost 20% to 16%.
BHP* is now the largest constituent at 13.3%,
Richemont next at 12.3% followed by Anglo
American at 11.2%.

18 finweek 10 September 2021 www.fin24.com/finweek

marketplace Simon says

COAL MINERS CURRO METAIR

Strong results Energy can give

amid damning a boost

Photos: Archive | Gallo/Getty Images report Disappointing Metair also had their best six months ever with
report card HEPS to end-June coming in at 170c compared
The UN’s climate report, or by its official name, to a headline loss of 56c during the comparable
the Intergovernmental Panel on Climate Curro’s financial results for the six months period. Results were released on 19 August.
Change, makes for some very sobering reading ending June, released on 18 August, were a They’ll benefit from the increasing capacity in the
and is important for several of our listed entities disappointment. The R1.5bn rights issue last export automotive sector, but I worry that they
in the longer term – with coal miners Exxaro year increased the number of shares by 42% are lagging in the energy storage space.They have
and Thungela Resources both in the spotlight. and Curro still has debt of about R4.4bn. top-end stop-start technology in their European
But in both cases they export to markets with HEPS for the period was down 49% while operation, but they seem behind the trend in
relatively new coal-powered power plants and the company added 7% in new learners and the lithium-ion battery sector as electric vehicles
high economic growth. So, while there will revenue was up 12%. The biggest concern is command more sales.That said, this sector is still
be pressure on them, it will likely be decades that the older schools, which are fuller than in the early days and if the company can get a
before their offtake markets start to fade. In the new schools, are only making returns of about strong strategy for lithium-ion energy storage, they
meantime, both companies reported strong 30%. This is in part due to non-payment of could be a large benefactor of electric vehicles.
results even as problems on theTransnet line fees, which the company expects will cost
to the Richards Bay Coal Terminal (RBCT) it around R62m this year, even as Curro SASOL
hampered their ability to get their exports out continues to offer discounts to parents. I hold
of the country.Thungela is now trading at more ADvTECH* and their results due 31 August Back in the
than 6 000c per share after listing at just above will likely be much better after a strong black?
2 000c. At listing I liked the valuation, but it is trading update, expecting HEPS to be about
now fairly priced, and I would not be entering 30% higher. Sasol’s full-year results through 30 June,
new positions at current levels. released on 16 August, showed a company which
The biggest concern is has avoided hitting the wall. Debt has come
ARB HOLDINGS that the older schools, down markedly but not enough for the company
which are fuller than to declare a dividend.The issue here is that it is a
Profits make it new schools, are only much smaller company, having had to sell several
worth a shot assets. Some of these former units will now sell
making returns of products to Sasol, reducing the latter’s margins.
ARB Holdings’ results for the year ending June, about 30%. For me the point that mattered most was the
released on 19 August, saw HEPS of 82.49c, recent UN climate report which sits with Sasol
up on 2020 but also up 41.7% on 2019, making squarely in its sights as a significant polluter in
this the best year ever for ARB. Sure, they SA. I’m not sure how this will play out, but I will
added to their lighting division which skewed be watching as someone who doesn’t own the
this statistic in their favour, but we also saw a stock. ■
dividend of 32.5c per share and a 10c special [email protected]
dividend, putting the stock on an 8% dividend
yield. Higher copper pricing has hurt profitability *The writer owns shares in ADvTECH, BHP, Sibanye-Stillwater,
to a degree, but their cabling business is well- Shoprite and PurpleGroup.
positioned, especially as we see new 100MW **finweek is a publication of Media24, a subsidiary of Naspers.
power generation rolling out.This is never an
exciting stock, but it is of high quality with great
management and worth a look for anybody
wanting some exposure to SA stocks with most
of their business domestically, especially in the
infrastructure space.

@finweek finweek finweekmagazine finweek 10 September 2021 19

marketplace investment

By Amy Degenhardt

ECONOMY

PMI data: An early warning

t Do purchasing managers’ indices flash a red light for a global growth deceleration?
he purchasing managers’ supplies filtered into PMI surveys, GRAPH 1: SA STANDARD BANK PMI: WHOLE
index (PMI) is a valuable as did the subsequent boom in ECONOMY (SEASONALLY ADJUSTED)
leading economic indicator activity as restrictions eased and
60

used to identify market production restarted when vaccine

conditions based on monthly programmes started (see graph 2). 55 EXPANSIONARY

surveys completed by senior What is the latest data 50
production managers. The value telling us? 45
of PMI is that the data comes
directly from key managers who In May 2021, based on data from

understand the dynamics of a IHS Markit and JP Morgan, global 40 CONTRACTIONARY
firm’s activities. To put it simply, expansion peaked at a 15-year

the information comes straight high, as many economies reduced 35

from the horse’s mouth. Variables restrictions due to vaccination

measured by the surveys include, progress and a slowdown in 30

but are not limited to, firms’ infection rates. Whilst July global JFAJAFJAFDADADOOAOAeueueueuuueucecpcpptrtbtrcrngbbccgngng2222222222222222222000000000000000000011121211111222222221998190091189980000 JFAJAFJAFDADADOOAOAeueueueuuueucecpcpptrtbtrrcngbbccgngng2222222222222222222000000000000000000011121211111222222221998190091189980000

output, new orders, price changes, growth remains expansionary SOURCE: Refinitiv DataStream

employment, future output, (manufacturing and services PMI

delivery times, and future activity. remain above 50), it falls below GRAPH 2: COMPARATIVE GLOBAL PMIs
The focus here is on the whole the recent highs, indicating a
economy PMI to better understand deceleration. 70
overall global growth trends, but
The current decrease is linked TIGHTER PRE-PANDEMIC PMI RANGE

60

the analysis can be broken down to the raw material, component

into specific areas of construction, supply shortage, and logistical 50

services, and manufacturing. delays which have pushed 40
PMI data is straightforward global supply delivery times to

to interpret as it is measured record highs and continue to 30
on a scale of zero to 100. A contribute towards inflationary

value greater than 50 indicates pressures. The divergence 20
expansion whereas a figure between developed and emerging

below 50 indicates contraction. markets’ recoveries continues 10
Looking at seasonally adjusted to deepen as emerging markets,

whole economy PMI for SA as an specifically Asian Pacific markets

example, July 2021 data of 46.1 where vaccine programmes have South Africa Whole Economy PMI (SA) United States Composite PMI (SA)
index points indicates that the progressed more slowly, have United Kingdom Composite PMI (SA) China Composite PMI (SA)
economy is in a contractionary been harder hit by the Delta European Union Composite PMI (SA)
SOURCE: Refinitiv DataStream

state as it has fallen below 50 (see variant and which continue to GRAPH 3: DEVELOPED VS EMERGING MARKETOUTPUT
graph 1). It is interesting to note the constrain the recovery efforts in
April 2021 expansionary high aligns both manufacturing and service IHS Markit PMI Output/Business Activity Index

65

with the end of the second wave and sectors (see graph 3).

easing of lockdown restrictions in SA, Overall, global PMI data from 60

and the subsequent fall aligns with July, with a score above 50,

the restrictions imposed due to the indicates that the global economy 55

emergence of third-wave infections. continues to recover at a reduced 50
rate due to the resurgence in Covid- 45
Before the pandemic 19 cases from the more infectious
Delta variant and subsequent
Prior to 2020, global PMIs scored

in a far tighter range (between restrictions. As global vaccine 40
46.9 and 55.5) compared to the programmes progress, we watch

more drastic post-pandemic range to see if supply-side pressures and 35 2015 2017 2019 2021
experienced from 2020 onwards Delta variant limitations ease. ■ Emerging market services
(13.80 to 68.70). Pandemic-linked [email protected] 2009 2011 2013 Emerging market manufacturing
lockdowns and the subsequent
impact on output, production, and Amy Degenhardt is an investment research Developed world services SOURCE: IHS Markit
analyst at NFB Private Wealth Management. Developed world manufacturing

20 finweek 10 September 2021 www.fin24.com/finweek

FUND
FOCUS

YOUR QUARTERLY
REVIEW OF SA FUNDS

SEPTEMBER 2021

LOOKING FOR
RETURNS

AS OFFSHORE ASSETS
BECOME EXPENSIVE

fundfocus introduction

By Leon Kok

OVERVIEW

Local or offshore?

SA fund managers say there is value left abroad but also at home as local issues shake investor confidence.
his past quarter in South Africa has verged on a
nightmare for some and we’re not out of the woods

t  CONTENTSyet.Government has temporarily managed to
by market capitalisation. Many of our market’s challenges
are not new, yet SA has been a great place to invest over
the very long term.”

stabilise the political situation but we’ve yet to face Coronation Fund Managers highlights its highly-rated

some of the economic and fiscal fall-outs. Global Managed Fund offering investors a balanced, but 23 Coronation
In this edition, prominent financial commentator not traditional, solution in the current environment. The

Dawie Roodt suggests that we may well be heading investment house says that with traditional asset classes A balanced, but
towards a “failed state”, requiring urgent attention. looking fully priced and inflation being one of many risks not traditional,
National Treasury projects that government debt will facing global investors, the fund generates alpha through solution

increase to R4.38tr, or more than 80% of GDP, in the next bottom-up stock selection and utilises diversification into 24 Allan Gray
two years due to (uncontrolled) government expenditure non-traditional asset classes, offering investors harmony
and slow economic growth. Five years ago, debt was a between risk and real returns. Is the ‘shrinking’
mere 53% of economic output. JSE a sign of a
Clyde Rossouw, co-head of quality at Ninety One, tells sinking ship?
The prime danger of this kind, ultimately, as has long of his fascinating career in investments, having witnessed

been experienced in Latin America and elsewhere, is several market crises such as the dotcom bubble, the 25 PSG Wealth
the printing of money, hyperinflation, currency Great Financial Crisis and, more recently, the
controls, a degrading currency, the hounding Covid-19 market crash. He shares some of the Investing
out of foreign investors, and it becoming key investment lessons he learnt over more offshore -
impossible to grow out of debt. than two decades. how much?

As recently as three years ago Among these is that “avoiding risk 26 Ninety One
Venezuela’s Maduro government, for doesn’t create wealth. You can’t avoid
instance, devalued the bolivar by 95%, investment risk because then you won’t Rewind to
the largest currency devaluation in create any wealth over time. In fact, if
look ahead

contemporary world history. you do nothing, your money will lose value 27 Sasfin
Not surprisingly, the attention to offshore because inflation will erode the purchasing
power of your hard-earned savings.” Pointers on a
exposure in this edition carries considerably more
sustainable

significance than usual among contributing analysts. Perhaps also worth remembering are the portfolio

PSG’s Adriaan Pask, for instance, discusses how much comments of Wall Street columnist Junius Ellis, in his

local investors should ideally place offshore, a subject also book How to Pick Fund Winners. “It’s absolute baloney that 28 Q & A

touched on briefly by Sasfin’s Veenesh Dhayalam. investing is the triumph over fear or greed. Is it all doom

Dhayalam maintains that offshore exposure remains “They have nothing to do with the need to buy a and gloom?

an attractive option, and an appropriate allocation is not home, send your kids to college and save for retirement. 29 Last Word
unjustified. “(But) there is no ‘perfect’ index and the These are only some of the reasons why folk put their
MSCI World Index doesn’t pretend to be one. Its flaws money at risk in today’s skittish stock and bond markets. Investing in
are well-documented in terms of its significant skewing The day is long gone when you could reach milestones outstanding
towards the US, and, not surprisingly, leaning to large on the proceeds of a savings account or the tips of your global funds

technological companies.” perpetually bullish broker.”

He points to many contrarian indices that provide Mutual funds, as such, he argues, offer you a wealth

less concentrated options, including emerging markets of options. “For all the hype, they provide professional

(EMs) and regional funds. “This, however, is not to suggest management at an affordable cost. In effect, they have

that EMs or other non-developed markets offer greater made small investors big beneficiaries of professional

diversification; their attraction perhaps is their perceived expertise rather than proverbial stooges on the losing end

promise of greater opportunity as their risk profiles are of the smart money’s trade.”

invariably riskier than those of developed markets.” That said, Ellis adds, there’s no guarantee that a fund you

Allan Gray’s Nadia van der Merwe and Stephan Bernard fancy won’t become a loser because of gold-plated sales

pose the question whether the shrinking JSE is the sign of a charges, profligate overheads or poor investment decisions.

sinking ship.They argue that there is cause for considerable In similar vein, this takes from Warren Buffett. “The

concern when a net delistings trend emerges over time. most important thing to do if you find yourself in a hole

That said, they remain optimistic. Says Van der is to stop digging.The worst thing in the world to do is to

Photo: Shutterstock Merwe: “Without efforts to address this situation, it will continue throwing money at it.Though it’s painful to pull

be difficult to significantly grow the breadth and depth out, in the end it is far more profitable to leave the party

of the market. However, notwithstanding the challenges, and cut your losses before things go to zero.” ■

the JSE remains one of the world’s 20 largest exchanges Leon Kok is an independent writer on public policy and investment markets.

22 finweek 10 September 2021 www.fin24.com/finweek

fundfocus Coronation

OFFSHORE

A balanced, but not traditional, solution

i The Coronation Global Managed Fund offers ample opportunities in the current environment.
nvestors who want to invest offshore with Real assets SOPHISTICATED THINKING GOING INTO
a longer time horizon are likely to have one HOW WE INVEST BEYOND EQUITIES
of three needs: capital preservation with Our real assets bucket (infrastructure and

property investments) comprises 9% of the

some growth; growing their wealth in real portfolio. Our infrastructure investments,

terms with some protection; or maximum which we access through listed assets that

long-term growth. have concessions to operate toll roads, Equities Non-equity
Most investors may find themselves bridges, tunnels, and airports, are extremely remain the exposure
attractive on a stand-alone basis and relative foundation
somewhere in the middle of this needs to the valuation of other inflation-linked with which
spectrum but wondering where to find assets. They typically offer highly durable to achieve
that balance in an environment where the real returns

opportunities for growth and protection may and predictable investment outcomes

seem unclear. (concession life spans of 20 to 60 years) as at 31 July 2021 ■ High-yield fixed income
With traditional asset classes looking and also generate income streams linked ■ Real assets
to inflation, providing protection against ■ Investment-grade fixed income ■ Equity
fully priced and inflation being one of many inflation shocks. ■ Absolute returns
risks facing global investors, a portfolio that ■ Inflation protection
generates alpha (above-market returns) Within the listed real estate sector, we are

through bottom-up stock selection and taking advantage of attractive opportunities SOURCE: Coronation Fund Managers

utilises diversification into non-traditional in German residential, Indian office and

asset classes can offer investors that harmony Australian freehold properties. These property now and then a business that we already own

between risk and real returns. categories are all less affected by a shift from in the portfolio becomes subject to a buyout

physical to online retail and towards increased offer, with 58.com and 51job being recent

Fundamentally diversified working-from-home. examples that have worked in our favour.

The Coronation Global Managed Fund is High-yield fixed income Investment-grade fixed income
a classic global balanced solution with a

moderate risk profile. As is clear from the Our high-yield fixed income bucket, at 7% of At 9% of the portfolio, we continue to keep

figure, it offers a level of diversification that the portfolio, demonstrates the depth of our duration very low in our investment-grade

is hard to replicate on an individual basis, and research effort across different asset classes fixed income bucket, only investing in highly

means that the fund doesn’t look anything that allows us to assess the relative attraction liquid instruments. We are essentially using

like its peers or the underlying indices that of holding a company’s ordinary equity this bucket as liquidity to deploy into more

comprise its benchmark. versus a bond instrument issued by the same attractive opportunities as and when they arise.

While equities remain the foundation business. Examples include investing in a Investment-grade spreads and volatility are at

with which the fund aims to achieve real convertible bond offered by the leading Indian multi-year lows and, as such, we believe that

returns, it is further differentiated from the online travel agent, Make My Trip, and a high- now is not the time to be moving up the credit

traditional 60/40 global balanced portfolio yield bond offered by Mexican bank Banorte. risk spectrum and out in terms of duration.

by holding many investment opportunities Inflation protection Actively balancing risk and returns
outside the norm, which we discuss in more

detail below. We believe this is important in At 10% of the portfolio, our inflation Building well-diversified portfolios that take

an environment where, in our view, the global protection bucket comprises a combination advantage of all investable asset classes (as we

bond index offers a negative real return over of long-dated (30-year) inflation breakeven have discussed above) and look nothing like the

the next several years. instruments and commodities (gold, platinum traditional 60/40 global balanced fund takes

Equities and copper). The fund has held gold (the extensive research and a significant amount of
metal) over many years, but we recently investment experience and expertise.

At 59% of the portfolio, the equity bucket switched some of our exposure into the gold The combination of this expertise and our

comprises 40 to 60 shares, which are carefully miners to improve our gearing to the gold robust, tried-and-tested investment approach

selected from a universe of 2 500 to 3 500. price. We continue to own both platinum has enabled Coronation Global Managed

We believe our selection shows conviction (14 and copper and remain quite bullish on both to deliver a real return of 5.1% (in USD) over

of the ‘themes’ within this bucket account metals but have reduced our positions into the past five years. Providing investors with

for 90% of the holdings), but fundamental price appreciation. exposure to a wealth of opportunities in

diversification at the same time. At a very traditional and non-traditional asset classes, it
actively balances both risk and returns. ■
high level, we look to invest in companies with Absolute return

strong competitive positions, operating in a Our absolute return bucket, at 6% of the Coronation is an authorised financial services provider.
growing market, with capable management portfolio, is where we look for tactical For full fund details, please refer to its minimum
and good capital allocation track records. opportunities such as buyout offers. Every disclosure document.

@finweek finweek finweekmagazine finweek 10 September 2021 23

fundfocus Allan Gray

MARKETS

Is the ‘shrinking’ JSE a sign of
a sinking ship?

t Allan Gray’s Nadia van der Merwe and Stephan Bernard look at the factors that influence delistings.
he number of companies listed on the is seeing happening with the JSE, is the
JSE has decreased from 776 to 331 consolidation of companies into larger listed
over the past 30 years, with over 14 corporations. “The number of listings may

companies delisting every year on a have declined, but the average listed company

net average basis.This has spurred analysts to is significantly larger today than it was 10,

discuss the JSE’s “slow death” in the context of 20 or 30 years ago, even after adjusting for

a struggling local economy, many arguing that inflation. The total market capitalisation has

investors should take their money and run. Is it increased significantly over time, and it is fair Nadia van der Merwe Stephan Bernard
this simple and should investors be worried? to say that the decreasing number of listings Senior manager at Investment analyst
does not necessarily signify a weaker market,” Allan Gray
“There is cause for concern when a net at Allan Gray

delistings trend emerges over time. This could says Bernard.

be symptomatic of a faltering economy and Van der Merwe illustrates this by explaining alternative source of funding. For example,

persistent negative business sentiment, but that in 1982, there were 93 companies Airbnb raised $5.4bn in private funding to grow

there are several other factors at play,” says listed in the mining sector, 45 of which were the business ahead of its $3.5bn IPO in 2020.

Nadia van der Merwe, senior manager at individually-listed gold mines. “Today, only seven It was valued at over $86bn after its first day of

Allan Gray. locally-listed gold miners exist – all owners of a trade – a sizeable business for a new listing.

Looking at history to understand trends portfolio of mines.” “The greater availability of private capital
could mean that companies that would
Considering the total number of listings on the Smaller companies delisting otherwise have listed for funding fail before they

JSE, much of the decline over the last 20 years Bernard says that the downward trend in reach that point.The other observation is the

occurred during the early 2000s, driven by a the number of company listings over the tendency of some large growth companies such

high number of delistings combined with few past decade is mostly a result of delistings as Naspers* and Amazon to have a portfolio

new companies coming to market. Following among small businesses that fall outside of ‘start-up’ ventures. In this manner, these

the tech crash, sentiment was severely the acceptable size and liquidity range of the companies are providers of early-stage funding,

depressed, and many companies struggled. average asset manager: During 2020, there with the potential of spinning off successful

Some of them failed, several were taken over. were 19 company delistings, 16 of which were businesses as they reach scale,” says Van

The number of listings subsequently stabilised smaller than mid-cap. In 2021 to date, there der Merwe. However, she adds that a heavy

and remained broadly constant from 2004 to have been 11 company delistings, with ten regulatory burden remains a listings deterrent

2016. Since then, fewer new companies have smaller than mid-cap. – and a driver of delistings – in a post-global

come to market, while delistings remain at “The market capitalisation of new listings financial crisis world.

broadly similar levels. has exceeded that of delistings every year since
“Over the past 30 years, we have
as far back as 2008,” says Bernard, adding The bottom line

experienced three major cycles of new listings, that the number of companies with market “We cannot ignore the impact of SA’s

each driven by a specific sector. While elevated capitalisations above R5bn (in 2021 rand value) macroeconomic challenges on the listed equity

markets should generally boost listings across has increased over time – from 83 in 2000 to market. Without efforts to address these, it will

sectors, there are often specific sectors 113 in 2010, and 121 in 2021. be difficult to significantly grow the breadth and

characterised by conspicuous optimism. It “This suggests that the investment universe depth of the market. However, notwithstanding

is unsurprising that in the late 1990s, at the for larger investors has actually expanded over the challenges, the JSE remains one of the

height of the tech boom, technology companies time. Drilling down one further layer, many of world’s 20 largest exchanges by market

comprised a significant portion of new listings. the more prominent delistings of recent years capitalisation. Many of our market’s challenges

During 2006 and 2007, in the build-up to SA have been for reasons that suggest value are not new, yet South Africa has been a great

hosting the 2010 Fifa World Cup, it was the and confidence in future returns, rather than place to invest over the very long term,” says

construction sector. For most of the 2010s – because of businesses failing.” Van der Merwe.

the glory days of listed property – real estate Major delistings include Clover, Pioneer Bernard, too, is optimistic. “Prominent recent

listings were plentiful,” says Stephan Bernard, Foods, Assore and Comair. delistings support the view that local shares are

Photos: Supplied investment analyst at Allan Gray. Companies staying private for longer trading on attractive valuations. We think there
is upside from here. And should sentiment
Consolidation of companies into larger Globally it appears that companies are staying turn, we may well see a reversal in the delistings
listed corporations trend too.” ■
private for longer, partly driven by the growing

A huge global trend, in line with what Bernard availability of private equity, which offers an *finweek is a publication of Media24, a subsidiary of Naspers.

24 finweek 10 September 2021 www.fin24.com/finweek

fundfocus PSG Wealth

By Adriaan Pask

OFFSHORE

Investing offshore – how much?

l There are many factors to consider when you are deciding between investing locally or offshore.
ocal investors might think the grass is greener on the other side due FACTORS AFFECTING THE DECISION TO INVEST IN FOREIGN ASSETS
to the myriad of challenges our country faces. In recent months,
however, we have seen some of the country’s largest and most Validate home bias Reduce home bias
decision

reputable investment managers warm up to domestic assets,

often citing that poor sentiment has created an opportunity too Risk and return impact of Limited benefits Significant benefits
attractive to ignore. So, how do you decide how much of your funds to adding foreign securities

invest offshore and how much to invest locally? Domestic sector concentration Unconcentrated Highly concentrated
Making decisions based solely on the past can prove quite Domestic issuer concentration Unconcentrated Highly concentrated

costly. Our research shows that, over the next ten years, the US

stock market will likely underperform the past ten years by a long Domestic transaction costs Low High

margin. Similarly, the prospects for SA investments seem much Domestic liquidity High Poor
better than what was experienced over the recent past. This Domestic asset taxes Advantages Disadvantages
argument is not centred around economic growth prospects, but

rather around valuations. At this stage, it seems all but certain that Other domestic market risk factors No impact Significant risks

the US economy will continue to benefit and grow from masses of

monetary and fiscal stimulus, whereas the local economy remains Additional considerations: regulatory Impact unique to each investor
trapped in a dangerous chokehold of poverty, unemployment, and limits and liability matching systems

weak productivity. SOURCE: Vanguard
The problem is that the strength of an economy is not always

the best proxy for future investment outcomes. When valuations are

similar, go where there is growth. However, in the current environment 50% would suggest that you are not optimally diversifying to manage

valuations are so high in the US that we believe earnings will only allow portfolio volatility.

firms to grow into their steep valuations – don’t expect much further SA still has plenty of benefits to offer local investors from a tax

multiple expansion. perspective, like tax incentives to local investors, retirement fund

In contrast, SA is the underdog; few retail investors expect much to contribution tax deductions or tax-free investment benefits. Investing

happen here, and it shows in the ratings. Therein lies the opportunity. locally is also often more cost-effective. One also need to consider

Although much improvement is required to turn around the economic returns on an after-cost and after-tax basis.

fortunes of our country, that is less so for its investment landscape. Don’t forget to consider sector and issuer concentration
Even a moderate surprise to the upside will see ratings improve.

Looking beyond economic growth and valuations One of the key concerns currently is that both the domestic and US
market is heavily concentrated at the top. Domestically, we have

It’s not all about the investment outlook. There are many other factors Naspers* dominating at a 15% weighting, and in the US the top-

to consider. Let’s not forget the first rule of successful long-term 10 shares in the S&P now account for almost 30% of the market

wealth creation: diversification. Offshore assets Remember, just because capitalisation. Data shows that sectors are not
need SA assets and vice versa. They work the US is seen as less static but evolve over time, making it dangerous to
together as a team. Sacrifice the one, and you think your portfolio should mirror global weightings.
sacrifice portfolio diversification. It really is that In 1899, the UK accounted for 25% of the global

simple. We always advise a healthy balance, attractive, it does not economy, but in 2019 it only accounted for 5.5%. In
tactically tilted towards the area of preference. 1900, the rail sector was the biggest in the US and

Also remember, just because the US is seen as preclude other offshore the UK, while today this sector is nearly non-existent
less attractive, it does not preclude other offshore investment destinations. and has been replaced by new sectors like health
investment destinations. Emerging markets and technology.
are brimming with opportunity and Europe is in
a similar situation to SA, with moderate upside No one-size-fits-all solution

surprises set to deliver better returns. Although it would make things easier, unfortunately,

Then there are the practicalities of regulations and tax incentives. there is no such thing as one-size-fits-all financial advice. Each

While the asset allocation in retirement funds may be constrained to a person’s circumstances are different. What we can confidently say is

maximum of 30% in offshore equities, this exposure is closer to 40% offshore investing plays an important role in terms of diversification

or 50% when the offshore exposure via rand hedges is considered. and risk management. Any decision to invest offshore must be

According to our calculations, the appropriate level of diversification taken in a considered and sober manner. Contrary to common belief,

for discretionary portfolios is around the 50% level. Levels far above headlines are not a good predictor of future investment outcomes. ■

50% may introduce excessive currency risks and reduce the efficiency Adriaan Pask is the chief investment officer of PSG Wealth.

of risk management. On the other hand, an exposure too far below *finweek is a publication of Media24, a subsidiary of Naspers.

@finweek finweek finweekmagazine finweek 10 September 2021 25

fundfocus Ninety One

By Clyde Rossouw

ASSET ALLOCATION

Rewind to look ahead

Clyde Rossouw has witnessed several market crises such as the dotcom bubble, the Great Financial Crisis and

t more recently, the Covid-19 market crash. He shares some of the key investment lessons he has learnt.
hrough my career of more than two I wish I could say that every single – at times, valuations don’t seem to matter.
decades in investments, I have learned investment our team has made in the last Eventually though, fundamentals will start
several lessons. Here are a few. 20 years has been a success, but that isn’t driving the broader market again.This leaves

the case. You need to accept when you investors who own assets that they can’t value

1. Have a clear investment are wrong, know how much money you very exposed to sharp market corrections. If

philosophy and process have lost, and importantly, learn from your you own something that you can’t value, you

You can’t invest successfully over time unless investment mistakes. have no idea what the risk of losing money is.

you have a well-defined philosophy and 5. Avoiding risk doesn’t create wealth 9. The best ‘investment stories’ carry
process.The key is finding a process that works the highest potential to lose money
and sticking to it day in and day out. So, being You can’t avoid investment risk because then

disciplined is crucial. you won’t create any wealth over time. In fact, There is no shortage of good “storytellers” in

2. Align your temperament, intellect if you do nothing, your money will lose value the investment industry. Unfortunately, some
and experience because inflation will erode the purchasing “fantastic investment stories” could see an
power of your hard-earned savings. investor lose a lot of money. Many investors

Being a successful investor is not only about 6. Scepticism not cynicism leads to have jumped onto the cryptocurrency
harnessing your intellect and experience. fewer errors bandwagon, piling into Bitcoin, Ethereum
Temperament is incredibly important in fund and many others. It is sobering to note that

management because, ultimately, it determines Another valuable lesson is differentiating more than 4 500 cryptocurrencies have

how you behave in difficult circumstances. between scepticism and cynicism. If you are a been created but around 1 647 have been

When you think about any investment decision, cynic on a market or company, you will make abandoned or declared “dead”.

the first question you must ask yourself is: mistakes because your view will remain fixed –
“What edge do I have?”
no matter what evidence is produced. 10. Don’t confuse luck with skill

Secondly, you need to consider whether At the same time, if you blindly believe every When a share goes up, many investors attribute

you have superior insight based on the work great “investment story”, you will also make it to their skill and when that same share goes

you have done. And lastly, “Have I seen this mistakes because you need to assess whether down, they feel they were unlucky. Sometimes

before?” You may have deep experience and those stories are based on facts. luck, not skill, can result in a windfall – which

investment expertise, but maintaining an Our investment team is firmly brings me to GameStop’s CEO, George

even temperament is particularly important in the camp of sceptics, as Sherman. GameStop runs a network

when you face a situation with a highly opposed to cynics. Healthy of stores that sell digital video

uncertain outcome. scepticism means we keep discs. Nowadays, most players

3. Investing is more than a an open mind on potential download games from the
numbers game investments. We believe that internet, so the business has a
if we have done sufficient declining revenue stream and not

If you want to be an active investment manager, work, we should have the much of a future.

spend equal time studying history, economics, opportunity to change our minds. Despite the company’s poor

psychology and accountancy. While you need 7. Have a contrarian or prospects, retail investors on the social
a solid knowledge of statistics and financial differentiated position media platform Reddit decided to drive
accounts to value assets, understanding the the share price up.They were hell-bent on

psychology of markets and investor behaviour is How do you win in investment markets? squeezing out hedge fund managers.

also key to maximising investment success. You need to be an early “cheerleader” for a The mass investors who got the short

On top of that, being a history and contrarian investment idea that, ultimately, interest down to 20% from 120% effectively

economics buff gives you an edge. History helps becomes more mainstream. We were big SA allowed the CEO to be on the job for less than

us make sense of countries’ policy regimes bond investors in the Opportunity Fund long a year and walk off with more than $170m.The

over time and the factors that shape the global before it became more of a consensus view. shares are trading at $250-odd, but we believe

macroeconomic environment. Essentially, if you find an investment idea before the company still isn’t worth more than $10.

Photo: Shutterstock 4. Things do go wrong – learn from everyone else chases that idea, you are going to In conclusion
your mistakes be well-rewarded.
Over the long term, markets go up but not in a
Common layman mistakes are falling in love 8. If you can’t value an asset, you can’t straight line. Balancing risk and return remains
quantify risk the cornerstone of successful investing. „
with a stock, sticking to losers for too long and
Markets move through different stages Clyde Rossouw is the co-head of quality at Ninety One.
not doing a proper assessment before investing.

26 finweek 10 September 2021 www.fin24.com/finweek

fundfocus Sasfin

By Veenesh Dhayalam

PORTFOLIO MANAGEMENT

Pointers on a sustainable portfolio

a Navigating the current investment environment is quite challenging. Diversification
s an investor, one could almost be forgiven for being either
petrified or excited given an abundance of investment An important component of investing, even if at times correlations are
possibilities. Choice and variety are meant to be good, right?
similar, and especially during crises. Having different levers to source

A catch, though, is that choices can no longer be differentiated sources of risk and return consolidated in a portfolio, the

constructed simply on old-fashioned analyses based on valuation possibilities of achieving high-quality investment outcomes are enriched.

and economic data, amongst others. On the contrary, challenges in Offshore investing
the current environment comprise ongoing government intervention;

changing regulation; transformation of technological innovation; It’s certainly an attractive option, and an appropriate allocation is not

mutating pandemics and alike. unjustified. Whilst there is no “perfect” index and the MSCI World Index,

Herewith, several important pointers aimed at an advantageous a recognised global index, doesn’t pretend to be one. Its flaws are well-

approach to portfolio construction and management in the present documented in terms of its significant skewing towards the US and not

testing environment: surprising leaning to tech. However, there are many contrarian indices and

More than simply focusing on new age offerings that have been launched that provide more
investment returns expressive alternatives.These include regional and specific
themes that are meant to capture the megatrends

Historically, asset management may have been which will drive growth in the future.This, however, is

primarily about returns, especially excess returns. not to suggest that these alternatives do not have

However, today’s leading asset management their idiosyncratic characteristics, however, they do

operating models tend to be skewed towards a offer a promise of greater opportunity; something

sound wealth management methodology. beyond the standard global exposure.

A holistic approach, for instance, allows for Nor should one overlook environmental, societal

the construction of a more complete solution and governance enhancements made to world

or solutions and services, focused on a series of indices as investment options. But, as with any

astute needs rather than being encapsulated by investment decision, one needs to consider the risks.

the platitudes of a single investor. Listed property
Asset management is merely one element in the

value chain, aimed primarily at enhancing societal wealth and In managing property allocation, an actively-managed

wellbeing. One cannot, for instance, disregard the eroding effect of stock-specific mindset is preferable to broad sector or beta

fees on investor returns.These, indeed, are critical among all players in the participation. Presently, one needs to adopt a medium- to long-term

investment value chain, meaning that service providers are morally and view in the recovery of this asset class as it has the potential to

ethically obliged to justify their fees relative to their value-add. recover strongly in time. However, it may be accompanied by bouts

Aggressive versus conservative investing of intermittent volatility with a range of possible outcomes. The
precipitous decline of the domestic side has been well-documented

Generally, aggressive and conservative investors are differentiated after its imperious multi-year dominance.

based on their capital allocation, risk tolerance, their place in the

investment life cycle, and underlying needs. Not uncommon, of course, Optimal number of mutual funds in a portfolio

is to find aggressive investors migrating to more conservative profiles Like asset classes, underlying funds in a solution is meant to serve a

as their needs change. However, both regimes are exposed to risks certain purpose and are meant to behave differently for purposes of

in their approach, such as short-term capital loss and not meeting diversification. From a purely financial engineering perspective, there is

inflation-plus objectives due to underlying asset classes not providing no “ideal” number of funds regarding how many is too many or too few in

required rates of return. terms of realising the same outcomes. Moreover, whilst targeting certain

Fixed-interest instruments in a balanced portfolio risk premia, unintended outcomes of blending too many funds can be
detrimental to outcome. Some solutions are “diworsified” rather than

Fixed-interest instruments serve an extremely important function but diversified and one needs to determine the value-add of the underlying

are often underappreciated in portfolio management. The seeming funds, as some would be diluted in their overall exposure.The overall risk

downside is that too often they seem to be too boring relative to more and cost of any solution must be carefully considered.

risky assets. That said, they’re not riskless. Whilst current times may seem challenging, one could easily argue

The role of these instruments, primarily, is to infuse levels of that there always has been volatility in markets, and there always will

certainty and stability within a portfolio, and, in some instances, be disruption in some form, thereby continuously challenging the status

Photo: Shutterstock provide guaranteed returns above inflation at significantly lower levels quo of investing. One has to balance the sensible advice of sticking to

of volatility and variability of returns relative to risky assets. A sensible the long-term objectives but to also be adaptive enough to capture the

and measured allocation approach to them is essential given their market dynamics that will continue to play out in a non-linear fashion. ■

significant purpose and varying behaviour in different scenarios. Veenesh Dhayalam is the head of asset manager research at Sasfin Asset Managers.

@finweek finweek finweekmagazine finweek 10 September 2021 27

fundfocus Q&A

By Leon Kok

ECONOMY

Is it all doom and gloom?

s Economist Dawie Roodt from the Efficient Group gives his forecasts for the local and global economies.
adly, South Africa has digressed minister of trade, industry and competition,
down a slippery slope in recent Ebrahim Patel, who believe that the so-called
years, coerced by various political, “development state” should be doing more,

economic, social and international involving significantly greater centralisation of

factors.The question arises: Whereto from power and resources. Their labours only make

here? We spoke to Dawie Roodt, a founding things worse.

member, the chief economist and director Are we heading towards being a
of the Efficient Group, a diversified financial “failed state”?
services company.

Do the new Cabinet and executive have To some extent we’re already there. For
the skills, insight and political will to all practical purposes, for example, we’ve
overcome SA’s multiple crises? privatised the police – there are more than
three times as many private security people

The answer is a big no. It’s important to as policemen. Another example is the

understand that the ANC has created country’s putrid education system where integrate with the rest of the world, and offer

a massive patronage system, the state has failed dismally. excellent yields.That’ll continue to attract

meaning that its existence is Much, however, still works. some foreign direct investment but not the

primarily focused on feeding off The press remains independent, bricks, mortar, factories, and new mines that

the state. Secondly, ideologically the judiciary may be slow and we so desperately need.

the ANC is socialist, driven by ineffective but is mostly unbiased Three-year outlook for the rand?
roots anchored somewhere and generally respected, and the

in 1920s Leninism. It’s simply Reserve Bank and financial markets Currently it’s correctly priced. I think it could

not ideologically placed to run a function seamlessly. maintain current levels with a, say, 5%

modern economy. Dawie Roodt Your GDP forecasts for the depreciation per year against the US dollar if
Additionally, die-hard Founding member and next five years? there is not a crisis of some sort – locally or
chief economist of the internationally. But be sure that some crisis is
communists in its ranks, such 2021 is likely to be a good GDP year the norm, which means that we ought to see
as Pravin Gordhan, continuously Efficient Group another big fall and volatility in the next year
attempt to implement outdated because of the very low base last

socialist ideas such as keeping year, and because of current strong or two.

SAA in the air and refusing to positively commodity prices. But over time the rate of Local growth outlook (US, China, Europe
restructure Eskom. growth will again slow to something like less and emerging markets)?
than 2% for various reasons such as potential
Moreover, skills levels at the top are very

limited with many of the incompetent drawn in electricity and other infrastructural drawbacks. I expect mostly strong growth in all these

primarily for the constituencies they’re able to Implications of SA’s gross debt-to- major economies for at least a year, or maybe
bring to the organisation. GDP heading from around 53% in 2017 even two years. Thereafter the recent stimuli
to 80% this year? will lose its momentum and growth will
These factors, in fact, make it extremely probably slow down. I am also concerned
difficult for any leader (the president) to

transform the ANC and boldly set SA on a The recent surge in commodity prices and the about the recent crackdown on various

course to meaningful economic recovery. Nor is accompanying tax windfall will postpone the companies in China which can derail the

it helpful that the ANC’s major partners, Cosatu inevitable somewhat. But without a significant recent strong performance in China.

and the SACP, oppose significant reforms. cutback in state spending, the debt-to-GDP Is now the time to increase one’s
Clearly, we’ll be in for more of the same until trajectory will continue to rise.That means offshore exposure (or are major foreign
that the state will eventually face reluctance equity markets too overcooked)?
the economy self-corrects, such as rampant from investors to buy state debt. From there
inflation forcing the state to spend less in

real terms. Or perhaps until some political onwards, things like prescribed assets will It is always a good idea for South Africans

development such as the ANC losing an become a possibility. Eventually, excessive debt to have significant exposure offshore. Also, I

Photos: Supplied I Shutterstock election to more competent forces. will lead to high inflation, placing inordinate believe that international equity markets still

Are those at the top not capable, then, of pressure on the Reserve Bank. have some legs left. So yes, take money “out”.
recognising the deepening crisis?
Three-year outlook for foreign direct Where are commodity prices headed
Yes, some do, but generally they’re incapable investment? from here?

or unwilling to do something about it. More In short, not good. But bear in mind that SA’s Still strong but soon, within a year, they’re likely

disconcerting perhaps is the likes of the financial markets are very liquid, well-regulated, to level off and enter a period of falling prices. ■

28 finweek 10 September 2021 www.fin24.com/finweek

fundfocus last word

By Leon Kok

OUTLOOK

Investing in outstanding global funds

m Making the case for some of SA’s offshore funds.
uch has unfolded since FUND SELECTED GLOBAL FUND PERFORMANCES FUND SIZE Rm
we last explored the GLOBAL EQUITY
case for local investors TEN-YEAR ANNUALISED RETURN % FIVE-YEAR ANNUALISED RETURN % 22 296.0
26 837.0
to maximise their Old Mutual Global Equity 21.20 14.63 24 755.9
18.55 14.14 8 518.0
offshore exposure, and perhaps the need now Ninety One Global Franchise

is greater than ever.The domestic economy is

appallingly managed; centralisation of power Allan Gray Orbis Global Equity 18.30 11.71

is alarming; corruption is rife; criminality in Coronation Global Equity Select 18.17 13.44

KwaZulu-Natal and Gauteng has been over the Ninety One Global Strategic Equity 17.05 12.95 4 639.5

top; and, of course, all compounded by Covid-19. GLOBAL MANAGED

Can this be resolved soon? No, not at all. Stanlib Global Balanced 16.00 11.56 3 350.0

It has been frequently claimed that unless Coronation Global Managed 15.20 9.08 8 563.9

South Africa opts for the proverbial “high Ninety One Global Strategic Managed 14.11 9.39 5 349.9
road” in its economic and fiscal approach, GLOBAL FLEXIBLE
it’s set to go down the tubes. This is perhaps PSG Wealth Global Flexible Fund of Funds 16.22 11.61 6 154.4
somewhat exaggerated. SA already has Coronation Global Optimum Growth 15.95 11.16 8 563.8
a lot going for it, but unlike Japan, we are Foord International 13.21 6.79 3 542.1
not – and probably never will be – a society EMERGING MARKETS
dedicated to economic development. Coronation Global Emerging Market 12.32 10.89 6 303.4

The continued implementation of populist

policies further remains imminent, and these REAL ESTATE

are well-set to run us into medium- and long- Marriott International Real Estate 13.37 5.81 265.0

term quagmires. But equally, we’re unlikely to MISCELLANEOUS

become another emerging market basket-case. Denker Global Financial 12.49 10.04 47.0

Also likely is that the tax authorities will extend Sanlam Pan Europe 11.27 8.39 107.8
the net as far and as wide as possible.The Stanlib Offshore America 8.95 6.42 US$ 13.1
middle- and higher-income groups should brace Stanlib US Currency Fund of Funds 7.66 1.32 --
themselves for sharp tax rises.
SOURCE: Stanlib Weekly Update of SA Unit Trusts
Personally, nothing new to me – I covered

Latin and Central America extensively during and factor-driven process for stock selection. Managed funds deserve consideration.

the 1990s and witnessed many of these kinds The market state drives dynamic asset Global flexible funds typically invest around

of ravages first hand. selection or portfolio construction, resulting the world in a mix of assets, including shares of

That said, the case to invest in some of SA’s in a diversified, low concentration, but high companies, bonds, commodities, property and

prized global funds is palpable.The domestic conviction portfolio. other alternative assets such as infrastructure

asset management industry has long been Second is the R26bn Ninety One Global funds and private equity funds.

world-class and in the past 15 years we’ve Franchise Fund managed by Clyde Rossouw Emphasis in the PSG Wealth Global

been increasingly availed of a superb selection and which was highlighted in Fund Focus’ Fund, for instance, with some R6.1bn under

of global funds.The accompanying table sets June edition. It’s markedly different to the Old management and domiciled in Malta, is on

out clearly impressive performances and what Mutual fund, reflecting a pure and consistent equities, but there is no limit on other asset

can be secured locally. expression of quality that is focused solely classes. Interestingly, however, is a proviso that

Top of our 10-year annualised performance on what its investment team consider are its management may switch to 100% cash in

list is the R22bn Old Mutual Global Equity attractively valued best-of-breed franchise extremely adverse conditions.

Fund managed out of the UK by Jupiter companies. Finally, some sound advice on globally-

Fund Management. It seeks out compelling These include hard-to-replicate enduring oriented funds. Be realistic with your

investment opportunities wherever these exist competitive advantages; dominant market expectations.The great Franklin Templeton,

globally, irrespective of sector, country, or region. positions in stable, growing industries; low whose $10 000 made him a millionaire, didn’t

According to portfolio team manager Ian sensitivity to the economic and market do it in a day or week. Invest R10 000, and even

Heslop, the fund offers investors a well- cycle; healthy balance sheets and low capital if you earn 20% annually, it might still take 20 to

diversified portfolio of 3 600 shares across intensity; and sustainable cash generation and 30 years for it to become a million.

developed world economies, with no bias to any effective capital allocation. Mutual funds won’t get you rich quickly,

one geographical region, industry, or sector. For those seeking a managed-type bent, but if you persist in investing, and you invest

The investment approach, he says, follows the Stanlib Global Balanced, Coronation Global in those that are persistently good, your

an unemotional quantitative (not fundamental) Managed and Ninety One Global Strategic wealth will inevitably grow. ■

@finweek finweek finweekmagazine finweek 10 September 2021 29

cover story food producers

30 finweek 10 September 2021 www.fin24.com/finweek

cover story food producers

THERE’S
(ALWAYS)
MONEY
IN FOOD

Food prices are accelerating in South Africa
and across the planet. finweek looks at SA’s
listed food producer sector to gauge how
they’re performing amid rising food prices.

By Jaco Visser

@finweek finweek finweekmagazine finweek 10 September 2021 31

cover story food producers

p  eople must eat. Considering Maslow’s Roy Mutooni Local grain scenario
hierarchy of human needs, food, water, Senior equity analyst at
warmth, rest, security and safety are Absa Asset Management Locally, SA’s Crop Estimates Committee (CEC) forecast
the basic needs of humans that require a maize harvest of 16.4m tonnes – the second-largest
fulfilment. Money is ordinarily made when a need and Patrick Ntshalintshali since records started – for the 2021 marketing year.
a solution meet each other and the acquiring party A manager of Perpetua This compares to a total harvest of 15.3m tonnes
values the solution enough to transfer cash for it. Investment Managers’ during the 2020 marketing year, according to the CEC.
equity and balanced funds
Food, as opposed to water, is not a public good in Despite the expected bumper harvest for the current
Photos: Archive I www.perpetuaim.co.za SA and is produced according to market principles. year, the price of maize, as traded on Safex, is trading at
It is a big industry. In terms of Stats SA’s basket roughly R1 000 per tonne higher than a year ago.This
to measure the consumer price index, food is the price refers to yellow maize for delivery in December in
second-largest component after housing (another both comparable years (see graph 2).
base need), comprising 15.48%.
Meat production globally and locally
And food prices have been accelerating locally. In
December last year, the rate at which food prices (at the World meat production is estimated to expand from
consumer level) increased reached double the speed 337.2m tonnes (carcass weight equivalent) in 2019 to
of headline inflation, 6.2% compared with 3.1%. Since 345.6m tonnes this year. Between 2020 and this year,
March this year, consumer-level food price inflation has production is estimated to increase by 2.2%, primarily
remained above 6% annually (see graph 1). Worryingly, driven by a 4.2% surge in pig meat production.This
food price inflation at the farm gate has remained reflects “an anticipated rebound in meat production
elevated above 6% per year since October last year. in China, with notable expansions in Brazil, Vietnam,
the US and the European Union, partially offset by
Global grain scenario likely contractions in Australia, the Philippines and
Argentina”, according to the FAO. “The anticipated
So, why are food prices accelerating? Grains, which meat production growth in China reflects likely output
form the bulk of world food production, can explain expansions across all meat types, especially pig meat,
this the best. World grain stocks (which includes driven by large investments in enhancing meat value
wheat, coarse grains and rice) has been in decline chains and biosafety.”
for three years in a row with a moderate increase
of 0.3% forecast for 2021/2022, according to the Global meat prices have, nevertheless, not risen
UN’s Food and Agriculture Organization (FAO). as robustly as grains. For the period January to May
The world is forecast to produce 785.8m tonnes of this year, compared with the same five months
wheat in 2021/2022 (or an increase of 1.4% from the last year, the FAO Meat Price Index rose only 1.3%.
previous marketing year), 1.516bn tonnes of coarse “International meat prices rose from January to May,
grains (which include maize, barley and sorghum and reflecting solid import demand, especially from East
indicates a 2.5% production increase), and 519m Asia and the Middle East, amid limited expansion in
tonnes of rice (1% increase), according to the FAO’s global export supplies despite recovering production
Food Outlook published in June. in key producing regions.”

When we turn to grain prices, the squeeze in carry- Locally, meat prices have surged.The average price
over stocks is obvious. Wheat futures for September of mutton (A2/A3 grade) breached the R100/kg level
as traded on the Chicago Board ofTrade have surged for the first time during the second week of July to trade
to around $280 per tonne in May. A year earlier, it was at R100.17/kg. By the last week of August, the price
trading at $185 per tonne, according to the FAO.The retreated to R91.60/kg, making it the 14th consecutive
IGC Wheat Price Index – which is trade-weighted and week of trading above R90/kg, according to data
measures major export quotations for the grain – was compiled by Absa.
28.5% higher in May than a year before.
Similarly, the price of beef (A2/A3 grade) was 17.2%
Maize also saw a strong rebound with international dearer during the final week of August compared with
prices reaching its highest point in February 2021 the same week a year ago, Absa data shows.This grade
since June 2013, according to the FAO. Chinese of meat traded at R51.60/kg after reaching its highest
imports of maize (which is primarily used as an animal price of R54.41/kg in February, data from Absa shows.
feed) jumped 182% year-on-year in 2020/2021,
accounting for all the increased trade in maize, the Local food price inflation
FAO says. By May 2021, the price of US maize was
around 111% higher than a year earlier, the FAO says. The Bureau for Food and Agricultural Policy (BFAP)
compiles an alternative food inflation basket,

32 finweek 10 September 2021 www.fin24.com/finweek

cover story food producers

called the BFAP Thrifty Health Food Basket, which GRAPH 1: FOOD PRICE INCREASES
“measures the cost of basic healthy eating for low- AND CONSUMER INFLATION

income households in the SA context”, according to 12
the bureau.The BFAP basket “is designed to feed a

reference family of four (consisting of an adult male, 10
an adult female, an older child, and a younger child)” 8
monthly where the parents both receive the minimum

wage (R4 229.55 per month for a 195-hour working %6

month), child grants (R460 per month) and the

children benefit from a school feeding programme. 4
During July, the cost of BFAP’s basket rose 4.2%

from a year earlier, or by R119, to R2 392 per month. 2

The bureau noted that several constituents’ prices rose 0
by more than 10% on a yearly basis, including plant
Rand/tonne Aug ’20
oils, pork (chops and ribs), margarine, dried beans, Sep ’20
Oct ’20
beef (stew and offal), chicken (IQF and fresh cuts), Nov ’20
Dec ’20
super maize meal, pumpkins and bananas. Products Jan ’21Food CPI CPI headline Food PPI
Feb ’21
which saw a jump in prices of between 6.7% and 10% Mar ’21 SOURCE: Stats SA monthly statistical releases for CPI and PPI
included chicken giblets, canned pilchards, white sugar, Apr ’21
May ’21
Jun ’21
Jul ’21
Aug ’21
polony, cabbage and beef (mince and brisket). GRAPH 2: MAIZE FUTURE PRICE PER TONNE ON COMPARABLE
Roy Mutooni, a senior equity analyst at Absa Asset TRADING DAYS IN 2020 AND 2021 (DELIVERY IN DECEMBER)

Management, tells finweek the biggest driver of food 4 500

price inflation currently is meat prices. “The issue is that 4 000
meat price inflation, which is basically chicken as it is 3 500
more consumed, is running quite high. Until October

2021 the base of food, as well as meat, inflation is low. 3 000
So, food inflation might remain at high levels at least 2 500
until then and probably will start to taper off due to the

higher base effect by November or December.” 2 000

Patrick Ntshalintshali, who helps to manage 1 500
Perpetua Investment Managers’ equity and

balanced funds, points to global dynamics underlying 1 000

local food prices. “Food price inflation is high at the 500
moment due to global supply shortages, elevated

soft commodity prices and logistical challenges 0
that resulted from the pandemic,” he tells finweek. Jan '21 Feb '21 Mar '21 Apr '21 May '21 Jun '21 Jul '21

“However, indicators are showing that more supply SOURCE: SA Grain Information Service

is coming through, commodity prices have peaked GRAPH 3: SA’S LISTED FOOD PRODUCERS BY TURNOVER
and started softening. This would bring a much-
needed relief to prices at the consumption level.” R'bn

He forecasts that food prices will slow to below 5% 30

annual growth by the end of the year. 25

Tiger Brands 20
15
Reporting their full-year results between 1 June 10
2020 and 31 May 2021, SA’s 13 listed companies in 5
the JSE’s food producer sector generated a turnover 0
of R135.04bn and a net profit of R7.02bn, according Tiger Brands Tongaat AVI Ltd Oceana QuantumRFFGooLtdds
RCL Foods Astral Foods Holdings Premier FisChrionogkSeaesnadBrHBoartravhneedrstss
to data compiled from the companies’ annual
Libstar AH-Vest
financial results releases. Among these, Tiger Brands,

with an annual turnover of R29.76bn, and Remgro’s

75%-owned RCL Foods, with a turnover of R27.8bn,

are the largest (see graph 3). SOURCE: Companies’ annual financial statements

@finweek finweek finweekmagazine finweek 10 September 2021 33

cover story food producers

“Another price increase of this magnitude, which is mostly recovering high input
costs that the producers have been facing, is not sustainable considering the

poor state of the economy and rising competition in the food-producing sector.”

Founded 100 years ago,Tiger Brands manufactures Rella Suskin managed to increase its revenue from SA operations
and sells brands such as Koo, All Gold,Tastic and Head of research by 7.1% to R14.6bn and from international operations
others across the continent.The company, which is on at Benguela Global by 18.5% to R1.83bn, according to its interim financial
a strategic trajectory to increase market share and cut Fund Managers statements. Overall, revenue rose 8%, underpinned
costs, sold off its value-added meat products unit (the by a 9% increase in prices despite a 1% contraction in
source of a 2017 listeriosis outbreak, resultant deaths Noel Doyle volumes. Passing through a 9% increase, compared
and now a class-action lawsuit) last year and plans to CEO of Tiger Brands with food price inflation at the producer level of 8.2%,
do the same with its deciduous fruit business. is quite a feat. It is, however, not likely to be repeated.
Photos: Archive I www.tigerbrands.com
“I think that is the correct strategy forTiger Brands “Another price increase of this magnitude, which is
– they need to focus on grains and groceries in SA. I mostly recovering high input costs that the producers
believe the group needs focus and historically they have have been facing, is not sustainable considering the
been strong in branded food products,” says Mutooni. poor state of the economy and rising competition in
the food-producing sector,” says Ntshalintshali.
Rella Suskin, head of research at Benguela
Global Fund Managers, agrees. “I do believe that the RCL Foods
strategy to divest of non-core business units with no
competitive advantage is essential to Tiger Brands Meanwhile, SA’s second-largest food producer, RCL
turning its business around. It will allow management Foods, told the market in a trading statement recently
to focus their attention on innovating, branding that it expects headline earnings per share for the full
and growing product offerings with strong value year through 30 June to increase to 90c per share
propositions rather than being distracted by needing compared with 13c the previous year.
to put out fires in small, lossmaking units.”
“The expected improvement in the group’s results
During an investor presentation on 20 May, a is mainly driven by a strong recovery in sugar and
question arose whetherTiger is considering selling baking as well as Vector Logistics, and a continued
its underperforming maize unit. CEO Noel Doyle solid performance from grocery,” the company said
answered: “Maize is a category that isn’t a great in the statement. “Chicken continues to focus on its
fit but extracting maize from an integrated site in turnaround plans, which should deliver benefits in the
an integrated business is quite a challenge. We’ve next financial year.”
had a few conversations around it. It isn’t an easy
transaction to conclude, given how embedded it is in RCL’s chicken unit, which includes Rainbow
the whole milling infrastructure. So that’s certainly one Chicken, constituted R346.2m of RCL’s total
of our underperforming assets in the portfolio. A value- impairments worth R1.5bn in its 2020 fiscal year.
destructive exit is quite difficult to construct.” The milling division was impaired by R314.3m and
Vector Logistics by R418m. From the company’s
So, with the maize unit not likely to be sold soon, recent trading statement, as well as its half-year
Suskin implies a hope that a refocused Tiger would results through December, it seems that only
regain market share. “In a nutshell, they are selling the chicken unit is struggling to gain profitability
not-so-great parts which are lossmaking and giving momentum. In December, RCL said that it plans to
you a special dividend. I don’t think it’s a bad strategy. make the chicken unit a standalone division reporting
A smaller, more manageable and more branded quality directly to CEO Miles Dally.
business is left behind which has better returns.This
will allow management to better manage its brand “I think that RCL is preparing to unbundle the
portfolio which is currently losing (market) share.” chicken unit to shareholders,” says Mutooni. “It will
be like what Pioneer Foods did with Quantum Foods
During the six months ended 31 March,Tiger some years back.”

34 finweek 10 September 2021 www.fin24.com/finweek

cover story food producers

FOOD PRODUCERS: WINNERS AND LOSERS

Miles Dally Paul Cruickshank 40
CEO of RCL Foods COO of RCL Foods 35
30
25
% 20
15
10
5
0

Meat Fish Unprocessed food Processed food Vegetables Other food Fruit
Oils and fats desserts eggs and cheese Bread and cereals

Mutooni says there are various reasons why RCL’s and
chicken division, with its revenue of R8.8bn during
the 2020 fiscal year compared with competitor sweets Milk,
Astral Foods’ R14.1bn, is struggling. The first reason
he offers is poor management. “At least now they Sugar,
have appointed some Country Bird executives to SOURCE: Stats SA – CPI released July 2021
Photos: www.rclfoods.com run the division,” he says. Furthermore, RCL was too
focused on a strategy where they drive value-added Food winners and losers
chicken products compared with Astral’s focus on
lowest-cost production as chicken is a basic food Not all primary food producers benefitted in equal measure from higher
item in SA, he says. In the same vein, RCL focused prices. Using Stats SA’s indices (to compile consumer food price inflation),
too heavily on the quick-service restaurant market price increases over the past 4.5 years are varied (see graph).
to sell their products, which led to a situation where
inappropriate portion mixes were sold off into the Meat producers saw a cumulative rise in prices of 34% between
market for IQF chicken, Mutooni says. December 2016 and July 2021. Producers of oils and fats (which includes
sunflowers, soybeans and canola) attained price increases of 31.8% over
Chickens are not the only source of agony for the period whereas those producing fish gained 26.6%.
investors. “I think there has been many a frustrated
RCL shareholder with a return profile that has On the other end of the spectrum, fruit prices gained 0.4% over the
consistently destroyed value for shareholders for at period, explaining why some large food producers may want out. Other
least the last five years,” says Suskin. “While they own factors, however, also influenced those operating in the fruit industry.
some strong consumer brands, this has not been
sufficient to offset the struggling chicken, sugar and Rella Suskin, head of research at Benguela Global Fund Managers,
logistics businesses. A path to value creation also compared Tiger Brands’ to-be-sold deciduous fruit business with RFG’s
seems to be quite some time out.” international division as follows: “Both have suffered over the last few
years from droughts in the Western Cape, an extremely volatile exchange
RCL’s share price contracted 33.5% over the past rate and more recently a temporary glut in food service demand from
five years and 44.4% over the past three years. Over international markets and supply chain blockages due to Covid-19.” ■
the past year it gained 11.9%.These movements
compare with Tiger Brands’ share price which slumped Astral Foods
53% over five years, 36.2% over three years and
gained 2.8% over the past 12 months. Not all chicken producers are struggling, though.
Even as SA’s poultry imports hit about 26% of local
At the beginning of August, RCL announced consumption during the six months ended 31 March,
the retirement of Dally at the end of November and Astral Foods continued to be profitable. Profit
the appointment of Paul Cruickshank – who has after tax declined 38% to R229.6m in the period
been at RCL since 2004 – as CEO. This might link compared to R371.1m a year earlier, Astral’s interim
with Mutooni’s anticipated corporate action which financial statements showed. Unlike Tiger Brands
can see the chicken unit either sold or spun out. passing on higher input costs to customers, Astral
Ntshalintshali goes even further as to a possible doesn’t have that luxury. The company’s poultry
corporate shakeup at RCL. division saw its operating profit margin sliced to 1% in
the six months through March compared with 5.1%
“Our sense is that the chicken division would be in the comparable period.
separated and spun out,” he says. “Then Remgro
might sell its spreads business (Siqalo) to scale it into “Does Astral have pricing power? No is the
a major player in the sector.” answer,” says Mutooni.

@finweek finweek finweekmagazine finweek 10 September 2021 35

cover story food producers

This may be due to Astral’s product offering which Average world
is focused on lower-income consumers. “The majority food consumption
of Astral’s product offering is IQF (individually quick
frozen) chicken, which is a highly commoditised The UN’s Food and Agriculture Organization (FAO) publishes its
product,” says Suskin. “The price increases they are Food Outlook twice a year. The latest, with data until the end of
able to put through are largely dictated by the cost of May and published in June this year, shows up interesting facts
maize, particularly in tough economic conditions. At about food consumption in the world. In the accompanying table,
the half-year results we saw Astral’s poultry division we show the FAO’s calculations for the consumption of different
just about break even as they absorbed the majority food types per person per year in kilograms. We compared
of the maize cost-push inflation. Astral is not in the consumption in 2010/2011 with that in 2021/2022.
business of subsidising food costs for consumers, but
rather maximising value for shareholders.” The table shows a marked shift away from grain products
(especially rice) and sugar to meat and fish products over the past
Maize prices may, again, come to Astral’s rescue. decade. ■
Feed, at half year, constituted 69% of the cost to
produce a broiler, the company said. “We think grain AVERAGE WORLD FOOD CONSUMPTION PER CAPITA
prices have peaked with more production coming
onstream this year,” says Ntshalintshali. “So, a decline Food type 2021/2022 consumption* 2010/2011 consumption
in these prices will provide some relief to Astral and
boost its profitability.” Wheat 67.4kg 67.5kg
Coarse grain 28.7kg 28.5kg
Mutooni says one of the reasons why Astral Rice 54.2kg 56.4kg
performs better than RCL’s Rainbow Chicken, is due Sugar 22.1kg 23.9kg
to the type of broilers used. “The genetic makeup Meat 43.5kg 41.9kg
of Rainbow’s broilers has been inferior to that of Fish and fishery products 20kg 17.4kg
Astral,” he says. “Astral uses the Ross breed whereas
Rainbow uses the Cobb breed.” SOURCE: UN’s FAO reports

AVI Mutooni. “Simon Crutchley (AVI’s CEO) has oversight Simon Crutchley
of every division and has a strong team reporting to CEO of AVI
AVI, which owns brands such as Five Roses, I&J, him.” In addition, AVI’s investment in IT infrastructure
Photo: www.avi.co.za Ellis Brown, Willards and Bakers, has invested has benefitted the company. “AVI has sophisticated
heavily in its IT systems over the years. Coupled IT systems in place to maximise category value
with a lean expenses structure and highly-regarded extraction by monitoring price-volume relationships,”
management team, it is no wonder it trades at a says Mutooni. “Tiger Brands has struggled with this
rather expensive price-to-earnings ratio of 15.4 times for over a decade.”
and forward ratio of 14.6 times. Over the past year,
the share price gained 7.1%. Benefitting the company through lower costs, is
its factories. “AVI also has efficient factories,” says
“AVI sells food products, but its core business is Mutooni. “The efficiency in factories and IT systems
building brands,” says Suskin. “It is this focus that point to the fact of stringent capital allocation. So, while
differentiates AVI from other food producers in SA. Tiger Brands has spent capex in the past on facilities
Brands are built by adding value, providing consistent and IT platforms, they were not efficiently used.”
quality and remaining top-of-mind during customers’
shopping experience. AVI has chosen food categories Ntshalintshali summarises why AVI stands out:
where it is able to bring innovation to the product, “They have a great proven management team
whether it’s through range extensions or innovative that has consistently delivered enormous value to
packaging, so that price does not oscillate with the shareholders over the years.The group has achieved
underlying commodity price.” good revenue and earnings growth, generated loads of
cash, its balance sheet is strong and their returns on
On 27 July, AVI said in a trading statement that investments are superior.” ■
revenue for the year ended 30 June was 0.5% higher,
“mainly due to higher volumes at I&J in the second [email protected]
semester and price increases in most categories offset
cost pressure, primarily as a result of the weaker rand”.
Nevertheless, the company guided shareholders that
HEPS would be between 5% and 7% higher.This again
proves prudent cost management.

“AVI has best-in-class management,” says

36 finweek 10 September 2021 www.fin24.com/finweek

advertorial Scoin

Two South African businesses
bring real gold into the digital age

w The South African Gold Coin Exchange and The Scoin Shop have signed a new agreement with Troygold, a fintech start-up.
ith over 45 years in the industry, traditional wallet that digitises the customer’s gold – bought or uploaded onto
retail shops, an e-commerce site and pioneering the platform and a linked Mastercard debit card (issued by sponsoring
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are always chasing innovation and looking to reshape the industry. Once specific, numbered gold Krugerrands and bars in a vault. Each owner

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Troygold was founded in 2018 by brothers Bastiat and Dane and Johannesburg, where the physical bullion bars or gold coins are

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“We have always been traditional gold The Scoin Shop has 11 brick-and-mortar stores in
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no counterparty risk.” of physical on-ramps into the digital Troygold
Having studied in New York City during

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Dane Viljoen, Troygold’s co-founder and chief sales officer, through the safe and trusted environment of a Scoin store,” adds Dane

explains: “Being exposed to gold in both the banking and mining Viljoen. Enabling a broader market to save and transact in fractions of

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a customer opens a Troygold account which offers a gold savings gold out of the dark and lighting it up. ■

@finweek finweek finweekmagazine finweek 10 September 2021 37

on >> Management: Say hi to a new breed of accounting colleagues p.40
mthoeney >> Motoring: Much more (electric) MINI p.42
>> Personal Finance: Finding the balance between lifestyle and

retirement p.44

CEO INTERVIEW By Timothy Rangongo

A great story to tell

Seelan Gobalsamy, the CEO of Omnia Holdings, talks about steering a company through crises.

Photos: Shutterstock | Supplied w  hen Seelan Gobalsamy first joined Seelan Gobalsamy headwinds. In early 2019, the Omnia board sat down
the board of Omnia as a non- CEO of Omnia Holdings and made some management changes. The business
executive director in September also did a rights issue to pay off a large chunk of its
2018, the diversified company that debt.
supplies chemicals and specialised services and
solutions for the agriculture, mining and chemical “The business had about R6.3bn of debt at that
application industries was in dire straits with point and it did a R2bn rights issue, which was
its debt, and holders of the stock had lost
confidence and gradually sold it en masse. quite big at the time,” he says.
By 2019, Omnia’s share price had dropped “A lot of companies face that, where they
by more than 85% over the preceeding five
years. While Omnia saw a steep increase in its have a lot of debt and about three options.
share price at the end of 2017 after announcing The first could be to sell some assets; second,
higher-than-expected profits and a slight increase buckle down with heads in the sand and hope
in sales, the opposite happened when its full-year it will go away; or third, go to shareholders and
results showed a slump in profit six months later. At say that we need more money — which is what
the end of 2018, its share price slid further when it we did.” Omnia received the support of 98% of its
announced a loss for the first six months of the 2019 shareholders to raise the R2bn it needed, according
financial year. to the company at the time.
“The board started seeing that there were these The rights issue shored up Omnia’s balance sheet a
dark clouds on the horizon and something very bit and reduced their debt. With things stabilised, the
major needed to be done,” recalls Gobalsamy of the company then needed to put in place a turnaround
plan. Enter Gobalsamy, who was appointed executive
director to manage the changes, including putting the
turnaround plan in place.

38 finweek 10 September 2021 www.fin24.com/finweek

on the money spotlight

Transition from finance Rand 2015 OMNIA SHARE PRICE

Gobalsamy’s background had previously been in 160 2016 2017 2018 2019 2020 2021
financial services prior to joining Omnia. “I had been 140
in insurance and asset management most of my life 120 SOURCE: TradingView
with Old Mutual, Liberty and Stanlib.” 100
80 The group disposed of its Oro Agri business
He says coming into this business as a non- 60 which it acquired in May 2018, effective 7 January
executive director at first was “not only a culture shock 40 2021, for $146.9m, which is over R2bn in proceeds.
but also a content shock, as you deal with chemicals, 20 Further development of Oro Agri would have required
very hazardous processes and large manufacturing a significant time investment from the leadership
plants which is very different to what you deal with in 80 team and would have required substantial capital to
an intangible financial services environment.” 60 support growth.
40
Nevertheless, he says that if you give something 20 Omnia had also been a relatively passive investor
your best and apply your mind thoroughly, and put in since acquiring Oro Agri in 2018 and, to enable its
the hard work, success will follow. 2014 full potential, the group would have had to invest
significant additional capital in Oro Agri to fully
Ultimately, business is not about the chemicals, “If you have integrate it into its operations.
plants, paper and the pens, it is about the people, he got the right
says. “It is about whether you have the right people team, the right “We used that cash to pay down some debts.The
doing the right things, being given the right direction people and the company, as at March 2021, is debt-free.”
and putting in place the right discipline and flexibility to right level of
allow innovation and people to thrive.” motivation, the He adds that the company was also able to declare
right level of R1bn worth of dividends – a R2 ordinary dividend per
He holds that leaders should not fear going into excitement, the share and a R4 special dividend.
different sectors. “If you are able to run a business, right level of
there are a lot of basics that are similar.There are some innovation and “It is good for shareholders, going from a company
nuances but overall, a lot of similarities.” commitment at a huge level of distress to something that is safe
— you can do and making good progress. The share price has
Tough decisions wonders.” gone from R15 to R50, which is good. Our market
capitalisation has increased to between R8bn and
To get Omnia out of the financial pickle it was in, R9bn, from the R2bn that we were at.”
some tough calls had to be made. One of the biggest
executive lessons for Gobalsamy is that it is usually Omnia has also been able to put in place a broad-
difficult to make tough decisions. “Often boards, based staff share scheme for the first time. “We
management and leaders battle to make the tough have been able to give all of our staff shares in the
decisions. It is quite easy to make the easy decisions.” company. We funded that, as the company itself. We
didn’t add debt to it. So, every single staff member at
Among the tough decisions for Gobalsamy was Omnia is now a shareholder.
when the board discussed the different possibilities
of either borrowing more money and trying to “We have a great story to tell of an old SA
continue trading out of its high debt, selling some company started in 1953 which is involved in
assets or doing a rights issue. agriculture and mining, employs thousands and
thousands of people, and a company that has come
“The board made a very tough decision to say let through a major crisis. I think that is the real positive
us do a rights issue to solve the problem and put the story to tell. A lot of accolades must go to all the
company on a secure footing to go forward. I think that people involved in this change.” Gobalsamy vows
was a learning for me. by people: “If you have got the right team, the right
people and the right level of motivation, the right
“Often, we don’t really deal with the problem, we level of excitement, the right level of innovation and
don’t solve it, we don’t really make the difficult decision. commitment — you can do wonders.” ■
We almost park it and say it will go away or it will change
or maybe things will go in our favour.” [email protected]

Highlighting the importance of making tough calls
today and not tomorrow, Gobalsamy says “if we had
not made the decisions we made before the pandemic,
who knows where we would have been today, as
liquidity reduced and markets tightened up”.

The pay-off

What has happened since making the tough calls is
that the company has become cash-generative. The
company bit the bullet and sold a large global asset,
for which the price offered was more meaningful
to them than the value they could have generated,
according to Gobalsamy.

@finweek finweek finweekmagazine finweek 10 September 2021 39

on the money management

By Johan Steyn

The future of accounting:
co-habitation with bots

The new breed of techno-colleague is here to stay. We can avoid them at our peril, or we can form a mutually

h beneficial working relationship. Automation while others have learned to run the
umans need not apply.” Imagine course by embracing smart technology like AI.The
reading those words on a job-seeker race is swift and lengthy, and the finishing line is
website portal. The smart technology continually moving out of sight.
era introduced us to computer
systems that can be programmed to do the tasks On the horizon glimmers a new day of

that most human workers do daily. intelligent automation. Those businesses which

Computers can see (computer vision), they can are in their infant shoes or only now learning to

speak and hear (natural language processing), they walk are very, very far behind in the race. Will they

can execute tasks (robotic process automation) ever be able to catch up?

and they can think and learn (machine learning). In a recent global survey, covering all business

One might wonder what is left for human workers domains, nearly 90% of business leaders

to do in an age where robots can do what we do indicated that they plan to deploy intelligent

faster, more accurately, without being involved with automation to stay ahead of their competitors.

unions and industrial action, and never needing 42% of CEOs indicated that their organisations

sleep or sick leave. are already on a digital transformation journey,

In his book Humans Need Not Apply: with 56% indicating they have experienced

A Guide to Wealth & Work in the Age of gains with the implementation of intelligent

Artificial Intelligence, futurist and technology automation.

entrepreneur Jerry Kaplan cautions readers that Finance functions on techno steroids
the warning signs of techno-unemployment are

before us. “The two great scourges of the modern All the functional areas in business are

developed world – persistent unemployment and candidates for smarter automation. Perhaps

increasing income inequality – plague our society Jerry Kaplan the best of all is the finance function. Supplier
even as our economy continues to grow. If these Futurist and technology onboarding, accounts payable, audits,
are left unchecked, we may witness the spectacle procurement, cost management, closure
entrepreneur

of widespread poverty against a backdrop of processing, and customer enquiries are among

escalating comfort and wealth.” the accounting activities and procedures that

White-collar bots are here computing technology can streamline.
Technology like machine learning may help firms

For decades white-collar jobs were mostly spared boost their value by improving loan underwriting

the onslaught of automation. While robots may be and lowering financial risk. As corporate

taking over less educated individuals’ blue-collar accountants, analysts, treasurers, and investors

employment, artificial intelligence (AI) is set to strive toward long-term prosperity, AI may help

disrupt higher-paying occupations for university- reduce financial crime through enhanced fraud

educated professionals, ensuring that no one is detection and pick up on unusual transactional

immune to the influence of technology on the behaviour.

global workforce. Smart technology is influencing the sorts of

In order to compete in the global market, employment roles that will be accessible in the

organisations are utilising smart automation future of accounting. Humans will undertake

technology to decrease their operating costs, more of the analysis as improved technologies

increase the development and delivery of new handle monotonous tasks, making them the

products and services, and offering clients a essential link between data and clients. In the

better experience. future, technology will continue to have an

Many businesses are attempting to leave their influence on the function of the accountant and

infant shoes of basic process automation. Others the need for accountants.

are only now learning to walk without assistance Accounting is reaching new heights thanks

by implementing platforms like Robotic Process to technological advancements. Whether you're

40 finweek 10 September 2021 www.fin24.com/finweek

on the money management

But whichever way you look at it, smart automation and robotics pose a
threat to many workers. We can either fear the advances of technology

or we can embrace it, ensuring we make ourselves robot-proof.

Photos: Shutterstock | Getty/Gallo Images an experienced accounting professional wanting With automation expected to become a big part
to keep on the cutting edge of the business or an of accounting in the near future, it’s critical to have
ambitious novice, you'll want to be aware of how the abilities needed to perform the managerial
the accounting profession is changing due to and analytical jobs that technology can’t. Many
smarter technological platforms. accountants may also take on a consulting position
with customers, which means they’ll need to be
Are they coming for our jobs? adept at analysing large amounts of data to detect
patterns and trends. Knowledge of data mining and
When people hear robots will be introduced other data science techniques is essential.
into the workforce, it is normally met with
suspicion if not outright fear and resistance. The education of future finance professionals
A few years ago, I worked in the technology must be built on a solid understanding of
division of a large bank. The bank was the first technology applications to the craft.Tertiary
local one to introduce a humanoid robot called educational institutions across the board need
Pepper. Standing just under a meter-and-a- to review their curricula considering the rapidly
half tall, weighing nearly 30kg and with large changing demand for skilled, tech-savvy workers.
child-like eyes, Pepper was destined to welcome
customers as they entered a bank branch. Technologies impacting finance

Despite all the excitement generated around our Audits, tax preparation, banking, and payroll are just
little electronic co-worker, many of my colleagues a few of the labour-intensive aspects of accounting
expressed a sense of unease. What made matters that are fast becoming entirely automated. As AI is
worse was that in the same week the bank’s used to develop self-learning systems, technology
financial results were announced.The CEO’s will take over the repetitive and time-consuming
remarks were taken out of context and the media
reported that the bank would be getting rid of activities, allowing finance professionals to handle
thousands of workers. Imagine that: The first the analytical and advisory responsibilities.
of a potential cohort of robot workers are Cloud computing enables access to
introduced and it seems that many would be resources like data and processing power.
left without a job. The constant updating of information is a
significant benefit of a cloud-based system,
The bank’s leader actually said that they allowing accountants and clients to analyse
plan to employ fewer people over the next data and make decisions based on the most
financial year due to smarter ways of working up-to-date information.
and better automation. But whichever way Blockchain technology will influence the
you look at it, smart automation and robotics
pose a threat to many workers. We can either fear demand for accountants in the future. The
the advances of technology or we can embrace it, appeal of blockchain for accounting stems from
ensuring we make ourselves robot-proof. the prospect of a new form of accounting ledger
— one that can be updated and validated in
Educate for the future real-time without the risk of being tampered with
or damaged.
What are finance professionals to do? Almost
all the mundane, repetitive tasks in the finance Welcoming the future
function are candidates for automation.They need
to ensure that they have a good understanding A new neighbour has moved in next door in the
of the business applications of smart technology. financial fraternity. Do we fear and avoid it, or do we
They do not need to become technical experts welcome it and learn to live together in harmony?
who can write the algorithms which enable a The new breed of techno-colleagues is here to stay.
machine-learning platform to operate.They need We can avoid them at our peril, or we can form a
to understand how their profession is moving mutually beneficial co-habitation ecosystem. ■
from mainly historical reporting and analysis to
anticipating and advising on future trends utilising [email protected]
prediction models.
Johan Steyn is a Smart Automation & Artificial Intelligence thought leader
@finweek finweek finweekmagazine and management consultant. He is the Chair of the Special Interest Group
on Artificial Intelligence and Robotics with the Institute of Information
Technology Professionals of South Africa.

finweek 10 September 2021 41

on the money motoring

By Glenda Williams

More than a little electric

All torque and silent action in the refreshed all-electric MINI Cooper SE.

i t is the perfect city car. Small, standard equipment. Green mobility and an electric performance
manoeuvrable, nippy, and now in The refreshed all-electric MINI Cooper in the sleeker, updated MINI electric.
emission-free format, the trendy all-
electric MINI Cooper SE adds green SE is offered in two trims and four packages, into the cabin.That perhaps is what is most
mobility to the iconic MINI brand. 2021 has namely Classic, Iconic, Signature and MINI surprising and comforting about this purely
brought a refreshed version of the pure Electric Collection.The latter offers exclusive electrically-powered MINI.
electric model launched locally last year design features like a multitone roof.
and finweek got first dibs at a drive. Other than the “fuel” gauge and single
The MINI is a car I’m familiar with. Aside But how different is it to its popular gearing, all the bits and bobs are those
from car tests, when in CapeTown I often conventionally-powered sibling? Turns out, you would find in a regular MINI. It’s a
commandeer my daughter’s MINI. Anyone not that much. seamless and easy transition from any
familiar with Cape Town knows that small fuel-powered vehicle.
cars are particularly suited to the city’s Mix of modernism and nostalgia
narrow streets and tight parking spaces. A refined cabin, stamped with MINI’s
While somewhat larger than the classic Along with modern twists like Union Jack unique styling like its toggle switches and
Mini first introduced in 1959, the modern taillights and LED lighting for its fabled large round touchscreen, offers the usual
day MINI retains much of the original DNA, round headlights, the three-door compact array of features found in a conventional
quirkiness and personality that captured hatch still retains the quirky styling and MINI. Central locking, cloth and leatherette
the hearts of so many around the world. cuteness factor that gives this car so much sport seats, Bluetooth, USB, infotainment
Along with size, comfort and technology charm and personality. touchscreen, six speakers, multifunction
have also been amplified. Unlike the classic leather steering wheel, rear park distance
Mini that focused on low cost rather than Except for a few features, this pure control, active pedestrian protection, cruise
comfort, today’s MINIs, part of the BMW electric MINI looks like a regular MINI. control, and electric windows are among
stable since 2000, are premium vehicles. What’s different? The closed hexagonal the standard features.
Built at the British MINI Plant in Oxford grille, retro-looking wheels, e-badging,
alongside the conventionally-powered yellow accents on body parts like the mirror The test car came equipped with
Cooper S model on which it is based, the caps and the absence of exhaust tailpipes Connected Media and an electrically-
new 2021 electric model is mechanically are dead giveaways. operated glass sunroof, both items
identical to the one introduced last included in the Classic package.
year and comes with moderate exterior Updates to the 2021 model include
changes, refined trim levels and increased changes to the front and rear bumper and Apple CarPlay, though, is only available
the iconic round headlights and hexagonal with MINI Connected Navigation,
radiator grille are more clearly emphasised. included in the Iconic and Signature
Packages, but can be specified as an
Electric ease option for Classic and MINI Electric
Collection models. Adaptive headlights,
There’s a sense of the familiar when slipping driving assist and head-up display are
among the options available.

42 finweek 10 September 2021 www.fin24.com/finweek

on the money motoring

Let me debunk the belief that an electric car can’t be
exciting or sporty. The MINI electric really packs a punch.

Photos: xxxxxxxxxxxxxA conventional set-up in the MINI sport mode. It’s agile too, the sports seats This green MINI looks, feels and drives
electric’s driver-friendly and refined interior. holding you nicely in place as you zip like a fuel-powered MINI. It’s an electric
around corners. and fun drive.To coin a British expression,
Like the regular MINI, the it’s a corker.
electric model seats four, though Regenerative braking, an energy
it’s tight for adults in the rear. Boot space, recovery mechanism that slows the Time behind the wheel of this premium
too, is the same, the space able to be little electric car was delightful.The days
expanded by folding down rear seats. vehicle, is key to charging the battery and spent with it brought a more considered
improving range.This urban runabout approach to electric vehicle driving and a
A silent powertrain gives little indication features two regenerative-braking wane in range anxiety.
of a car’s presence. But this green MINI modes. One coasts much like a
heralds its approach with a futuristic tune. regular fuel-powered vehicle when It’s the perfect eco-friendly city slicker,
decelerating, and another more its 217km range more than sufficient for
An electric ride forceful mode that in true daily commuting. And let’s not forget
one-pedal driving style that currently it’s still the most affordable
There’s little to announce that you’re in a mostly negates the need electric vehicle on offer locally.
vehicle with an electric powertrain aside to use the brake pedal.
from the silent start and instant torque. Unlike a fuel- There’s just one question mark. Will this
powered vehicle, electric MINI’s range be enough to win over
The electric technology is the same highway driving South Africans whose historical focus has
as that used in the BMW i3. A single in an electric car is been on ability to travel long distances?
electric motor drives the front wheels and not frugal. It’s stop- Time will tell. ■
together with the automatic single-speed start city driving with
transmission provides instantaneous power. accompanying regenerative [email protected]
braking that tops up the
This compact electric rides much like its battery and increases range. TESTED:
fuel-powered sibling. It handles well with An exercise to compare “fuel”
a good centre of gravity although the ride All-electric MINI
on its 17-inch wheels appears a tad firmer consumption on the highway versus city Cooper SE (2021)
and the steering slightly heavier. It’s around driving proved an interesting one.
145kg heavier than a conventional MINI but Powertrain: Electric motor
that doesn’t dent performance, which can Leaving home using the MINI’s mid Power/Torque: 135kW/270Nm
be adjusted depending on which drive mode drive mode (a mix of sporty and green Transmission: Automatic single-speed forward
is chosen: sport, mid, green, and green+. driving), I made my way to the office on and reverse
the highway, a trip of 19km.That depleted 0-100km/h: 7.3 secs
Let me debunk the belief that an 23km from the range. Utilising the same Top speed: 150km/h
electric car can’t be exciting or sporty. mode, I left the office with 140km in the Range (claimed): 217km
The MINI electric really packs a punch. “tank”, this time opting for the 18.5km Power consumption (claimed): 17.5kWh/100km
Its acceleration is staggering, more so in route home through the city streets. Battery: 32.66kWh
Safety: Six airbags
What an eye-opener. I arrived home Boot space: 211 litres
with 144km, more than I left with. Proof CO2 emissions: Nil
positive that city driving is where the MINI Warranty/Maintenance Plan: 5 years/
electric shines. 100 000km
Battery warranty: 8 years/100 000km
Like a cell phone, the MINI electric is Price: R658 000 incl. VAT
easy to charge. I plugged it into a 220V
outlet overnight with the cable supplied
and woke up to a full “tank”. It takes 12
hours to fully charge the battery from zero
(an unlikely scenario) this way. Assuming
an electricity cost of 1.95c/kWh, it would
cost around R74 for a full “tank” if the
battery was fully depleted.

An installed wall box (added cost)
provides an 80% charge in around 2.5hrs,
while fast-charging DC chargers found
around the country offer a 100% charge in
35 or 40 minutes.

@finweek finweek finweekmagazine finweek 10 September 2021 43

on the money personal finance

By Jacques Claassen

Balance your lifestyle
with a retirement portfolio

One of the biggest challenges in financial planning is to strike the right balance between your current and future needs.
t here should be a distinct differentiation
between the purpose of a lifestyle portfolio, Strike the right balance
which is to invest in for your current needs,
She also concedes that it is unthinkable to expect

someone to think about an investment portfolio

and the objective of an investment portfolio when you do not have a roof over your head or food

that must provide you with an income after your on the family table. She reckons these situations set

retirement. The latter must help you to have a roof challenges for financial planners to strike the right

over your head and enable you to maintain your balance together with their clients.

lifestyle after retirement. Van der Merwe says a good financial lifestyle

These two portfolios mostly lead to a certain plan forms the basis of further investments to

extent of tension. As we know, it’s never easy for provide for retirement. “It's like an intention to build

people to spend less on their families’ current lifestyle a beautiful house. If the building plans have not

needs. As your income increases, your monthly been drawn up correctly, your kitchen could possibly

expenses will usually also increase, despite inflation, be far too small and your bathroom too big. The one

in order to live more comfortably. is not more important than the other, but the wrong

“But be careful not to buy things that you do not proportions make the whole house unbalanced.”

need with money that you do not have in order Within a family context, both parents should

to impress people that you do not even like,” understand their financial challenges.

warns Hester van der Merwe, who was Parents could even get their children

named the Financial Planning Institute’s involved from an early age and get their

(FPI) Financial Planner of the Year at input on certain suitable aspects.

the end of 2020. Children could even be allowed to

make monetary mistakes in a safe

Two portfolios closely environment from which they
intertwined can learn without causing lasting

From there stems the greater damage.

emphasis that financial advisers Apart from regular sessions

usually place on providing for where parents communicate

retirement. Van der Merwe points out openly with a financial planner, the

that one’s lifestyle portfolio and your consideration of financial coaching

investment portfolio for retirement is, according to Van der Merwe,

are closely intertwined. If people do not also a good idea. “We cannot see our

analyse all their objectives together with a blind spots and we need someone to

financial planner, the chances are great that help us in this regard. It is of the utmost

one of the two portfolios will be neglected. importance to know that you can rewrite your

“Regard and consider all aspects with a balanced money story with the right help.”

eye and mind,” says Van der Merwe. “Your career

Photos: Shutterstock | Starburst Promotions | Supplied and retirement; your family; all the needs and further A typical lifestyle portfolio

development of other family members; your health; When asked what makes up a typical lifestyle

recreation; possible involvement in the community; portfolio, Van der Merwe says it’s important to look

and your legacy all come into play. It doesn’t help at what components will add value in the long term.

should you lose sight of one phase that’s important The value of a brand-new car depreciates the

to you. All people’s needs differ.” moment you drive it out of the car dealership. A

According to Van der Merwe, studies of the brain well-kept house that is situated in the right area

have shown that people are prone to have far less should increase in value. Apart from a primary

sympathy with their future self than their current self. residence, your lifestyle portfolio could also

In other words, thinking about where you would one include a holiday home. Every lifestyle portfolio

day like to be is almost like speaking about a stranger. should, however, also include an emergency fund.

44 finweek 10 September 2021 www.fin24.com/finweek

on the money personal finance

Parents could even get their children involved from an early age and get their input on
certain suitable aspects. Children could even be allowed to make monetary mistakes

in a safe environment from which they can learn without causing lasting damage.

Because it’s not meant for capital growth, your Hester van der Merwe 5 healthy principles
emergency fund should always be made up of FPI Financial Planner of for financial
cash, even if the interest rate is low. planning
the Year 2020
Van der Merwe also warns that older 1. Live within your means
people do not always fully finance a move to a Brand Pretorius 2. Don’t make (unnecessary) debt
retirement village through selling their primary Retired CEO of McCarthy 3. Set yourself sound long-term objectives
residence. She gives a few examples: 4. Maintain an emergency fund
z In order to get enough money for her Motor Holdings 5. Live with an open hand (with a clenched

retirement dwelling, an elderly lady had to fist, no one can give or receive)
withdraw R395 000 from her investment
portfolio. How does 'retirement'
z After the sale of a primary residence, people treat a well-known
sometimes simply buy a cheaper usufruct in a businessman?
retirement development; it gives them some
extra cash to add to their income-generating Brand Pretorius (73) retired in 2011 as the CEO of
investments. McCarthy Motor Holdings and as executive director
z Sometimes people must withdraw a large of the Bidvest Group. Pretorius has, however, kept on
lump sum from their pension fund to settle working during his “retirement”.
an outstanding mortgage bond. They
are, therefore, moving money from their Consequently, his career now stretches over a
investment portfolio to a lifestyle portfolio. A period of 48 years: 22 years at Toyota SA, 16 years at
paid-up house does not, however, generate McCarthy and 10 years in his own consultancy. He is
money for daily living expenses. currently a director of Italtile.
z Sometimes retirees sell their house to
supplement their income, after which they go Pretorius’ investment portfolio is diversified in
and live in their children’s garage, which has respect of sectors and geography; it is managed by a
been converted into a flat. qualified independent expert.

On close inspection “My approach is conservative. Up until now, I have
been able to limit my monthly drawdowns from my
“Each person’s circumstances are unique, living annuities to 2.5% because I have supplemented
which require the same versatile financial plans. my income with my director’s fees, leadership coaching
However, it’s important to know what the job of and consultancy work. I have been able to invest in
each asset is in a portfolio. Evaluate every asset more retirement annuities every year since 2011 –
according to its purpose, which will enable you to mainly to utilise the income tax benefits.”
determine what the exposure to it will entail in a
portfolio. You should, for example, not have 40% According to Pretorius, his family has always
exposure to motor cars in your lifestyle portfolio. avoided extravagance. “I have never invested in high-
I believe the best car is one that’s been paid up risk schemes. My property portfolio consists of my
in full and which has been well-maintained.” home and my holiday home. We are now contemplating
moving to a smaller house, preferably close to medical
In summing up, Van der Merwe says it’s facilities.”
important to live and work according to a
financial plan. “You cannot approach financial As an avid petrolhead, he is privileged to have a
well-being randomly or intuitively. Start saving sports car for his daily use and an SUV for holidays. ■
very early and plan so that market forces can do
their job and so that you can reap the benefits of finweek 10 September 2021 45
capital growth over the longer term.” ■

[email protected]

@finweek finweek finweekmagazine

Piker on the money quiz & crossword

On margin Test your general knowledge with our first quiz for September. You
can complete it online via fin24.com/finweek from 6 September.

The short version Mark is short for. I know it’s 1. South Africa’s National Union of Mineworkers 5. True or False? Furniture giant Ikea is going
weird, but I refuse to believe rejected a Section 189 process issued by to start selling renewable energy to Swedish
This issue’s isiZulu word is Mark is a full name. I know China Africa Precious Metals Co in Matlosana households for the first time.
igama. Igama is a name. I copywriter Marks, art director to retrench 200 mineworkers. In what year
suspect most people who Marks, Marks in account was the trade union founded? 6. In what year did the United States invade
read the Everyday Zulu management, Marks on Afghanistan?
column have no idea that client side, Marks in media ■ 1944
I work in advertising. And – they are everywhere, and I ■ 1982 7. True or False? Woolworths chief executive for
having worked in advertising have been afraid to ask them ■ 1994 South Africa, Zyda Rylands, will retire from
for over two decades, I am what their igama is short for. the position from 30 September 2021.
amazed by how much Well, today I am asking. 2. True or False? A European buyer recently
things have changed, and bought the Morgenhof wine estate near 8. How much money is the SABC owed by
most of that change can be Is client Mark short for Stellenbosch for R525m. former group chief operating officer Hlaudi
attributed to one igama.That Marketing? Production Mark Motsoeneng for legal fees incurred by the
igama is Mark Zuckerberg. short for Markup? Strategy 3. Which Covid-19 vaccine was the first to be public broadcaster on his behalf in numerous
Mark short forTarget approved by the United States Food and Drug legal cases?
When I first got into Market? We knowTom is Administration in late August?
the industry, an advertising short forTomfoolery and Ben 9. Which giant SA retailer revealed that it is
campaign was a TV ad, some is short for Benchmark.Wait ■ Pfizer-BioNTech vaccine testing an automated concept store with no
radio, some print, outdoor a minute! Mark and Ben ■ Moderna mRNA vaccine cashiers or till points?
and a bit of tactical stuff. might just have the same ■ Johnson & Johnson vaccine
Digital was an afterthought, root – Benchmark. My mind ■ Woolworths
and that’s if it was even is blown. 4. Which one of these countries will open up ■ Pick n Pay
part of the mix. But now … tourist visa applications to everyone who ■ Checkers
Oh, my goodness. So many Igama is also a word, and has been vaccinated with one of the shots
elements. Social media really boy has Mark Zuckerberg approved by the World Health Organization? 10.The drummer Charlie Watts died in August
has changed everything. given copywriters more at age 80. Which famous rock band was he a
work, writing amagama ■ Norway member of?
Every time we work on (plural of igama) for all these ■ Russia
a campaign that requires new elements. ■ United Arab Emirates
social media elements, I
find myself wondering what – Melusi’s #everydayzulu by MelusiTshabalala CRYPTIC CROSSWORD NO 782JD

ACROSS DOWN

1 Share the abundant profits from dicing fruit? 2 Please, no morning practice! (3)
(3,3,5) 3 Shocks trade unions in newspaper (5)
4 From all accounts, an unsmiling fellow (6)
9 Decorate with diamonds (3) 5 Incorporate measure by association (7)
10 Unfair clue without English translation of 6 Wrongly boo at girl, the one in debt (9)
7 Rows of mattress covers no longer
“Cableway” (9)
11 Clued-up informer, we hear (5) available (8-3)
13 Resort to shut down clothing shop (7) 8 It’s a problem for the site (11)
14 Serious matter for a comedian? (2,4) 12 End with no bias (9)
16 Hatches, we’re told, are features on a boat (6) 15 Sort of sandwich that’s bad for your
18 Direction about down clue is set apart (7)
19 Trees topped at the head of the field (5) teeth? (7)
20 Suggestion to boss went up in smoke (9) 17 Steel oneself when predator wakens?
21 Short form made over to companion (3)
22 Of a mind to take a casual job with Edward II, (4,2)
19 Cook’s piece of late news (5)
we hear (2,7,2) 21 It’s about due (3)

46 finweek 10 September 2021 Solution to Crossword NO 781JD
ACROSS: 1 Eras; 3 Knotweed; 9 Nuances; 10 Rapid; 11 Trigonometry; 13 Ideals; 15 Litchi; 17 Nevertheless;
20 Pluto; 21 Maestri; 22 Roentgen; 23 Jack
DOWN: 1 Einstein; 2 Amati; 4 No-show; 5 Three wise men; 6 Empiric; 7 Dude; 8 School report; 12 Big
stick; 14 Execute; 16 Stymie; 18 Extra; 19 Spar

www.fin24.com/finweek

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