Financial Mail - April 2 2020

WANDILE SIHLOBO EXCLUSIVE: Land reform – long on promises, short on delivery. Here’s how it could play out ...

Lockdown: stories from inside a township P32

Junked

Edcon’s Pa ison: you can’t just leave it to capitalism P39

What else could possibly go wrong...

RCL Foods’ dirty exec enrichment scheme P43

Top SA fund managers take a Covid-19 beating P44

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April 2 - April 8 2020

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financialmail.co.za April 2 - April 8, 2020

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fox

features

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We won’t pay, say tenants

Common ground

The need to take time out

Now listen here!

Sunday Times/Alon Skuy

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PicEG credit R ULHere ARS 4 Editorials 5 Editor’s Note 6 State of Play 7 Letters 8 At Home & Abroad 38 In Good Faith 60 Backstory

FM FOX 9 Lease Agreements 10 Another Week 11 Trending 11 Dinner Party Intel 12 Diamonds & Dogs 12 Hot Property 13 Mining 14 Digital

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Pattern Recognition Coronavirus in Pictures Numbers Gimme

FEATURES 20 Ratings Downgrade 26 Land Reform 30 There Shall Be Work 32 Covid-19 Response 34 Social Media Analysis AFRICA & INTERNATIONAL 36 Zimbabwe MONEY & INVESTING 39 Edcon 41 Mall Owners

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Shareholder Activism Unit Trust Performance Quantitative Easing Global Investor Investor’s Notebook Market Watch Global Markets JSE Top Stocks Economic Indicators

Apocalypse now 00?

WANDILE SIHLOBO EXCLUSIVE: Land reform – long on promises, short on delivery. Here’s how it could play out ...

Lockdown: stories from inside a township P32

Junked

Edcon’s Pa ison: you can’t just leave it to capitalism P39

RCL Foods’ dirty exec enrichment scheme P43

Top SA fund managers take a Covid-19 beating P44

www.financialmail.co.za

April 2 - April 8 2020

What else could possibly go wrong...

SA: R32.00 inc Vat Botswana: P29.20 Eswatini: SZL29.20 Zimbabwe: Z$5

ADFOCUS 53 Buying Habits FM LIFE 55 Podcasts 57 Inbox 58 A Moveable Feast 59 Memes

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Illustration: Julia Grey

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editorials HERE’S MOKONYANE’S CHANCE TO ‘LIFT THE RAND’

N Pieter Bauermeister / AFP

ow is the time for Nomvula Mokonyane to shine. Let’s hope she’s been hitting the gym hard. Because this, right here, is the moment she promised three years ago after the night of the long knives, when her ally, former president Jacob Zuma, sacked most of the cabinet, sparking a ratings downgrade.

“Let the rand fall,” said Mokonyane famously in April 2017 after Fitch and S&P downgraded SA to junk status, “we will pick it up.”

Yet, when her moment arrived on Friday, after Moody’s became the last of the ratings agencies to downgrade SA to junk status, and the rand plummeted to R18 to the dollar (down from R14 in January) there wasn’t a peep from the former water & sanitation minister. In fact, the only real reference to Mokonyane in recent weeks was a report by the German-based Water Integrity Network, which detailed how R4bn was lost in “irregular expenditure” during Mokonyane’s tenure as minister. Not exactly flattering stuff.

True, Mokonyane doesn’t really have a soapbox from which to lift up the rand: last May she withdrew as an ANC MP because of “family responsibilities” (nothing to do with being accused of taking bribes by Angelo Agrizzi). But she is still a member of the ANC’s national executive committee, so there is that.

Still, Mokonyane’s fighting words were typical of so many politicians in the heady months before Zuma’s axing: aggressive economic foolhardiness, characterised by a toxic mixture of pig-headed arrogance and startling, wilful fiscal illiteracy.

Many of her ilk faded into the shadows as the economic meltdown became apparent. Others, however, still have no problem pronouncing on the economy, and the ratings agencies, despite being fatally ill-equipped to do so.

Public protector Busisiwe Mkhwebane, in 2019, tweeted: “God deliver us from these rating Editorial

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Editor: Rob Rose.

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April 2 - April 8, 2020

agencies and oppressors of the downtrodden for economic freedom in our lifetime.”

Mkhwebane, of course, has no idea what she’s talking about. Blaming a ratings agency for diagnosing the economy is like blaming a doctor for telling you you’ve got cancer.

If anything, Moody’s deferred the diagnosis until there was no chance it wasn’t cancer. The two other agencies, Fitch and S&P, had SA in junk status three years ago.

Other critics piled on this week. The SACP, for example, “denounced” the action by Moody’s, saying it was “heartless, insensitive and inconsiderate”. The SACP — which, let’s remind ourselves, is still an alliance partner of the governing party — even accused Moody’s of wanting to “usurp economic policy formulation from democratically elected governments”. The SACP, no doubt, would also accuse the cancer-diagnosing doctor of being part of a “class agenda” and a “neoliberal manoeuvre to impose corporate capture”. The National Education, Health & Allied Workers’ Union, an affiliate of Cosatu, was as clueless, calling Moody’s “depraved”.

The truth is, this downgrade is already costing us. The fall in the rand makes imports more expensive, and prevents SA from getting the full benefit of the drop in the oil price. At least $2bn in foreign investment (in government bonds) will leave the country, and it’ll cost the state more to borrow money, which has to be repaid.

But tell that to Danisa Baloyi, the former Black Business Council president and Zuma ally who said in 2017 that a downgrade didn’t matter, since “many South Africans don’t have billions on the stock exchange”.

Luckily, the person speaking the most sense on this issue, who knows all too well what’s at stake, is finance minister Tito Mboweni. It’s high time that the economic duncerati in the ANC left it to him. After all, they’ve had their time to “pick up the rand” and they’ve failed. x Subeditors: Dave Landau (Chief), Magdel du Preez (Deputy), Dynette du Preez.

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NO SKOP EN SKIET, PLEASE

T

ransport minister Fikile Mbalula would seem to be quite enjoying the state of disaster in SA. He gets to post endless pictures of himself on Twitter, being sure to tell the nation he’s “working”. And while one may appreciate the harmless, if juvenile, pleasure he seems to derive from a “for-realsies” crisis, the response of some of his fellow cabinet ministers to the coronavirus lockdown has been more disconcerting.

Take defence minister Nosiviwe Mapisa-Nqakula, who thought she’d allay our fears about abuse of power by saying the armed forces would resort to “skop, skiet and donder” — against civilians, one presumes — only “if circumstances determine that”. Chillingly, she added: “For now, we’re a constitutional democracy …”

And police minister Bheki Cele, asked about the heavy-handed police response just hours into the lockdown, reportedly said: “Wait until you see more force.”

So it’s no surprise, given the combative rhetoric of their political overlords, that SA’s armed forces are playing fast and loose with individual rights and the bounds of the constitution.

It’s a far cry from the restraint President Cyril Ramaphosa urged. Of equal concern, of course, is that he hasn’t reined in his errant, power-hungry executive.

In Rwanda, the first Covid-19-related death was of a person shot because he violated lockdown regulations. That’s what untrammelled power and a lack of accountability will get you. x

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editor’s note by Rob Rose 123RF/giffaleens

THE ELUSIVE RET DONORS Is Atul’s cheque in the mail? Where are the agents of radical economic transformation (RET) now that small companies are battling to survive?

@robrose_za roser@fm.co.za

‘Here, there’s a real risk that if we pull over to change the tyre and stop the engine, we might not be able to start it again’

F

inally we have some radical economic transformation — even if it’s in the form of a Covid-19-induced blowout — and where are the horsemen of the radical economic transformation (RET) movement? Nowhere to be seen, as luck would have it.

Instead, who do we see riding to the rescue, saddlebags weighed down by weighty cheques: the supposed agents of white monopoly capital (WMC).

First there’s the Oppenheimer family, whose patriarch Ernest created Anglo American in 1917. It has donated R1bn to SA’s efforts to defy Covid-19. Then there’s Johann Rupert, the scion of Anton Rupert’s Rembrandt tobacco empire, who was painted by slippery PR company Bell Pottinger as the face of WMC. His companies have set aside R2bn. Others to have sunk their wealth into tackling Covid-19 have been equally vilified: African Rainbow Minerals founder Patrice Motsepe (R1bn) and tech giant Naspers (R1.5bn).

Odd, isn’t it? I’m sure it’s just the “WMC media” purposely suppressing the stories of all those RET businessmen who’ve also donated to the cause.

After all, the way the original tendercrats, the Gupta family and their apparatchiks, used The New Age and ANN7 to lobby to get various rules changed, supposedly to help all small businesses, you’d think they’d have donated billions by now. Maybe right now, Atul Gupta is wedged up on a pillow stuffed with R200 notes from Eskom in Dubai’s Saxonwold Shebeen, trying to get the Bank of Baroda’s online banking system to make a forex payment to SA’s solidarity fund.

But where are the donations from the founders of Regiments Capital and Trillian or the R1bn cheques from other state-capture beneficiaries, like McKinsey, Hogan Lovells or British American Tobacco? Where is Eric Wood’s or Edward Zuma’s donation? Surely, Carl Niehaus has one or other inheritance to tithe?

Just last week, Niehaus wrote that the Guptas “were never the real state capturers”. Rather, he said,

“we continue to be captured by the likes of the Ruperts, the Oppenheimers, the Christo Wieses, the Stephen Koseffs, the Brian Joffes, the Koos Bekkers, the Stellenbosch mafia, and their companies”.

Yet here are the evil extractionists, donating cash.

Sure, it’s not everything they have, by a long stretch.

But it’s more than we can expect from Atul or Eric.

Speaking to the FM this week, Rupert said that while his donation was billed as R1bn, it has actually been leveraged up to R2bn. “Two weeks ago, I called the president and offered him the help of Business Partners, as a delivery system to help small business, which is something they’ve been doing for 38 years.

And I told him I’d make a donation too,” he says.

The way it’s broken down, R500m is donated by Rupert directly, R500m from his company Remgro, and another R1bn from Business Partners (in which Remgro owns 45%) as “subsidised finance”. “In this way, we’re able to gear it up to R2bn,” he says.

Rupert says his donation was made on the condition that it goes directly to ease the cash-flow crunch for small businesses — not so they can pay rent to property companies, or repay banks. Landlords and banks must come to the party too, he says.

“You see economists going on about how we must cut the interest rate. My father started a small business, and I can tell you, they don’t go under because of interest rates. They go under because of cash flow.

And Covid-19 has hit their cash flow,” he says.

Jonathan Oppenheimer, who spoke to the FM this week, said the same thing. “It’s a national crisis, and our family is deeply connected to SA, so there was no question of not doing this.”

Unlike many other parts of SA’s social fabric, small businesses have no safety net. “Think of SA as a car that’s driving down the road and then suddenly gets a puncture,” he says. “Here, there’s a real risk that if we pull over to change the tyre and stop the engine, we might not be able to start it again. We must make sure that while we’re changing the tyre, the engine can idle.

Small businesses are the gubbins in the engine: if they break, we won’t be able to start the car again.”

The Oppenheimers’ fix has been to start the SA Future Trust, which was set up in just 10 days, funded

by R1bn from the family. The way it’ll work is, small businesses can approach the trust and apply for a “loan” of R750 a week for every person they employ.

The companies will have to pay it back, but it’ll be interest-free for five years.

Oppenheimer says this will buy small businesses “the time to idle on the side of the road until they can press the accelerator and drive away”.

The thing is, partly thanks to the Guptas and those fine gentlemen mentioned earlier, SA’s economy is so weak that many small businesses might not be able to drive away once Covid-19 is gone. Nonetheless, with little other support out there, these donations give them a better chance than they otherwise would have had. Once Atul’s billions land (any day now, surely), I’m sure it’ll be much easier still. x April 2 - April 8, 2020

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state of play by Natasha Marrian COSATU’S WEAK IMMUNITY

N

o-one can predict what our country will look like on the other side of the health and economic crises into which it is plunging. Dramatic shifts are already apparent in the economy, and in our politics in particular, and further far-reaching changes are inevitable — by the time finance minister Tito Mboweni rises to deliver the medium-term budget policy statement in October, if he does so at all, SA will be a vastly different country.

When we hold the local government elections next year, we will have passed through the fire and into an unknowable future. But the consequences of the pandemic and the economic meltdown do not have to be only negative — they could present an opportunity for President Cyril Ramaphosa’s administration to effect the reforms that were expected when he took office two years ago.

Mboweni said as much in a media conference call over the weekend on the Moody’s downgrade to junk status. The Daily Maverick described this as Mboweni’s “Hallelujah moment”. He used the word to describe his reaction to Ramaphosa giving him the green light to finally implement the structural reforms needed to rescue the economy. The president now has to display the fortitude to allow Mboweni to do so.

For the past two years, the president has had a tough time taking decisions, having to appease the factions in the ANC, his many opponents and his allies — even his friends have interests that are often at odds with his own.

This has led to policy disarray. Think of the flipflopping over SAA — first the carrier was going to be restructured, then days later it was to be placed in business rescue. Both the ANC and even Cosatu at the time questioned the need for an airline that appeared to serve only the elite, not the working class. A few

@NatashaMarrian marriann@fm.co.za

No amount of posturing will change this.

SA will have to reckon with the new normal of the postpandemic era

good week There weren’t many cheers when Moody’s junked us on Friday — except from finance minister Tito Mboweni, who now has President Cyril Ramaphosa’s backing to reform SA’s badly listing economy. Mboweni’s voice of reason has long fallen on deaf ears, but maybe the forces of radical economic transformation and the unions will finally pay attention. We’d start with a bloated civil service, red tape, labour laws and malfunctioning municipalities, not a new unit in the finance ministry, however snappy its name. But that’s us. x 6

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April 2 - April 8, 2020

short months later the coronavirus has rendered all the dithering moot, as even well-run airlines battle to survive travel bans.

The business rescue practitioners last week lodged an application to liquidate SA Express. The government is currently “mulling” whether to oppose this. It is a no-brainer, but the navel-gazing continues.

The public-sector wage bill is another example of crippling indecision — the government took forever to act, despite Mboweni having revealed last year the mess bequeathed by former public administration minister Faith Muthambi, who signed off on wage hikes without the requisite mandate.

Now workers are not going to receive the last leg of an agreed-upon increase, come April 1 — and there is little they can do about it. This too presents an opportunity for Ramaphosa’s administration to address the public-sector wage bill decisively. It has to be done, since now when we borrow we will be treated like a “degenerate gambler”, as one unionist put it. While unions have rejected the government’s offer to replace the final leg of the Muthambi agreement with a new offer, in the long run these unions will have to think long and hard about their options.

It is very likely that the pay issue will end up as the subject of lengthy court battles, which could stretch well into next year and coincide with the elections.

Cosatu-aligned unions could try to use the polls as a whip to shift the government’s stance — but this will not necessarily work. No money and no amount of political posturing will change this. SA — its parties, unions and society as a whole — will have to reckon with the new normal of the post-pandemic era, in which we relate to each other in fundamentally different ways.

Unions, for their part, run the risk of rendering themselves irrelevant if they remain locked in ideological fortresses. x

bad week Medical experts now expect the coronavirus to kill more US citizens than twice the toll of the Vietnam War. On a day when the US recorded 500 more Covid-19 deaths, President Donald Trump thought fit to boast to reporters on the White House lawns that his hair blowing in the breeze was his own. The rest of the world has long known Trump has an empathy deficit, but the tone of his public statements — and his handling of this tragedy — make it clear that his preoccupation is nothing other than his own reputation. x

you said...

you said... letters Together we’ll vanquish the virus It was only a matter of time before SA was affected by the coronavirus outbreak (Covid-19). Now, as a country, we need to pull together to defeat it — as we did when SA was being devastated by HIV/Aids.

It’s not disputed that SA administered one of the biggest HIV/Aids programmes in the world. It resulted in life expectancy increasing from the 40s to 65 — a significant and remarkable achievement.

The leadership demonstrated by President Cyril Ramaphosa and all spheres of government during the Covid-19 outbreak must be supported and applauded. For the first time, we have put aside our political differences for the sake of SA. This should be viewed as the beginning of good things to come — that political parties can rekindle and invoke the spirit of great leaders such as Nelson Mandela to put the country first instead of political grandstanding.

Business, churches, NGOs and civil society should now also work together to defeat this pandemic.

With all hands on deck, we can fight and defeat Covid-19.

Mafika Siphiwe Mgcina ANC Sedibeng task-team co-ordinator (writing in his personal capacity)

Outsource prosecutions — it works Robert Appelbaum’s call for an amnesty proposal for perpetrators of state capture (Features, March 12-18, and Opinion, March 19-25) makes for an important debate. Its basic premise — that prosecutions will flounder because, according to Appelbaum, the “lawyered rich” will outmanoeuvre the overstretched state prosecutorial capacity — is, unfortunately, supported by many high-profile prosecutions in SA. These have progressed no further than the incubation stage after many years, and others have taken a decade or more to conclude.

But there is another alternative. The state should reintroduce the system that was employed with great success decades ago, when it outsourced prosecutions for complex commercial crimes to leading counsel in private practice.

Some of the notable commercial criminal cases that found their way into our law reports — and which resulted in convictions — bear fruitful testament to that approach. Moreover, faced with such formidable prosecutions, perpetrators may be persuaded to come clean very smartly and seek reduced prison sentences by way of plea bargains, as happens regularly in the US. It would then become unnecessary to introduce any proposed amnesty, and avoid the moral criticism that crime really does pay.

On duty: The defence force and police patrol streets of Alexandra during the national lockdown Alon Skuy

online In addressing the nation, President Cyril Ramaphosa, renowned for his serenity, spoke of the possibility of “hundreds of thousands” of coronavirus infections and of plans to bring in the army to ensure the lockdown is enforced.

While I’m loath to criticise the president at this time of emergency, your editorial sums up the fundamental flaw in his administration. The right statements are made, but these are not followed through with the appropriate actions.

[At the time of Ramaphosa’s statement] people from overseas were still coming into SA without effective tracking. The lockdown was (inadvertently?) announced in advance to give people the opportunity to return to their home provinces, and by so doing to spread the virus to the rest of the country. The lockdown is premised on tracing and testing, but with fewer than 5,000 tests a day, it will probably have to be extended to June or July.

The panic in Ramaphosa’s eyes may well be due to his realisation that his government is not “ready to govern” this pandemic. Andrew Merrifield

While watching the horror show in Italy, British Prime Minister Johnson was happy to pursue a policy of benign neglect, or what he called “herd immunity”.

Show me your articles on Covid-19 before the UK began its lockdown. We’re all clever afterwards. John Hepton It’s not a matter of “show me the articles before it began”; rather, the essence of the editorial would be: “Learn from the unfortunate circumstances of other affected communities and then use this knowledge to prevent or limit the effect in your own constituency.” That’s something Johnson patently ignored. Anthony Sturges At last this charlatan is being called out. An incompetent buffoon of a man with no seriousness of purpose and totally out of his depth. James Hamill The FM might rant and rave about anything a centre-right government does, but the Dutch, I think, are persisting with a herd immunity approach, as least as of now. Businesses stay open. It probably is too early to say which is optimal. But it is never too early to have a dig at your political opponents. Paul Barnard

The FM’s lockdown newsletter As you’ll have noticed in the first few days of the lockdown, there’s a lot to read out there — good and bad. But the FM’s mission has always been slightly different: to bring you the intelligence behind the news — usable information that clarifies, not confuses. Which is why we’ll be bringing out a daily coronavirus newsletter for the duration of the crisis.

Every day our editors will sift through the churning ocean of stories throughout the world to flag the three best, must-read articles. We’ll also bring you exclusive news and analysis about SA’s response to the outbreak, as well as daily graphs and the best pictures of a world in lockdown.

To subscribe — free of charge — visit www.businesslive.co.za/fm

Oshy Tugendhaft Attorney, Sandton The FM welcomes concise letters from readers. Letters must carry the name and address of the sender. They can be sent to The Editor, Financial Mail, PO Box 1744, Saxonwold 2132. E-mail fmmail@fm.co.za

April 2 - April 8, 2020

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at home & abroad by Justice Malala CYRIL’S TIME TO SHINE With an adoring country behind him, Ramaphosa must use the downgrade to act decisively, economically and politically

T

he most frequentlyasked political question in SA over the past two years is this: what will it take for the president to move boldly on the economic and political reforms necessary to lift the country out of its 10 wasted years?

There has been no answer. The trauma of SA’s downgrade to junk status and the Covid-19 pandemic should serve as the cold shower the president has needed to make bold decisions.

Over the past 12 years of decline many argued that SA needed to get to the very edge of self-destruction before its leaders would wake up and change course. Yet, as the looting and the mismanagement deepened, noone in our ruling elite would listen — or act. After the dreadful Jacob Zuma was kicked out of office by the ANC in February 2018 his successor, President Cyril Ramaphosa, dragged his heels in instituting urgently needed economic reforms despite the goodwill he was gifted with. He consulted, and consulted, and promised action.

None came despite

@justicemalala

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The ball is now firmly in Cyril’s court — and he knows what he needs to do

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April 2 - April 8, 2020

dire warnings from his finance minister Tito Mboweni, business leaders and civil society that we were facing disaster.

Instead of loosening trade union Cosatu’s grip on the ANC, he claimed he was building consensus. That led to zero action on moderating the rampant public sector wage bill. Instead of moving with haste to quash the toxic Zuma faction within his party, he allowed party secretary-general Ace Magashule to openly run a parallel organisation that threatened the Reserve Bank’s independence and advocated for policy that came straight out of Julius Malema’s playbook.

Now we are here. I do not know what value destruction SA-style looks like, but this surely is it. Moody’s finally did the inevitable last week and cut its sovereign credit rating to subinvestment grade. SA now has a junk rating from all three major ratings agencies. You can’t blame Moody’s.

SA’s government debt to GDP is going to balloon like my waistline during this lockdown. Unemployment will leap to horrendous levels.

Mboweni seems to appreciate, as he has always done, the deep trouble we are in. In his statement after the downgrade, he said: “To say we are not concerned and trembling in our boots about what might be in the coming weeks and months is an understatement.”

The Moody’s action came on the same day that SA entered its first 21day lockdown (there may be an extension, for those who believe that this

may be a one-off) to try to arrest the spread of the Covid-19 pandemic. The devastation of the pandemic is already well known — and terrifying.

“We’re about to see a dizzying decline in economic activity,” Mark Zandi, chief economist at Moody’s Analytics, told Vox. “There’s no analogue to it in the modern era.”

Every country across the globe faces this new reality. Some will come out of it sparkling. Others will not. In which category will we fall? Will we continue our snail-like pace, our failure to seize the day? Will Ramaphosa and his team fall back to their old ways — no bold action and their hands tied by their allies in Cosatu and their comrades in the Magashule faction?

Mboweni told journalists on Sunday that when he told Ramaphosa about Moody’s looming downgrade the president said that SA needed to now move more boldly on structural reforms.

“I said: ‘Hallelujah’,” said Mboweni.

Some of us have heard Ramaphosa say this before. We also exclaimed with a hundred ‘hallelujahs’. We have been disappointed, even if we remain hopeful. The ball is now firmly in Ramaphosa’s court. The days of people writing about what he “should do” are over now. He knows what he needs to do: institute the necessary economic reforms, move boldly to end the toxicity of the likes of Magashule in the ANC, and set the country to work on a vigorous reconstruction and development programme. He has a fantastic governor and team at the Reserve Bank, a fine finance minister and a limping but vigorous National Treasury.

Crucially, Ramaphosa has an adoring country behind him. We have seen him act like a leader throughout this Covid-19 crisis. He needs to act just as decisively on the economic and political front. x

Digging up unusual, interesting tidbits in and around the business scene

LEASE AGREEMENTS

We won’t pay, say tenants The scene is set for a protracted battle between landlords and retailers over rental payments now that stores are shut Adele Shevel shevela@fm.co.za

ý In a battle to cut mounting losses caused by the Covid-19 lockdown, retailers and landlords are set for a face-off over rent holidays.

While restaurants and momand-pop stores were the initial front of the skirmish, it has already expanded to JSE-listed retailers and even warehouses, which are testing the strength of their leases.

In recent days, landlords contacted by the FM have been in crisis meetings on how to deal with the lockdown, which has closed all stores except those selling essential items such as food and medicine. In some cases, retailers have flatly said they won’t pay rent during the forced closure.

While restaurants were the first to ask for rental concessions, now larger retailers with deeper pockets are making similar demands.

The SA Council of Shopping Centres (SACSC), which represents both retailers and shopping centre owners, is trying to play peacemaker. “There has to be a concerted effort to find a way that works for everyone,” says Stephan le Roux, the council’s president.

“You can’t just pass on the load. In the interest of the industry as a whole, there must be co-operation and realistic expectations by all parties.”

Le Roux says retailers have

Chairs placed apart to

obligations towards enforce a distance between employees, supplishoppers at a mall in Mamelodi, Pretoria ers and landlords.

Getty Images/AFP/Phill Magakoe On the flip side, property owners spend about 60% of rental income on rates, operational costs — including fine own the majority of the security and cleaning — and intermalls in SA. However, property est on loans. companies with industrial space Firms in greatest need of will be less affected, as warehousrelief, says Le Roux, are mom-andes will still be needed during the pop retailers, restaurants and serlockdown. vice providers with limited cash Last week, the impact of the and slim odds of recovering lost lockdown came into sharp relief revenue. when Grant Pattison, CEO of SA’s “The focus here should be on largest clothing retailer Edcon, said the smaller retailers in the immeit only had enough cash on hand to diate term; big national retailers pay salaries. have resources they can tap into, Worse — he said it wasn’t clear like shareholders or extending if Edcon would be able to reopen existing credit lines,” he says. once the lockdown ends.

Yet those big retailers are also Other retailers are taking a taking a knock. Le Roux says they tougher stance. TFG — with brands make 80%-90% of their turnover including Foschini, Totalsports, in shopping centres, and occupy Markham and Sterns — has simply about 80% of the floor space in told landlords it will stop paying malls. This means both sides rent during the lockdown. Until depend on each other. “Forcing now, TFG has been an outlier pershopping centres out of business former in a dour environment, or retailers to close their doors is releasing positive updates while its not in anyone’s interest. Everybody peers battle. has to take pain — but let it be “The decision was not taken shared.” lightly and has been guided by JSE-listed property heavylegal counsel,” says Brad Rothenweights Hyprop, Liberty Two burg, head of TFG Property. “In Degrees, Growthpoint and Redethese extraordinary times we must

find ways to navigate the current climate, find solutions to mitigate the impact and ensure business continuity.”

Rothenburg isn’t predicting when TFG will begin paying rent again either — he says the retailer will assess the full financial impact once the situation stabilises, and then “engage with landlords”.

Woolworths is also talking to landlords. The group has closed its Country Road stores in Australia indefinitely. In SA, its fashion, beauty and home products are not considered essential goods so these parts of its stores are cordoned off.

Massmart is also talking to landlords about reducing its rent since all its Builders Warehouse stores are closed. Massmart, now run by Walmart veteran Mitch Slape, is consulting lawyers, the Consumer Goods Council of SA and the trade & industry department.

This week the SA Property Owners Association, together with the SA Reit Association and the SACSC, hosted a conference call to

April 2 - April 8, 2020

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AFP/Noel Celis

ANOTHER WEEK

STILL WARY A woman wearing a face mask shops at a supermarket in Wuhan, in China’s central Hubei province this week. The city where Covid-19 first emerged is reopening after a two-month lockdown.

Public transport has been restored, but stores still impose limits on the number of shoppers who can enter, and residents still wear masks

BY THE NUMBERS

discuss the crisis. Association chair Estienne de Klerk said in the call that the focus should be on protecting smaller tenants.

Some tenants had taken an aggressive stance to not pay rent, but this “isn’t helpful when we are all dealing with cashflow issues and the priority should be job protection and assistance to the smaller businesses”, he said.

Laurence Rapp, CEO of Vukile Property Fund, says one problem is that landlords have no idea which tenants will go to the wall, which will bounce back quickly and which will take longer to recover.

“The big tenants really should have the wherewithal to get through this,” he says.

The landlord-tenant tension reflects what is happening globally.

In the UK, Primark, New Look, Frasers Group and Footasylum have asked for rental holidays. The JSE-listed UK shopping centre owner Intu said recently that it has received less than one-third of the UK quarterly rents it is due, according to retailgazette.co.uk.

In Germany, media reports say adidas, shoe chain Deichmann and Swedish clothing giant H&M plan to halt rent payments.

Kai Warnecke, the head of the German Property Owners’ Federation, is quoted as saying adidas’s default on rent must not set a precedent.

“If so, it would be the end of the real estate market.”

Jan-Marco Luczak, the legal policy spokesperson for chancellor Angela Merkel’s conservatives, says “financially strong corporations” should not forgo rent payments and balk on contracts. “The decision of adidas is wrong,” Luczak says.

Back home, Le Roux says while many companies have obtained legal opinions, “the answer is not in litigation”.

“Not only will it be too late but there can be no winners. I think the property owners realise that relief to various degrees will be required across the board. However, property companies are also limited in how much they can assist,” he says. Any relief they can offer will be “limited”. x

April 2 - April 8, 2020

ECONOMIC CRIME: SA SLIPS TO THIRD

$1.7bn

in losses was incurred by companies that were victims of economic crimes in SA in 2020

60% of SA organisations say they have been victims of economic crime and fraud. That is a drop from 77% in 2018. The global average is 47%

34%

of internal fraud was perpetrated by senior management

59%

of economic crime incidents were not disclosed to the board of directors

42%

of SA firms did not conduct an investigation into their most serious fraud incident

Top 10 countries reporting the most economic crime Has your organisation experienced any fraud and/or economic crime within the last 24 months?

57%

India

69% 63% 60%

China SA

77%

60%

Kenya

75%

58% 53% 56% 50% 56%

US UK Uganda

54% 58% 53%

Mexico France

53% 49% 51%

Ireland 2018

66%

71%

2020

In SA, the worst types of fraud commi ed in SA was fraud by customers, bribery and accounting fraud Source: PwC

DINNER PARTY INTEL...

“The situation is very worrying, with a dramatic evolution: an increase geographically in the number of countries and also an increase in the number of infections.”

Matshidiso Moeti, the World Health Organisation’s regional director for Africa, speaking to France24 about the spread of Covid-19 on the continent

TRENDING

Tobacco ban may be hazardous to health Being locked down with a smoker who has run out of smokes could be the way to epic civil disobedience Paul Ash

ý Instituting and then reversing a ban on tobacco products shows masterful statecraft. Well, it would have if it had been planned, and if the reversal hadn’t been reversed.

Take all these things away from people — their freedom, their income, their alcohol and their cigarettes — then, after a few days, relent and tell them they can have their smokes back.

The smoking population will forevermore be pathetically grateful to the great, magnanimous, benevolent state benefactor. And they won’t mind so much about the other things.

The first question was whether

the government, in thinking about repealing the ban, was trying to appease Big Tobacco, in the same way that any sitting US president is pretty much a shill for Big Oil and Big Banks. Probably not.

The bigger issue is being locked down with a smoker who has run out of smokes.

That way lies civil disobedience on an epic scale.

It’s one thing to tell rational people that their continued good health depends on them staying

123RF/Katarzyna Bialasiewicz

indoors and out of what we used to call society.

It’s altogether another telling this to a nicotine addict. Heavy smokers might feel that they have nothing to lose.

If nothing else, the 21-day cigarette ban could provide useful anecdotal data to researchers looking at the illegal trade in drugs, rhino horn and perlemoen.

Bans rarely work, as the US learnt to its great cost during Prohibition. x

The topics you have to be able to discuss this week

1. Profiting off panic The US justice department is probing claims of insider trading by lawmakers who sold shares just before the Covid-19 pandemic sparked a major market slump. The investigation will examine the trades of at least one lawmaker, Republican senator Richard Burr, who received briefings and reports on the threat of the virus.

In February, Burr sold stock held by him and his spouse worth an estimated $1-million. And two weeks after that, he privately warned a group of wealthy constituents about the dire economic impact of the Covid-19 pandemic.

A shareholder in one of the companies whose stock Burr sold has sued him, saying he misused his access to information.

2. Censorship in Egypt Egypt has expelled a Guardian reporter over an article citing a study that challenged its official count of Covid-19 cases. Ruth Michaelson reported on unpublished research by Canadian infectious diseases specialists estimating an outbreak size of more than 19,000 cases in Egypt. The scientists used data from early March when Egypt officially had only three confirmed cases, according to Michaelson’s report. She was accused of “spreading panic” and her press credentials were revoked.

3. Well, now he nose An Australian astrophysicist was admitted to hospital after getting four magnets stuck up his nose in an attempt to invent a device that stops people touching their faces, The Guardian reports. Daniel Reardon was building a necklace that sounds an alarm on facial contact when the mishap occurred. The 27year-old said he was trying to liven up the boredom of self-isolation. “After scrapping that idea, I was still a bit bored, playing with the magnets. It’s the same logic as clipping pegs to your ears — I clipped them to my earlobes and then clipped them to my nostril and things went downhill pretty quickly when I clipped the magnets to my other nostril.”

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DIAMONDS & DOGS BY JAMIE CARR

HOT PROPERTY THE WOW HOUSE

Houseparty is at the top of the charts in places where there are tight distancing measures 12

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Houseparty

Sasol

The joys of a stay-home pub

Low oil prices batter shares

Clearly the impact of a lockdown varies DIAMOND enormously according to socioeconomic conditions. But for those around the world who still have functioning broadband and the skills to download an app, isolation is a lot less lonely with Houseparty and the rest of its cohort of video chat apps.

Houseparty has raced to the top of the download charts in countries that have tight distancing measures in place, pulling in 2-million downloads a week now that a trip to the pub has become virtual rather than actual.

The benefits of gathering a few mates together to share a beaker from the comfort of your own sofa are such that experts are starting to question whether the pub trade will ever make a comeback.

Convenience is a huge factor, the drinks are reasonably priced, there’s no need to worry about how you’ll weave your way home afterwards, and there’s little risk of getting involved in a brawl with some hardbitten alcoholic who takes exception to the quality of your tailoring.

The broadening of its popularity beyond its teenage target market into the realms of the middle-aged bloke has raised considerable technical issues, with many a cry of “bloody thing’s not working” before a child is summoned to get everybody connected. But once you’re logged in you can chunter on for hours, safe in the knowledge that since Covid-19 burst onto the scene, at least nobody’s talking about Brexit. The next step would be for a developer to come up with something that was simple enough to be used by the elderly and isolated, which could be a genuine lifesaver. x

It may seem a little harsh to point the DOG wagging finger in any singular direction when the markets are tumbling across the board, the coronavirus is stalking the land and there is little true visibility of quite how deep and hard it will strike, and how long it will take the economy to recover from the catastrophic imperative of lockdown.

Yet even among a tsunami of bad news, the complete collapse of Sasol’s share price demonstrates quite how spooked investors are about the future of the company.

The old routine that when two elephants fight, it is the grass that suffers definitely applies here, since the punch-up between Saudi Arabia and Russia has hammered the oil price and knocked the stuffing out of a relative minnow like Sasol. The impact of Covid-19 slamming the brakes on economic activity worldwide has also played a major factor in depressing demand and taking Brent crude down to around $24 a barrel, its lowest level in almost two decades, and a very long way from the $50 to $70 level that Sasol had been expecting.

The company has embarked on an urgent process of repositioning its operations to adapt to the new lowprice environment, including an accelerated asset-disposal programme that is intended to deliver proceeds north of $2bn, a rights issue that is targeted to raise another $2bn, and $1bn from working capital optimisation and costsaving measures.

The plan is to focus its portfolio on cost, technology and market advantage with assets that are diverse across sectors and able to operate at the low end of the cost curve. x

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WHERE: Noordhoek, Western Cape PRICE: From R895,000 to R8.9m WHO: Lew Geffen Sotheby’s International Realty Set against the backdrop of Table Mountain nature reserve, newly developed Chapman’s Bay Estate offers contemporary designed homes in a secure, country setting with sea and mountain views. Buyers have a range of options to choose from including plots only, plots with approved plans, and completed houses. Prices of plots start at R895,000 (including VAT) while completed townhouses and homes range from R3.7m to R8.9m.

WHERE: Tzaneen, Limpopo PRICE: R8.14m WHO: Seeff This luxury home in Doornhoek Equestrian Estate just outsideTzaneen offers country living with all the modern conveniences with stunning mountain views. The three-bedroom property offers top-quality finishes including floorto-ceiling folding glass doors, custommade cupboards, imported chandeliers as well as rosa stone slate and Cemcrete flooring. The house is surrounded by large, covered verandas that overlook a rim flow pool set in a timber deck entertainment area.

MINING

Ready for the long haul Not long ago some SA miners were struggling, but in a postCovid world their recovery might not be too painful Lisa Steyn steynl@businesslive.co.za

ý As SA jumps into action to contain Covid-19, huge economic fallout is inevitable. But SA’s hardy mining sector looks likely to emerge from the crisis in better shape than most.

As the nationwide lockdown took effect on Friday, most mining operations, with the exception of some in essential coal, iron ore and other production, were shuttered.

But Thishan Govender, equity analyst at Truffle Asset Management, says the miners on the JSE will survive, though at reduced levels of profitability until the crisis passes.

After a four-year commodity bull market, paired with disciplined capital-allocation and cost-cutting exercises, most major miners find themselves with little, if any, debt, giving them the ability to withstand the crisis, Govender says.

Etienne le Roux, another equity analyst at Truffle, notes that SA’s platinum miners, which were once teetering on the edge, are now in a net cash position, providing them with “exceptional liquidity”.

Despite Moody’s slashing SA’s sovereign credit rating to junk last week, the macroeconomic factors, at least in the short term, are also in mining’s favour, with the rand at ultra-weak levels of about R18 to the dollar – good news for a sector that incurs cost in rands and gets revenue in dollars.

Peter Major, director of mining at Mergence Corporate Solutions, does not see a three-week shutdown as a “big deal”.

“I don’t want to downplay the challenge, but they’ve been through tough times and have handled it pretty well,” he says.

Mining companies have, for example, survived strikes far longer, with some stretching up to five months at a time.

Major says mining has, over the past three decades, faced adversity on all sides — from the government, communities, Eskom and unions. “I think our mining companies, for once, have it better than most. Not accidentally, though. Our guys earned their [stripes]. The ones standing now are strong and can handle adversity,” he says.

While it is expected that some smaller miners are at risk of falling over as a result of the crisis, the Minerals Council SA says tax and other statutory fee holidays may assist companies in need.

So, on balance, SA mining is likely to get through the crisis — but what happens thereafter?

Gideon du Plessis, general secretary at Solidarity trade union, worries that retrenchments are inevitable.

“While mines do factor in losses from strikes or power cuts and the like, this is over and above all of these factors,” he says. “There are so many marginal mines already and mining companies are always under pressure to downsize. Our concern is that they now have a reason to retrench.”

Govender says that, while there

Gallo Images/AFP/Gianluigi Guercia

might be pockets of cost-cutting and restructuring in uncompetitive assets, “most of the asset base of our listed companies are generally cost-competitive globally”.

Le Roux says that in the case of gold and platinum miners, the prices of their commodities are extremely high, “so all miners will generate excessive cash flows when they get back to businessas-usual”.

The biggest question mark hangs over demand.

While supply disruptions of platinum group metals from SA usually cause global prices to rise, Le Roux says short-term demand outlook is still unknown, as many global vehicle manufacturers are shutting plants in response to the pandemic. He feels good about gold, given “all-time-low global interest rates, increased levels of debt globally, as well as the economic impact that is still to be felt around the world for a while to come”.

Peter O’Connor, metals and mining analyst at Australian-based Shaw & Partners, says the commodities with the brightest prospects are those critical for steelmaking — iron ore, coking coal and manganese. “That demand comes from China, as it ramps back up. It matters to countries like

Australia, Brazil and SA.” The Minerals Council, however, does not have a rosy outlook for the future. Though the weak rand provides a short-term benefit, its chief economist, Henk Langenhoven, says SA’s credit rating downgrade will ultimately have a significant influence on investment in equities and the cost of borrowing, both of which will affect fixed investment in mining.

“The downgrade, paired with the Covid-19 lockdown in SA and the [effect] on world markets for SA-mined commodities, will have a substantial impact on the sustainability of mining companies”, he says. x

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DIGITAL Cybercrime has already increased in parts of the world in lockdown to contain Covid-19, and SA won’t be any different Mudiwa Gavaza gavazam@businesslive.co.za

ý Expect cybercrime to rise, industry experts say. With SA — and many other countries — in lockdown, more of us are working from home than ever before. And that is not without its risks.

Millions of workers around the world are accessing enterprise systems outside the safety of the office. Opportunistic criminals may be lurking in the dark corners of the internet looking to steal passwords and access codes, and tap into sensitive business information.

And all of this is made easier when workers access systems from less secure locations.

This is likely to eat up valuable resources at a time when companies — and entire economies — are already staring down the barrel.

Attackers are finding increasingly innovative ways to breach cybersecurity systems and steal data, says Lukas van der Merwe, specialist sales executive for security at technology firm T-Systems SA. Last week the European Commission warned that cybercrime in the EU had already increased directly as a result of the Covid-19 pandemic.

Its president, Ursula von der Leyen, said cybercriminals were taking advantage of the amount of time that people spend online — while they also benefit from the health crisis itself.

“They follow us online and exploit our concerns about the coronavirus. Our fear becomes their business opportunity,” Von der Leyen said. As a result, the police co-operation agency Europol is fighting trafficking in counterfeit coronavirus “medicines”.

And more and more hospitals, research hubs and medical centres are being targeted by organised cybercrime syndicates which are after information, intelligence and 14

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system accessibility, according to the EUobserver newspaper. This means criminals who get their hands on information may be able to benefit long after the virus has been contained.

Recent research by the US’s Ponemon Institute shows that a data breach costs SA companies on average $3.06m (R50m) — much more than the global average of $1.42m.

With SA’s high cost of data — and in an environment where fewer than 3-million homes have access to fibre internet services — there are additional risks.

Hewlett Packard Enterprise SA MD President Ntuli says one of the easiest ways to safeguard an organisation’s cyber infrastructure is to stay off public or free Wi-Fi access points.

However, many South Africans may be tempted to use them.

He says businesses need to be vigilant. One-time PINs for verification is a security measure that companies can use, together with making use of a Virtual Badge, which turns a mobile phone into an authentication device.

Firms will also have to consider limiting the access that some staff have when accessing enterprise systems off premises.

So what are companies doing to protect their systems while maintaining productivity from those working at home?

MTN SA CEO Godfrey Motsa says over half of the network operator’s staff are working from home. MTN has given all its employees data bundles. Access to internal systems is through virtual private networks (VPNs) to ensure security.

VPNs have become the go-to solution for many organisations. A VPN extends a private network across a public network, and enables users to send and receive

April 2 - April 8, 2020

The other dangerous C

data across shared or public networks as if their computing devices were directly connected to the private network.

In this case, a manager at MTN can log into internal systems as if they’re sitting at the company’s Joburg headquarters.

Motsa says that as long as people are given the tools to do their work, businesses should be able to run as normal. “This is a wellorchestrated effort that’s really showing us an interesting way of working.”

Even before social distancing

became the order of the day, TSystems SA had a work-fromhome policy in place, says MD Dineo Molefe.

Taking a page from the remote working and online collaboration culture of Silicon Valley, she says: “Even before the coronavirus outbreak, we were on this journey.”

She believes the virus is likely to be a catalyst for many employers to revisit the traditional “bums on seats” view of people working in the office.

Telkom CEO Sipho Maseko says by this week, about 70% of staff

PATTERN RECOGNITION BY TOBY SHAPSHAK

1984, or Florence Nightingale? @shapshak

Most would agree that using phone data to fight a pandemic is a good thing — but it could become a post-Covid-19 habit

123RF/Mila Gligoric

T will work remotely. He says VPNs offer “multiple layers of security”.

For some, the cybersecurity threat is relative to the size of the business or number of people working there. Antonio Bruni, CEO of technology and delivery company Picup Technologies, isn’t too worried about the cybersecurity risk as his workforce have always accessed their systems in a secure online environment. With a network of about 1,400 drivers in SA, having delivered 3.5-million parcels since 2015, the start-up has a staff complement of just 22. x

Some are worried that we won’t be able to roll back these incursions into our privacy

he government is tracking your cellphone. And instead of being horrified at the spectre of a surveillance state, many people are happy about it because the invasion of privacy is arguably necessary and potentially lifesaving.

The data is used to track the spread of the Covid-19 pandemic as part of efforts to “flatten the curve”.

But, before you panic, this does not involve individual data, but so-called metadata. It’s anonymous, aggregated data that the SA cellular operators will give the government.

“It is important to look at the individuals affected in order to be able to help the department of health to say that we know, in a particular area we have so many people that have been infected,” communications minister Stella Ndabeni-Abrahams said last week. “The industry collectively has agreed to provide data analytics services in order to help government achieve this.”

Such surveillance is generally chilling and scary, and cause for concern.

But in this age of the world’s fastestspreading pandemic, tracking people is a tool — before the herd immunity principle takes effect and enough people have caught it and recovered to lift the community’s overall immunity.

Amid the personal and social horror, we are taking part in an amazing scientific experiment. Never before in history have we been able to track something like this. And it could be in real time, given the data at hand.

In a way, this might be the real

precursor to a time when the Internet of Things is an everyday reality, with sensors in our homes, online security cameras and autonomous cars providing a live feed of data about the planet.

In science fiction, this kind of constant surveillance is usually considered a bad thing. No more iconic a book than George Orwell’s 1984 imagined how it could be taken to Stalinesque extremes.

And that is the worry now. SA’s approach seems benign and is enabled only because a state of disaster was declared. It follows the anonymised and aggregated data approach used in Europe.

Other countries have used seemingly more draconian approaches. In South Korea, phones are being tracked and displayed in a publicly available database. Anyone can access it to check if they might have encountered a Covid-19 carrier. Taiwan is rolling out an “electronic fence” mobile service to check that quarantined people are not moving about. Israel’s domestic spy agency will track the phones of Covid-19 patients to ensure they’re quarantining properly.

This is alarming for libertarians and others worried that we won’t be able to roll back these incursions into our privacy.

As much as doctors are triaging patients, governments are triaging constitutions as they seek to mitigate the pandemic’s effects. It’s an ethical debate that will rage for as long as we’re fighting this invisible enemy. x Shapshak is editor-in-chief and publisher of Stuff magazine (stuff.co.za) April 2 - April 8, 2020

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CORONAVIRUS

Scenes from a lockdown Michele Spatari / AFP

Police and army personnel enforce the 21-day nationwide shutdown to contain the spread of Covid-19

Gallo Images/ Dino Lloyd

Gallo Images/Darren Stewart

Police and army personnel patrol an empty street in the Joburg CBD

Durban

Rosebank, Joburg

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AFP / Marco Longari

Gallo Images/ER Lombard

Sandton

A policeman enforces social distancing outside a supermarket in Yeoville, Joburg

.

April 2 - April 8, 2020

AFP / Marco Longari AFP / Luca Sola

Sunday Times / Esa Alexander

Homeless people arrive at a temporary shelter in Joburg

People wearing face masks in Cape Town’s CBD

Sunday Times / Alon Skuy

Sunday Times / Alaister Russell

Suspects lie on the floor as a police officer arrests them because they were found with alcohol in Hillbrow, Joburg

Walking the dogs despite the lockdown

A resident peers through her window as members of the defence force patrol the streets of Alexandra, Joburg

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BY THE NUMBERS

CORONAVIRUS EPIDEMIC

With the highest infection rate in the world, the US has now become the epicentre of the Covid-19 epidemic. Half of all infections are in New York Daily new cases in US

The rate of infections is slowing in Sea le, where strict containment rules are in place

World

803,313 US

164,719 1.8m masks and gowns, 10m gloves and 70,000 thermometers

Italy

101,739

are part of medical supplies airli ed from China this week.

It is the first of 22 scheduled flights, but is only a portion of what the US will need

Spain

94,417 China

82,276

A hospital in Philadelphia with room for 500 Covid-19 patients will remain shut a er its owner Joel Freedman said the city must buy or lease it for almost $1m a month. It was able to secure a free site from a university

123RF/Dean Drobot

deterioration of global prospects

57% warn that falling demand will hammer sales, showing that Covid-19 is causing problems beyond supply chain disruptions a er a production slowdown in China

Nike Training Club Nike has made all its Nike Training Club Premium workouts free for a limited time. The app (Android/ iOS) includes a library of more than 185 studiostyle streaming workouts, progressive training programmes (including bodyweight-focused training) and tips from the professional Nike Master Trainers.

Mar 30

Mar 28

Mar 26

Mar 22

Mar 24

Mar 20

Mar 16

Mar 18

Mar 12

result of the epidemic, Unctad estimates

ý Gyms are closed and the streets are out of bounds, but that doesn’t mean you have to sit on a couch and grow your midsection. Now more than ever, it’s so easy to train at home that you don’t even need home gym equipment.

With the sudden surge in forced self-isolation, a few training apps have made their premium tier free for a limited time.

April 2 - April 8, 2020

Mar 14

Mar 8

61% of the top 100 multinationals that Unctad* tracks have issued earnings revisions that confirm the rapid

30% is the average drop in 2020 earnings estimates for the world’s top 5,000 companies. The energy sector, airlines and the automotive industry are expected to be hardest hit

*UN Conference on Trade and Development

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Mar 10

Mar 6

Mar 2

Mar 4

Feb 27

Feb 29

Feb 25

30% - 40% is the expected drop in global foreign direct investment in 2020 and 2021, as a

Just keep moving

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Feb 21

Global economic fallout

GIMME

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Feb 23

Feb 15

death toll could reach 200,000, even with containment measures

Feb 17

25,000 20,000 15,000 10,000 5,000 0 Feb 19

April 30: distancing guidelines are extended to this date by President Donald Trump, a er his advisers say the US

Workout sessions vary from 15 to 60 minutes. There are also tips on improving your mindset, movement, nutrition, recovery and sleep.

Down Dog Known for its yoga tutorials, Down Dog (Android/iOS) isn’t just one fitness app but a group of apps that focus on a variety of workouts. Its app selection includes yoga, yoga for beginners, high-intensity interval training (HIIT), barre (which incorporates movements derived from ballet), and sevenminute workouts.

Most workouts can be done without equipment. Down Dog’s premium options are free to use for only a very limited time, but the free tier offers users introductory workout videos.

Peloton (iOS/Android) Probably one of the most comprehensive fitness apps around, Peloton is offering a free 90day trial that allows users access to its entire library of at-

Source: Johns Hopkins University, New York Times, Unctad

home workouts. To do the inapp workouts, users don’t require their own Peloton equipment, which is ideal for people who are starting out.

It offers a variety of training programmes, including running, cycling, yoga, HIIT, stretching, boot camp and cardio. Sessions are video- and audio-led to keep users engaged throughout.

YouTube and social channels Some of the people who will suffer most from self-isolation are professional athletes and personal trainers. People who are used to moving on a daily basis are taking to their social media channels and YouTube to document their at-home training. Lions rugby players Elton Jantjies and Courtnall Skosan, for example, are using social media to promote physical health and share their fitness tips. The Instagram Stories format gives pro players a platform to publish quick snippets of motivational content and training tips. x Marcé Bester

FEATURES An in-depth look at the hot button subjects of the day in SA and around the world

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APOCALYPSE NOW?

COMMON GROUND

LIFE IN LOCKDOWN

PUSHED TO THE BRINK

Moody’s decision to junk SA’s last remaining investment-grade credit rating is like a long-awaited death — hardly a surprise, but still painful when it finally happens

An exclusive extract from agricultural economist Wandile Sihlobo’s new book, Finding Common Ground: Land, Equity & Agriculture

The coronavirus throws the fault lines in society into sharp relief.

Staying in your home is easy in Sandton but a very different story in Alexandra

With a shambolic health sector and an economy in which people are without necessities, experts are concerned about Zimbabwe’s Covid-19 containment measures

April 2 - April 8, 2020

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cover story / ratings downgrade

APOCALYPSE What it means: All three major ratings agencies think the government is unlikely to implement the economic and fiscal reforms needed to halt SA’s downward slide

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April 2 - April 8, 2020

Moody’s decision to junk SA’s last remaining investmentgrade credit rating is like a long-awaited death — hardly a surprise, but still painful when it finally happens

T

Claire Bisseker bissekerc@fm.co.za

he downgrade by Moody’s Investors Service has struck a further blow to the punch-drunk SA economy, which was already reeling from the apocalyptic impact of the coronavirus pandemic. Not since 1994 have SA’s local currency ratings been this low. All the progress achieved over the past 25 years — during which SA’s ratings peaked in 2006 at A+ with S&P Global Ratings — has now been wiped out.

This is reflected in the rand, which traded at its weakest level yet against the dollar, at R18.05/$ early on Monday morning, before pulling back slightly. In January it was trading at R14/$ before the pandemic caused a seismic retraction in global risk appetite.

Given the scale of the Covid-19 outbreak, some have dismissed the Moody’s downgrade as a mere sideshow. But it would be a mistake for SA to ignore the two big messages implicit in Moody’s ratings action.

First, all three of the major ratings agencies now think SA has lost the battle — that the government is unlikely to be able to implement meaningful economic and fiscal reforms to halt its downward slide.

Second, the steep deterioration in SA’s economic and fiscal strength is not the result

of external shocks, such as the coronavirus pandemic, but the government’s continued failure to change its approach to managing the economy.

“SA now finds itself in the dangerous situation where the threat of a doom loop [a negative downward spiral] lurks large,” says Rand Merchant Bank (RMB) chief economist Ettienne le Roux.

“Made worse by the Covid-19 disaster, a period of deep recession and fast-deteriorating fiscal ratios could easily feed into further credit-rating downgrades, even sharper increases in debt servicing costs and so on,” he says. “In such a scenario, the government would find it increasingly difficult to fund a gaping budget deficit through traditional channels.”

The next big hurdle from a ratings perspective will be S&P’s review on May 29, with Fitch Ratings expected to move around the same time. Both agencies junked SA’s ratings in 2017 in response to former president Jacob Zuma’s axing of his finance minister, Pravin Gordhan.

S&P currently rates SA’s foreign currency debt two notches deep into junk territory on “BB”, but Fitch has it only one notch down, on “BB+”.

Both agencies placed SA’s ratings on a “negative” outlook last year in response to its failure to respond convincingly to its deteriorating growth and fiscal prospects. With Moody’s having retained SA’s “negative” outlook, in addition to its one-notch downgrade, SA is now rated junk with negative outlooks across all three agencies.

“This is risky territory,” says Citibank economist Gina Schoeman. She has been more concerned about downgrades deeper into junk from S&P and Fitch than the “inevitability” that Moody’s would finally catch up to their position.

The problem is that investors distinguish between countries on the top rung of the subinvestment grade (junk) ladder and those deeper within it.

“A country firmly established at the top on a stable outlook across all agencies can become an investment opportunity should it adhere to reforms and fiscal discipline,” Schoeman explains. “But a country two or three notches in requires a significant amount of often-unpopular measures to get back to investment grade.”

Peter Attard Montalto, who heads capital markets research at Intellidex, thinks South Africans underestimate what comes next.

SA is not now “magically free of its shackles”, he says, regardless of the “don’tcare attitude” of some politicians towards the downgrade. On the contrary, he says, Moody’s action will reduce the long-term growth potential of the SA economy through higher funding costs, higher volatility and less-liquid markets.

The immediate impact is expected to be capital outflows of between $2bn and $6bn, as the downgrade will cause SA’s automatic ejection from the FTSE Russell world government bond index. This will force passive index-tracking fund managers to exit the SA bond market from the end of April.

However, given the significant market sell-off over the past month, combined with the fact that the Moody’s downgrade has been long anticipated, the actual outflow could be smaller.

The initial market reaction seems to confirm the view that the downgrade had already been priced in. Though the yield on the R186 spiked by about 80 basis points to 11.28% initially, it has since fallen back to pre-downgrade levels.

Even so, the decision by Moody’s “could not have come at a worse time,” says finance minister Tito Mboweni. “The sovereign

April 2 - April 8, 2020

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cover story / ratings downgrade downgrade will further add to the prevailing financial market stress.

“These two events [the downgrade and the coronavirus] will truly test SA financial markets … Therefore, to say we are not concerned and trembling in our boots about what might be in the coming weeks and months is an understatement.”

Capital outflows put emerging market currencies under pressure 0%

-5%

-10%

-15%

-20%

-25%

-30%

3,000

2,500

2,000

1,500

1,000

Mexico

Brazil

Russia

Malaysia

Brazil

Turkey

SA

Chile

Colombia

Thailand

Indonesia

Poland

Chile

Indonesia

Turkey

March 21 2020 March 22 2020 March 23 2020 March 24 2020 March 25 2020

Saudi Arabia India Philippines

Thailand Malaysia India

Russia

Argentina SA China Mexico

Exchange rate % change, January 1 - March 23

Argentina

Poland Philippines

Colombia

Saudi Arabia

Source: Johns Hopkins Center for Systems Science & Engineering, S&P Global Ratings; Bloomberg, S&P Global Ratings

0%

-5%

-10%

-15%

-20%

-25%

-30%

3,000

2,500

2,000

1,500

1,000

April 2 - April 8, 2020

Emerging market case advance

500

.

In the absence of growth, SA’s fiscal picture looks dire.

Moody’s estimates that SA’s debt burden will reach 91% of GDP by fiscal 2023, inclusive of the guarantees to state-owned enterprises (SOEs). That would be up from 69% at the end of fiscal 2019.

The estimate is based on its assumption that Mboweni’s plans to restrain wage growth will not be fully implemented.

The actual outcome could be worse — hence Moody’s decision to retain SA’s ratings on a “negative” outlook. But it’s not just the potential for the coronavirus pandemic to worsen SA’s economic and fiscal challenges that has Moody’s worried.

It raises the longer-term possibility that “negative economic sentiment becomes fur-

FACTORING IN THE COVID-19 EFFECT

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Moody’s assumes that while SA’s power supply will slowly become more reliable, the restoration of full capacity will take years to complete. So even after the coronavirus pandemic subsides, SA’s growth will remain very low.

Moody’s has downgraded its 2020 real GDP forecast for SA to -2.5% (from 1% previously). This puts it at the conservative end of forecasts, as many local economists are expecting growth to shrink by 3% or more.

500

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Ettienne le Roux

0

Moody’s loses faith Moody’s key reason for downgrading SA is the continuing deterioration in the country’s fiscal position, combined with structurally very weak growth. But, more than that, it is because Moody’s “does not expect current policy settings to address [these issues] effectively”.

Put simply, the ratings agency no longer believes enough structural and budget reform will occur to raise SA’s growth rate and stabilise its galloping debt trajectory. In short, having given President Cyril Ramaphosa’s government two years to effect policy reforms, Moody’s has finally lost faith in its ability to turn things around.

This rationale unites all three ratings agencies. SA’s short-term fiscal performance has never been the main issue. Rather, their concern has been about its longer-term fiscal and debt sustainability, given the inability of the economy to grow at the levels required to create meaningful employment.

Essentially, the ratings agencies and SA’s citizens have all been asking for the same thing: evidence that SA is putting in place the building blocks for a sustainable recovery in growth and a return to fiscal sustainability.

Crucially, SA has not been downgraded because of the anticipated impact of the coronavirus. That gets scant mention in Moody’s statement. Quite simply, it is because of the government’s failure to make meaningful progress in lifting the binding constraints to growth and reining in debt.

S&P was the first to realise that the SA government lacked the wherewithal to implement the structural reforms and business-friendly policies needed to revive confidence and fixed investment. Over the past decade, it has led the other agencies in downgrading SA. Its bearishness has been vindicated by subsequent events.

Now, three years after S&P junked SA’s ratings, Moody’s has finally been forced to acknowledge that SA has made “very limited” progress with structural reform. It concedes that labour-market rigidities and uncertainty over property rights, generated by the ANC’s land-reform proposals, remain unaddressed.

Eskom’s inability to stabilise electricity production earns SA another black mark.

If the real risk of getting caught in a doom loop doesn’t motivate the government once and for all to go all out in implementing pro-growth policies ... nothing will

ther entrenched as policymakers and stakeholders continue to struggle to reach consensus on the structural reforms that would sustainably stimulate growth and employment”.

Given these downside risks, Moody’s fears that government debt could stabilise even later and at a higher level than it currently expects. It warns that a steeper increase in debt would weaken debt affordability, potentially challenging the government’s currently strong access to funding at manageable costs.

If this happens, Moody’s says it would probably downgrade SA again. The “negative” outlook suggests this could be within the next 18 months.

Dodging the ‘doom loop’ How can SA avoid a “doom loop” and get off the path to further downgrades?

Moody’s says it will depend on the government’s ability to contain the impact of the coming virus-related global recession on the SA economy; implement structural reforms to strengthen the economy, including by instituting a framework for reliable electricity supply; and undertake fiscal reforms to contain expenditure and enhance revenues.

Attard Montalto expects the government to fail to overcome all these challenges, given its track record in each area. Consequently, he expects Moody’s to downgrade SA again in the coming year. He thinks S&P and Fitch are also likely to downgrade SA in the coming months on the coronavirus impact.

“We see virtually zero probability that SA will regain investment grade status in the three-year forecast horizon,” he adds.

Absa economist Peter Worthington believes another downgrade from Moody’s is “not inevitable, but on balance probable”, especially since the coronavirus could deliver a sharper-than-expected blow to the economy than is factored into Moody’s credit-scoring model.

CORONAVIRUS FALLOUT

Most emerging markets in Europe, the Middle East and Africa will suffer GPD growth (%) 15 10 5 0 -5

Russia

2006 2007 2008 2009 2010

2011 2012

2013 2014 2015

He also thinks S&P and Fitch are “more likely than not” to downgrade SA at their upcoming reviews, given the country’s weak growth, ballooning fiscal deficits, slow structural reform, and now Covid-19.

S&P has already downgraded five emerging markets this year. This week it cut SA’s 2020 real GDP growth rate to -2.7%, while warning that the risks remain sharply to the downside across all emerging markets.

According to S&P’s “heat map”, which provides a comparative risk profile of 16 emerging markets, only Argentina is currently flashing more red lights than SA. On a scale of one to six, where one is the strongest score and six the weakest, SA scores two sixes for its fiscal deficit and debt trajectory and a dismal five for its economic profile. Only Argentina and India’s fiscal profiles score as poorly as SA’s, though when it comes to assessing the economy, Russia, Brazil, Mexico and Argentina also score fives.

Turning the ship Ramaphosa, in a last-minute throw of the dice, has given Mboweni permission to move more boldly with structural reforms.

To this end Mboweni will be establishing a special unit in the finance ministry to drive structural reforms throughout the govern-

LOSING FAITH

1996

Moody’s

S&P

Fitch

Subinvestment grade 1998

2000

2002

2004

2006

Source: S&P, Moody’s, Fitch, Absa Research

Turkey 2016

2017

2018

2019 2020

2021

Source: Bloomberg, S&P Global Ratings

SA’s local currency ratings A+ A ABBB + BBB BBB BB+ BB

SA

-10

2008

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2020

ment to address weak economic growth, the constrained fiscus and ailing SOEs. It’s possible that by threatening SA’s very economic survival, the shock of Covid-19, combined with the Moody’s downgrade, will break the ideological logjam that frustrates policy reform.

But it is also possible that it will ignite a battle royal over economic policy between the National Treasury and the rest of the government, the ANC and its left-leaning allies.

The Left is already demanding, regardless of SA’s acute fiscal and funding constraints, that the government hugely scale up its fiscal response to the coronavirus (including, says Cosatu, by implementing the original inflation-plus 2020 wage agreement) in line with the stimulus being unleashed by well-funded developed countries.

Yet many on the Left will probably resist Mboweni’s plan to approach the International Monetary Fund (IMF) or World Bank about accessing special funding to support the health sector in the fight against the virus.

A wider IMF bailout is not on the cards.

Even so, Mboweni clearly expects pushback, as he has stressed that he takes “no ideological position in approaching the IMF and World Bank” — it’s simply a matter of taking advantage of facilities that another 80 countries are grabbing to relieve pressure on their public finances.

“Something fundamentally has to break first for the politics to shift to reform,” concludes Attard Montalto. “Maybe the deep scars left by coronavirus on the economy and a permanent step-up in unemployment … will be it; maybe failed [government bond] auctions or going to the IMF will be it.”

Whatever it is that tips the balance, SA has finally come to its moment of truth.

As RMB’s Le Roux sees it: “If the real risk of getting caught in a doom loop doesn’t motivate the government once and for all to go all-out in implementing pro-growth policies … nothing will.” x April 2 - April 8, 2020

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cover story / ratings downgrade

THE BRAVE CAN CASH IN The Moody’s downgrade seems almost trivial in the context of the global Covid-19 meltdown, which has driven the JSE down to ‘once-in-a-decade’ levels and created rare investor opportunity Marc Hasenfuss hasenfussm@fm.co.za

Robbie Tshabalala

Y

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ou could argue that the muchfeared Moody’s downgrade of SA’s rating to junk status could not have been timed better, having been sidelined, as it were, by the worst global economic crisis in decades.

As global markets gyrate, unsure of the eventual impact of Covid-19 on economies, the widely expected downgrade is probably not the biggest worry for local investors.

The truth is, it just reinforces the notion that SA’s fiscal policymakers haven’t done enough to prime the local economy for growth — even before Covid-19 hit our shores. And that’s not good for JSE-listed companies that ply their trade in SA, or for your pension.

For now, this discussion is muted. Investment experts canvassed by the FM are more concerned about the implications of a prolonged economic lockdown on local businesses than they are about the fallout from the Moody’s downgrade. As one analyst puts it: “I was less worried about ratings agencies than the impact of the lockdown on what were recently deemed to be solid businesses.

“I’m not sure how many will survive if this extraordinary policy continues.”

Before the downgrade, some analysts argued that a downgrade was already pencilled into SA’s equity prices. This was con-

firmed on the first trading day after the announcement, when the JSE did not tumble into the “Armageddon mode” one excitable punter had predicted.

In the two days after the downgrade, the JSE all share index actually rose 2.6%, and the Top 40 index gained nearly 4%.

True, much of that was led by shares with a global, rather than South African, focus: Naspers and Prosus, luxury goods company Richemont, brewer AB InBev, British American Tobacco and mining firms.

This was, however, foreseeable, as the rand tumbled towards R18/$, which made firms that earn profits in foreign currencies more desirable.

Though the JSE financial industrial index, which includes the big banks, weakened on Monday, this wasn’t on a scale you could describe as catastrophic. And on Tuesday, that index soared remarkably, led by Absa (up 18.5%), Nedbank (up 12.9%), FirstRand (up 7.4%) and Standard Bank (up 6.8%).

Elsewhere, the mid-cap index, with a large proportion of SA Inc counters, rose 1% in those two days, while even the small caps index climbed.

Still, some market-watchers were disappointed that Moody’s didn’t cut SA a little more slack — at least until the impact of Covid-19 could be quantified.

Junked during a pandemic The question is, can the true impact of the downgrade for JSE stocks even be assessed in an extraordinary environment, buffeted by the Covid-19 shock?

Nolan Wapenaar, co-chief investment officer at Anchor Capital, believes the Moody’s report highlights just how difficult it is for companies to operate in the domestic environment. The most likely scenario, he says, is a continuation of job losses and difficult operating conditions.

“The higher real yield demanded by bondholders will make the cost of capital higher, while the size of government will continue to crowd out the private sector.”

On the (slightly) brighter side, Wapenaar says the saving grace for domestic equities is that Covid-19 has made shares extraordinarily cheap. “We think that there will be good opportunities for a bounce in equities. Some quality companies will continue to grow in this difficult operating environment but, structurally, domestically focused equities will have a tougher uphill battle on their hands,” he says.

As much as share prices are bouncing all over the place, the FM believes investors brave enough to grapple with volatile equity

JSE STOCKS IN 2020 Best performing

33.73%

DRD Gold Steinhoff International

17.86%

Prosus

16.24% 13.83%

Ninety One Plc Assore

9.86%

Naspers

9.83%

Montauk Energy Holdings

7.89%

Ninety One

4.89%

Textainer Group Holdings

3.51%

Reinet Investments

1.29%

Worst performing -67.99%

Redefine Properties

-68.05%

City Lodge Hotels

-70.51%

Famous Brands

-70.71%

Hammerson Plc

-73.27%

Hosken Cons Investments

-75.57%

Tsogo Sun Gaming

-78.52%

Fortress Reit-8

-84.04%

Nampak

-84.50%

Intu Properties Plc

-87.93% Source: Bloomberg

Sasol * As at March 31st

What it means: Adventurous investors looking past the Covid-19 pandemic can find bargains now valuations need to retain a long-term view of their investments.

The risk-reward scenario in stocks that have started to price in catastrophic outcomes, such as fashion retailers, gaming groups or real estate, might appeal to more adventurous traders. But at the same time, the chances of a permanent loss of capital are greatly heightened.

There are few stocks on the JSE with both a churning profit engine and a balance sheet awash with cash. This means that instruments such as NewGold (the goldlinked exchange traded fund) and NewWave USD ETN, as well as other more exotic commodity options, might gain popularity.

Some companies — such as Metrofile, Peregrine and Assore — have used this

moment to launch buyout offers. But their share prices suggest there is some doubt about whether those schemes will proceed.

Des Mayers, a veteran investment analyst at Afrifocus Securities, says investors should avoid focusing on near-term challenges for local companies. “Investors can’t value shares using a short-term yardstick. What can be pencilled in for the near term will look very different in two to three years.”

‘Huge opportunities’ Notwithstanding the downgrade, Mayers believes there are “huge” opportunities for investors who have a medium- to longterm view.

He cites restaurant franchiser Spur Corp, which deferred its interim dividend payout this week, as an example of a share being beaten down based on its less-appetising short-term prospects.

Yet Spur is conservatively managed, with a strong balance sheet and a sizeable cash pile. It generates vast amounts of cash, holds an enviable array of brands and doesn’t require huge capital expenditure to maintain its infrastructure.

This year, Spur will show a dent in its profits due to the lockdown, which requires all restaurants to shut their doors. But once circumstances normalise, the company’s strong balance sheet means it could be in a position to snap up struggling rival brands that have been pushed into survival mode by the lockdown.

But it’s the global shares that are likely to gain most traction with investors right now, partly due to the weaker rand. These include Naspers and Prosus, Richemont, AB InBev and Anglo American, which are all trading at reduced levels.

Other “internationalised companies”, such as paper company Sappi, hospital group Mediclinic, insurer Discovery and even petrochemical firm Sasol, may appeal to more adventurous investors, given the steep fall in their stock in March.

But there’s an important caveat. Wapenaar says Anchor is avoiding those companies likely to face long-term structural damage from Covid-19, and focusing instead on companies that should emerge from the crisis in reasonable shape.

“Some of these are trading at valuations seen only once in a decade. But we are approaching the scenario with caution and the facts are changing continually,” he says.

Wapenaar warns that it’ll take time for the market to stabilise — so investors who pile in now must be able to stomach further falls, before there’s any recovery. x April 2 - April 8, 2020

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feature / land reform

COMMON GROUND Dean Hutton/Getty Images

Wandile Sihlobo is the chief economist of the Agricultural Business Chamber of SA and a member of President Cyril Ramaphosa’s economic advisory panel and the advisory panel on land reform and agriculture. This is an edited extract from his new book, Finding Common Ground: Land, Equity & Agriculture

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fter 24 years of land reform, it is not possible to conclude in any definitive way whether it has actually benefited our economy or society. For every new urban and peri-urban settlement, and for everyone who has had the heritage they lost through discriminatory laws and practices restored, there is a “failed” farming project, or a small farmer in a remote area with no hope of earning a livelihood.

The result is that there are many opinions on what has gone wrong with land reform, and on what should be done about it. There is, however, one that is shared by all: the social fabric of SA and the economy are in danger unless a broad consensus can be reached on the way forward.

Land may not play as strong an economic role as it once did, but its central place in the history of dispossession, and hence in the manifold inequalities of our country, cannot be denied.

As a result, an accelerated process, based on the National Development Plan (NDP), is necessary to kick-start a longerterm land reform programme. Such an initiative would show our people that land reform will happen; it would demonstrate to the investor community that it can be done with no negative effect on the economy; and it would afford those who were most privileged by past injustice the opportunity to contribute to the process — regardless of whether they have any direct interest in land.

It would also create opportunities for inclusive participation by all sectors of the economy in the process of redistributive justice.

The focus here is the provision of land for human settlement, primarily but not exclusively in the urban areas of our country, and the provision of land for agriculture to create economic opportunities, primarily but not exclusively in the rural areas of our country. In the language of our constitution, therefore, the focus will be on land redistribution rather than on restitution and tenure reform.

(These proposals do not negate the need for restitution and tenure reform. There remains a need to relook at the framework within which expropriation can take place towards these ends. As importantly, we as a country need to consider the long-term effects of a situation where the (poor) majority have second-class citizenship because their rights to land are inferior — and are held to be inferior in perpetuity.)

This is, therefore, a call for land, capital, skills and expertise to be contributed in the interest of inclusive economic growth, improved equity in land ownership, and greater economic opportunities. This is the “Thuma Mina” call for land and property owners.

It’s a call that rests on the history of dispossession, unfair discrimination and the resulting inequality in the ownership and occupation of land in SA, which has contributed to the inequality in wealth. We must recognise that current land ownership patterns may lead to political and social instability, which could slow economic growth and development.

If we consider the numbers, the 70% of South Africans who live in urban areas occupy less than 5% of the land. As a result, land reform will always be measured against progress in the transfer of agricultural land. Of the 100-million hectares of agricultural land in SA, about 85-million are commercially farmed, and 14-million lie within “communal” farming areas.

In the absence of concerted action, there are four possible scenarios: ● SA reverts to the land ownership patterns that existed in 1994 (i.e. white commercial farmers own and farm all the commercial agricultural land and black people occupy, but don’t own, less than 14% of the agricultural land). This occurs

Per-Anders Pettersson/Getty Images

because newly settled farmers cannot use the land productively due to inadequate support, and too few black farmers can afford to buy their way into the existing commercial farming systems. ● The current pace of land reform is maintained. By mid-2018, 12.2% of There are many freehold land had been redistributed opinions on what has through the government’s restitution gone wrong with land and redistribution programmes. If we reform. There is one add land bought by the state for land shared by all: the reform but not yet transferred, the social fabric of SA proportion is slightly higher. In this and the economy are scenario, the land is used beneficially in danger unless a by the new owners (and they are broad consensus can granted secure property rights). Howbe reached on the ever, given the slow progress to date, way forward SA is unlikely to move rapidly towards an improved scenario along this path. ● Land reform is fast-tracked by the expropriation of at least 50% of the remaining freehold land owned by white farmers without compensation, these. An inventory of this land will be mainbringing about a 75:25 occupancy ratio. This may be tained, and the land title itself will be transpolitically acceptable in the short term, but it would ferred directly to beneficiaries, because the be economically disastrous in terms of its impact organs of the state have proved to be inefon the property market, the financial system and ficient and often corrupt landlords. the investment ambitions of the country.

The determination of conditions for trans● An initial 30% (28-million hectares) of freehold fer will be the responsibility of local land land is redistributed to black South Africans management committees, as envisaged in through a fast-track state-supported programme to the NDP to address inequality of ownership, achieve a new ownership pattern. In addition to provide for urban housing demand and crethat 30%, black farmers have access to communal ate new entrepreneurial opportunities in land (14%); white farmers retain access to 55-milhousing provision and maintenance, and in lion to 60-million hectares of agricultural land. farming and agroprocessing.

To build social cohesion while creating opporThe second leg of the proposal is the land tunities for inclusive economic growth, the final reform fund, which will have the following scenario is the most plausible. It may, however, be sources of capital: fiscally unsustainable. We propose a fast-track ● Land reform bonds issued by the Land plan, with two vehicles — a virtual “land deposBank with the necessary state guarantees; itory” and a land reform fund (to which those with ● Donations; and interest, expertise and wealth can contribute, and ● Joint venture financing models, particularfrom which those with the need can draw) — to ly between agribusinesses, large commercial address this potential pitfall. farmers, property developers and the commercial banks. The agribusinesses and comFast-tracking land reform mercial banks, through the Agricultural BusiThis fast-track plan for land reform, which should ness Chamber and the Banking Association be in place for a five-year period only, will strive SA, have already committed to matching the towards the goal of scenario 4: to demonstrate that state’s budget for land reform in the form of it will be possible to achieve a new land ownership a loan at a preferential rate over a set period. pattern of at least 44% black and 56% white in the Though the housing and agricultural secmedium term. The first leg of that plan involves the tors are at the forefront of land reform, the establishment of a “land depository”. capital required for such a programme far The land question is not only an agricultural land outstrips the capacity of these sectors; problem; it also relates to urban and peri-urban hence, opportunities will need to be created land. So it requires land from different sources, to for other investors to contribute to the chaladdress different demands. Possible sources lenge of restoring social justice, equitable include churches; mining houses; land expropriated land ownership, decent housing, and equifrom absentee landlords; municipal land; governtable economic opportunities. ment land not under beneficial use, including land White farmers were not the only beneowned by state-owned enterprises; urban landficiaries of the old regime, and most of those lords; commercial farmers, including game farmers who benefited from apartheid live in urban and foresters; agribusinesses; foreign landowners; areas while still benefiting from the injustices and farms in distress and close to failure. of the past. The proposal, therefore, also According to the proposal, these landowners includes a call for voluntary financial donawill be called upon to donate land voluntarily, give tions from the financial services industry, up some of their time and expertise to mentor new mining and manufacturing, and other entrants into the farming sector, invest in land nonagricultural sectors. This is specifically reform bonds, or contribute some combination of relevant to businesses that do not own any

landed property.

The endgame of this process is to unlock economic growth and employment opportunities, to create a vision of a dynamic and vibrant rural economy, and to restore decent life and economic opportunities in the urban areas through a better-serviced local community and a much more integrated and improved spatial dispensation in urban areas.

The process is one in which every South African buys into land reform as either a conscientious contributor, or a responsible recipient. The options that can be followed are diverse, and can be tailored to unique circumstances. Most importantly, though, under such a programme the state would put in place incentives for contributions to this critical “restoration” process, in financial terms or in kind (empowerment, for example).

Rural land and farmland When it comes to rural land and farmland, there are two possible ways in which to proceed.

The first involves churches, mining houses, state-owned enterprises and the like voluntarily releasing land directly to beneficiary households, communities or the land depository (linked to the Land Bank). This entity will keep a proper record of all of these land parcels and provide a certificate of recognition to the donor, which will entitle the holder to benefits such as procurement preferences or a wide range of preferential financial arrangements.

The entity will — in collaboration with stakeholders — allocate the land to beneficiaries in a decentralised fashion, with limited government engagement and no patronage, on the recommendations of district land committees. A key issue will be the will to subdivide land with speed and ease, but also with responsibility.

At the same time, clear criteria for beneficiary selection should be in place. If beneficiaries are paired with land parcels that are not aligned to their needs and aspiraApril 2 - April 8, 2020

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feature / land reform tions, they are being set up to fail.

A needs assessment, followed by a means test, must be at the forefront of the process.

Support systems through, for example, agribusinesses, commercial farmers, mining companies and churches should work to operationalise these newly established farming enterprises or housing developments.

The financial contribution to kick-start the process will come via the land reform fund, with finance offered on preferential terms (such as deferred interest payments and subsidised interest). In addition, a state guarantee for these on-lent funds could act as collateral to ease the access to finance for new farmers.

In the second option, commercial farming operators could contribute or donate land in a number of ways: ● Donating land without any ties attached (as in option 1); ● Subdividing land and allocating viable portions to workers, tenants and potential beneficiaries; ● Entering into joint ventures with privately identified beneficiaries. These could What it means: access subsidised A five-year fast-track capital, water rights, plan could help get market contracts and longer-term land the like, while reform efforts agribusiness could properly off the provide well-integratground ed support services.

This option largely gives commercial farming unions the opportunity to offer land for land reform in a proactive manner. Commercial farmers who participate should receive a certificate of recognition for their contribution, as well as incentives. Guarantees regarding future tenure security for contributing farmers, for example, will go a long way in attracting more commercial farmers to participate.

The urban question Like rural land and farmland, buildings (underutilised, vandalised, hijacked or empty) and vacant and unoccupied urban land can be donated to an entity linked to the departments of co-operative governance & traditional affairs and human settlements, with supportive finance, and urban and spatial planners and developers. This would immediately relieve the pressure on land for housing and shelter, while creating an ideal opportunity to deal with the legacy of apartheid spatial planning.

Housing developers and local government need to join forces, using the opportunity to renovate buildings and invest in bulk infrastructure on vacant land. In essence, developers and municipalities will “donate” their expertise and skills, and co-finance the initiative to relieve the housing backlog. As in the case of farmland, the 28

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finance can also be sourced from the land reform fund.

Privately owned farmland next to rural towns is highly contested and should be addressed within the ambit of this proposed plan.

Farmers and municipalities should establish models whereby the joint development of these farms (which are often un- or underutilised because of contestation and crime) could be activated to satisfy the increasing need for serviced plots and houses.

Donation of the land by farmers, which would be formally recognised under the land reform programme, would also contribute to creating social stability and reducing racial tensions in these communities.

Municipalities also have a key role to play.

Well-located land is required to reverse the legacies of apartheid spatial planning. Periurban households spend a significant amount of money on transport to and from urban centres for employment. Well-located land for social housing is therefore a key enabler to fight poverty.

The challenge is that well-located periurban land is valuable due to its development potential, and so is too expensive for low-income families to afford. This situation could be remedied if municipalities were to act proactively in their spatial planning and, through a simple administrative process, zone well-located land for social development.

Financial assets Finally, the personal wealth of the elite, including business leaders and urban professionals, vests in various financial assets and is substantial. This could be a valuable source of voluntary contributions to fund the implementation of land reform. Donations to a land reform fund by individuals or asset managers should be encouraged through incentives such as tax relief.

The main vehicle for such investments will be the envisaged land reform bonds.

There is already considerable international interest in investing in such bonds, with the understanding that the National Treasury will issue the necessary guarantees.

The creation of the land reform fund should be a simple process, whereby government funds, capital raised through land reform bonds and donor funds are merged into a fund that can be accessed with ease by the implementing agents and beneficiaries of land reform. In essence, it would be the main element of a blended financing model for land reform, facilitating the funding of land reform in a much quicker way, without any additional fiscal burden.

An enabling framework This plan relies strongly on the voluntary contribution of all South Africans to the goal of equitable land ownership.

To make it work at scale and within a five-year period, there should be some form of quid pro quo or, alternatively, a list of enablers that will encourage participation.

A potential list of enablers includes: capital (to be accessed at preferential terms for contributors and beneficiaries); real land rights with tenure security; water rights; and preferential market access contracts (e.g. in the form of export permits); reduced reliance on bureaucracy; and incubators for aspiring farmers.

To activate the voluntary contribution of land and support by commercial farmers, there could, in essence, be a few “big tickets”: ● An easy process and one-stop shop to submit the record of the transaction for recognition; ● A recognition mechanism offering an important benefit to the former owner. This could be in the form of empowerment recognition, or financial or other inducement; ● The speedy transfer of title deeds, or longterm and tradable leases to beneficiaries of land reform, including those who occupy land that’s already been procured for land reform purposes; ● The allocation of new water rights to the existing and new enterprises (owned by the beneficiary); and ● Restructuring the Land Bank and establishing a land reform fund, through which acquisition grants, subsidised loans and subsidies for on-farm improvements can be accessed.

As agricultural land covers most of the surface area of SA, it is the dominant element in the land reform debate. At the same time, the productive use of farmland is critical for economic growth, rural economic opportunities and food security.

It therefore is necessary for a specific social compact to be formed for the agricultural sector, drawing together all stakeholders.

We believe that, by sharing responsibilities and leveraging goodwill, it will be possible to accomplish the goal of changing land ownership patterns in SA. x This is an edited extract of a paper produced by Sihlobo, Mohammad Karaan, Dan Kriek and Nick Serfontein for the presidential advisory panel on land reform and agriculture, from Finding Common Ground: Land, Equity & Agriculture (Pan Macmillan), now available in bookstores and on Amazon Kindle

Waldo Swiegers/Getty Images

Policy paralysis Bongani (not his real name) planned to start farming commercially in mid-2005.

However, it was a dream he was forced to defer when he discovered, after a threeyear waiting period, that his application forms to access land from the government had not even been processed — they had been misplaced by the department of rural development & land reform (DRDLR).

In 2009, Bongani reapplied for land under the government’s proactive land acquisition strategy, introduced in 2006.

Under this programme, the state would buy land for land reform purposes and lease it to beneficiaries for between five and 30 years, before giving them the option to transfer ownership. In reality, beneficiaries were given only short-term leases of one to five years — not sustainable for farming.

According to Bongani, the process is as follows: ● Identify a farm in your area of interest; ● Submit an application through the district office of the DRDLR; ● The application goes to the beneficiary screening committee; ● It is transferred to the provincial land committee; and ● If successful, it goes to the national land committee.

In all, it takes about three to four years

— not factoring in the risk that another applicant may express interest in the same piece of land.

Then, to be eligible for post-transfer support from the government, land beneficiaries must have a fundable business plan — which has to follow a similarly tedious screening process.

If, after this, beneficiaries actually gain access to a farm, they must serve a probation period of about five years. At this juncture, they have no title deeds to use as collateral, so the business, including input costs, largely depends on one source: the government’s postsettlement support system. The result is permanent dependence on state resources, without real economic empowerment.

The government initially vested postsettlement support in different departments. The DRDLR was responsible for delivering the land; thereafter, beneficiaries approached the department of water & sanitation for water rights, the department of agriculture, forestry & fisheries for agricultural inputs, and the department of trade & industry for implements.

The fragmented approach resulted in a misalignment between the land and the associated services, which often set beneficiaries up for failure.

Then, instead of improving alignment,

the DRDLR ventured into the sphere of post-settlement support — typically the mandate of the national and provincial departments of agriculture — through the creation of the recapitalisation & development programme in 2009, which recapitalises poorly performing land reform projects. The problem is that this papers over the cracks, rather than identifying the root causes of failing projects, and it spreads the budget for land acquisition very thin.

Today, Bongani farms on communal land near Maclear. But his story is not unique — and it illuminates, in part, the frustrations of many aspiring black commercial farmers.

The bureaucracy that deferred Bongani’s dream of being a successful black commercial farmer could have been largely avoided had the market-assisted land reform programme that existed prior to 2006 been expedited. That approach entailed the transfer of title deeds to beneficiaries — an action that would have solved the problem of access to finance — and included immediate post-settlement support and mentorship.

If such a programme had been implemented at a faster pace, it is hard to imagine that aspiring black commercial farmers like Bongani would experience the challenges they do today. x Written with Johan Kirsten

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THERE SHALL BE WORK BY XHANTI PAYI

LOW-HANGING FRUIT SA’s agricultural sector has much to offer. It’s time for the government to focus on the practicalities to unlock that value

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n “Africa’s Path to Growth: Sector by Sector”, published in 2010, global consultancy McKinsey argues for a sectoral approach to development in Africa.

It notes, however, that the continent’s agro-ecological potential is far larger than its output — as are its food needs. “While more than onequarter of the world’s arable land lies in this continent, it generates only 10% of global agricultural output,” the authors argue. “So there is huge potential for growth in a sector now expanding only moderately, at a rate of 2%-5% a year. ”

Getty Images/Waldo Swiegers

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A decade after the publication of the article, agricultural economist Wandile Sihlobo expounds on this approach in Finding Common Ground: Land, Equity & Agriculture, in which he speaks directly and incisively to SA’s specific issues.

In this, his first book, Sihlobo lends important insights on how we can foster employment by looking at agriculture not as one uniform conglomeration of crops and livestock but as subsectors that

April 2 - April 8, 2020

represent particular opportunities.

First, Sihlobo makes the point that investment is important if we are to reap the employment benefits of the agriculture sector. He prefaces this with a deep and nuanced discussion of the thorny issues of land ownership in SA. Second, he takes the discussion to a practical level, referring to underutilised land in the former homelands, as well as subsectors that could deliver results.

Sihlobo argues that, using the goals of the National Development Plan, which set out to target “labour-intensive sectors” of the economy, we should focus on horticulture and field crops, which employ two-thirds of SA’s primary agriculture labour force. Again, this is a clear and practical way of thinking about the sectors of the economy.

It’s not a difficult proposition to understand, given that we are not yet close to having sophisticated machines that replace hand cultivation practices and manage particular plants. However, it presents an opportunity we should not sleep on.

In his state of the nation address in February, President Cyril Ramaphosa indicated that the government he leads will adopt a sectoral approach to economic development when it comes to state interventions.

I found this particularly refreshing, as it is an approach I have argued in favour of for some years.

Sihlobo is a member of the president’s council of economic advisers, and perhaps he argued his views on the matter in that council.

Sihlobo’s book also takes a practical view when it comes to using export markets in pursuit of growth, pointing to the growing global demand for beef, for example, driven in particular by China.

He writes: “All of this presents an opportunity for SA to partially address its twin challenges of rural unemployment and low economic growth.”

Here he is referring to the idea that our agricultural landscape varies, and that there are areas where the environment does not permit horticulture or field crops, but is suitable for livestock. An optimal approach to land use would thus take into account these various opportunities and subsectors of agriculture and farming.

Time to reap rewards According to the latest statistics, the agricultural sector in SA represented 2.2% of GDP in 2019. This was down from 2.5% in 2014, due to difficult conditions over the past few years, the drought in particular.

However, agriculture represents 5.4% of SA’s employed. With the right focus, it could do much better to help solve our problems of employment and growth.

Sihlobo is probably the most important economist writing on issues of agriculture in SA today.

His book is as insightful as it is practical, giving policymakers a lens through which to consider the pressing economic challenges the country faces. SA has never been so desperate for the well-thoughtout, research-based, experienceorientated and practical approaches to growth and development that Sihlobo offers. x Payi is the founder of Nascence Advisory & Research

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3/9/2020 6:48:31 PM

feature / covid-19 response

The coronavirus — and SA’s lockdown in response to it — throws the fault lines in SA society into sharp relief. Staying in your own home is easy in Sandton but a very different story in Alexandra

LIFE IN LOCKDOWN Claudi Mailovich mailovichc@businesslive.co.za

On patrol: Members of the SANDF on the ground in Alexandra Alon Skuy

he richest square mile in Africa has come to a standstill. In the Joburg suburb of Sandton, where men and women dressed for power usually throng the streets, only security workers are out and about. Under the 21-day lockdown to contain the spread of the coronavirus, they are considered essential workers.

The government’s aim in banning all unnecessary movement is simple: to save lives in a country where most people are poor, and where the health system will not be able to sustain the type of pressure that has seen even developed countries’ medical systems buckle in recent weeks.

In Sandton, home to the JSE and many multinational firms, there is almost no police or military presence on the streets. But the stillness is far from normal on this Monday morning.

Of course, people in Sandton have the luxury of space and money — both crucial when you’re told to stay in your home and sit tight for almost a month. In the neighbouring and densely populated township of Alexandra, however, life for the most part continues as usual.

On this, the fourth day since the lockdown took effect in the early hours of Friday morning, the streets in Alex are bustling with people, some moving in groups. Social distancing — one of the main requirements in combating the spread of the pandemic — seems nonexistent.

collect the money they owe — something that seems impossible now, given restrictions on movement.

She doesn’t yet have a plan for when the money doesn’t come in this month — and she’s worried about how she’ll survive.

“I do understand [why the lockdown has to be done], even though it is so painful for me,” she says. “We have to operate and follow the rules, even though the hunger will be too much.”

Standing a few metres behind her is Zandisile Phuteni, 45, who has lived in Alexandra since 1990. He says he has never before had to queue like this in the township.

Phuteni doesn’t believe everything will be OK — there are just too many people in Alex, he says. But he does think the government “has done right”.

He’s keeping his children indoors during the lockdown, but it’s become clear in just the first few days that this is much easier said than done in SA’s highly populated and poorer areas.

On Monday, the FM sees children moving around in groups in Alexandra, playing on the streets, while people walk about in pairs and groups as they go about their lives.

Lethabo Aphane, 35, an essential services worker, sits about 3m away from her colleagues while they have lunch together.

T

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Nomthandazo Maseko: ‘The hunger will be too much ...’

Claudi Mailovich

Monday is also the same day the Gauteng department of health confirms the first coronavirus case in Alexandra.

But the “invisible enemy” SA is fighting is evident only in a law-enforcement roadblock; the protective face masks some people are wearing; a mural that provides information about the coronavirus; and a controlled queue into the Alex Mall, where residents have gathered to buy food and collect social grants.

Nomthandazo Maseko, 28, is in the queue at Alex Mall, where shoppers have been directed to stand 1m apart. She tells the FM she faces big challenges with her small business — she sells clothes on credit. Getting paid requires her to go to her customers’ homes on the first day of every month to

Country of contrasts: An empty street outside the JSE; police disperse shoppers in Yeoville, Joburg Siphiwe Sibeko; Marco Longari/AFP

“I try to tell them about social distancing,” she says, but points out how they are still “very close”.

For her, Alex continues to function much as it did before the lockdown.

The situation is uncharted territory in democratic SA. When the lockdown took effect on Friday, there were concerns over the possible violation of people’s rights.

Over the weekend, the SA National Defence Force (SANDF) and law enforcement were placed in the spotlight as reports and videos of heavy-handed tactics did the rounds. Pictures circulated of soldiers — deployed to assist the police on the ground — and police officers making people do push-ups, and forcing them back into their homes, even though they had been within the bounds of their own properties.

A video also emerged of security forces allegedly firing rubber bullets at people queuing outside a supermarket in Yeoville, Joburg.

The Independent Police Investigative Direc torate has reportedly confirmed that it is inves tigating three cases — in Gauteng and the Western Cape — in which people died, allegedly as a result of actions by law enforcement.

The outcry prompted defence minister Nosiviwe Mapisa-Nqakula to condemn any such actions on the part of the deployed soldiers.

She reiterated the message delivered to the armed forces by President Cyril Ramaphosa ahead of the lockdown: desist from using excessive force. This, he had said, is not a time for “skop, skiet and donner”.

Mapisa-Nqakula said she had instructed the chief of the defence force to monitor the sit-

Zandisile Phuteni: Has never seen such queues in Alex Claudi Mailovich

uation and to deal with members found to have used excessive or unnecessary force.

“Such heavy-handedness is not in the interest of safeguarding our people,” she said. “It would be in the best interest of the SANDF to empower the public about the dangers of the virus, therefore people are urged to remain in their homes at all possible times. This will help curb the spread of the virus in our communities.

We appeal to all to play a positive role in ensuring that the spread of the virus is curbed.”

The police have also said people should lay charges against officers who step outside the ambit of their powers.

National police spokesperson Brig Vishnu Naidoo tells the FM that thousands of people have been arrested for breaching lockdown regulations.

He says the big challenge in the first few days was to get people to comply with the regulations and remain within the confines of their own premises. He says people were still running taverns, gathering in groups and walking the streets.

The other issue, he says, is that people do not maintain social distancing when buying their groceries.

In areas where this is a particular problem, extra security personnel have been deployed, says Naidoo, listing townships such as Alexandra and Diepsloot in Gauteng, and Khayelitsha and Gugulethu in the Western Cape.

“Everybody realises that the environmental design [in these areas] is not conducive to social distancing,” he says, but adds that people have to comply with the regulations.

Naidoo says while compliance is improving, the lockdown will not work if the rules aren’t followed to the letter.

“It’s a virus. We need 100% compliance. Not 99.99%,” Naidoo says. “If we don’t want to become like Spain or Iran or the US and France, we need 100% compliance.”

On Monday evening, in his third address to the nation in as many weeks, Ramaphosa emphasised the classless nature of the virus.

Looking back at the first four days of the lockdown, he said the decision to confine people to their homes was absolutely necessary to

save the lives of thousands, “even tens of thousands” of SA’s people.

He said South Africans have, for the most part, responded responsibly to the decision by staying at home and observing the regulations.

But he added that the government was concerned about people who do not appreciate the seriousness of the Covid-19 pandemic.

By Monday evening, there were 1,326 confirmed cases in SA and three people had died from Covid-19.

Ramaphosa reiterated the call that each and every South African should stay at home over the next 17 days, and venture out only for food and essential provisions, to collect a social grant, buy medicine or get urgent medical attention.

“If you do have to go out, make sure you We need 100% do everything you can compliance. Not not to get infected and 99.99%. If we don’t not to infect anyone want to become else. Some people like Spain or Iran may think this disease or the US and is something that France, we need doesn’t concern them 100% compliance and will never affect Vishnu Naidoo them — that it is something they only read about in newspapers or see reports about on TV,” Ramaphosa said.

“But it is very real, and it poses a great danger to every one of us and to our society. It infects the rich and the poor, the young and the old, black and white, those who live in the cities and those in the villages.

“Let us not make the mistake of thinking this is somebody else’s problem.”

But while the virus does not discriminate in its spread, it is the poor and marginalised who will be most hard-hit. In crowded and poor areas such as Alexandra, the government’s lockdown requirements seem to be nearimpossible to achieve.

The first days of lockdown have illuminated SA’s fault lines in the harshest of lights. The legacy of apartheid is far from dealt with; local government is missing in action (and has been for years); and people remain poor or destitute, and so are left without options when disaster strikes. x April 2 - April 8, 2020

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feature / social media analysis

CRETINS IN A DATAMINE The Covid-19 pandemic is allowing a time for introspection, and for appreciating how interdependent our world is.

Sadly, it’s also bringing the trolls out of their holes ...

Chris Roper

R

egular readers of this column will know that its subject matter is the words and actions of publicly exposed people, whether that means they’re exposed by virtue of the jobs they hold — politicians, business people or religious leaders, for example — or by dint of them foisting their opinions on us via social media platforms.

Its arena is the social, political and cultural landscape in which we find ourselves inextricably mired, and its aim is a simple one: to highlight some of its absurdities in a mildly amusing way, and to suggest some alternative ways to think about our world.

In this time of Covid-19, where we’re all locked down in the various and widely varying definitions of what we call home, some of the world’s columnists (yes, of course I’ve read them all) are turning to a more inward path.

It’s hard not to be sympathetic to this.

Who among us has not felt the urge to Insta-

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gram our wily reworking of a lasagne recipe, using repurposed boerewors leftovers instead of mince, and Melrose cheese spread instead of a mozzarella topping? And it would be a coldhearted soul who could sneer at the thousands of social videos showing precisely how bad the world’s children really are at drawing horsies.

Even hard-bitten newspaper editors are showing a hitherto unexpected soft side. The Guardian’s former editor-in-chief, Alan Rusbridger, more famous for taking a hard line with the US and UK governments over Julian Assange and WikiLeaks, wrote a lovely column ending with the words: “There will be much stress and sorrow in the months ahead. But a kind of better future feels quite tangible. Love, humanity and combination may yet win.”

News24’s editor-in-chief Adriaan Basson, who can more usually be found engaging in nasty battles with corrupt business people and politicians, wrote a column titled,

“Ngiyabonga SA, Well Done for Locking Down!” (His column also includes the slightly less cheery lines, “locally, SA’s economy is being decimated with every passing day ...

Thousands, if not millions, of people will lose their jobs. People will lose their homes, cars and go hungry.” So it’s not unambiguously a laugh a minute.)

But as tempting as this turning inward is, it’s my unhappy task to trawl through the detritus of communication that is social media, and bear witness to the less salubrious responses to our government’s coronavirus strategy.

Notice I say “our” government. One of the first signs of a South African who thrives on being the naysayer and pessimist is that he or she will refer to either “the” government, “the ANC” government, or the more direct and antagonistic “your” government.

I’m not implying that I don’t share some of the pessimism. In fact, like most of us, I share

quite a lot of it, and readers of this column can, I hope, bear witness to my ability to yell at clouds with the best of them. (This is a reference to the classic Simpsons meme of old man Simpson shaking his fist at a cloud, by the way. As an interesting aside: it’s very difficult to write columns for a print publication in a world where our lexicon has been so changed by the internet.

Who would have ever thought I’d be reduced to writing out a meme?)

But the fact that we’re all pretty much trained by painful experience (or at least I hope we are) to mistrust authority figures, and especially politicians, shouldn’t mean we abdicate our responsibility to be part of the messy solution, rather than triumphant praise singers for the problems.

If there’s one good thing that will come out of the straitened circumstances of lockdowns, it’s that people are rediscovering that they’re part of an interdependent society.

Most of us can balance these things. We can be part of trying to make sure the broader pro-

If there’s one good thing that will come out of the straitened circumstances of lockdowns, it’s that people are rediscovering that they’re part of an interdependent society

ject of saving lives, the economy and our ideas of ourselves as a people succeeds. But we can also be hypervigilant about the actions of our government and civil servants, and especially those technocratic wannabes like police minister Bheki Cele and transport minister Fikile Mbalula, who believe now is their time to pull in their potbellies and shine.

In the column referenced above, Rusbridger, a media man whom I admire very much, writes that “French political theorist Alexis de Tocqueville wrote about the power we have been reexperiencing over the past few weeks: ‘In democratic countries knowledge of how to combine is the mother of all other forms of knowledge; on its progress depends that of all the others.’”

Unfortunately, there are those among us who actively work against this mechanism. I’m not talking about honest critics; I’m talking about those who want to destroy dialogue simply for their own petty ends.

I like to keep an eye on a few of these choice edge-idiots. They range from the mumbling contrarians of the alt-right-lite and the kneejerk revolutionaries of the WMCRET (white monopoly clichés of radical economic transformation) faction, to your basic clever dude sitting in front of his or her gaming console and taking advantage of the pandemic death rate to score points in their limited dating pool.

As annoying as these types are, I find them valuable to my work. They function as a sort of cretin in a datamine, giving early warning of the dumbest takes on important issues.

For those of you who don’t remember, the canary in a coalmine of yore (a word I’ve always wanted to use) would be carried underground in a small cage by miners. If the air became poisonous, the canary would keel over dead, serving as a warning. Technology rendered them obsolete in 1986, so it gives me a certain ironic satisfaction that modern technology has brought these cheerful yellow birds back, even if only as an extraorWhat it means: dinarily strained analogy.

We have a If you’re a regular paddler responsibility in the murky streams of to be part of social media, you’ll have the messy your own favourite cretin in solution, rather a datamine. My favourites than praise are the alt-white and the altsingers for the right, who like saying things problems like “the lockdown is worse than apartheid”, or that (and I probably shouldn’t actually quote this one, as it’s potentially just a sockpuppet) “black privelage [sic] means thousands of black ppl can move around and shop while lone white cyclists get full force of the law. Black privilege is real.”

Oh, and tweets calling for the World Health Organisation to be disbanded, or claiming that deploying troops is the certain death knell for our constitutional freedoms.

It’s not that we shouldn’t be alarmed at a misuse of force by the SA Police Service and SA National Defence Force. There are real concerns, and there are very real examples against which we absolutely have to fight back.

But we can’t let the cretins in the datamine hijack these concerns, with the aim of driving us apart and destroying the very necessary collaborative power we need to solve the large societal problems.

The checks and balances of a gritty, messy democracy are always evolving. We need to monitor and nurture that evolution — not toss the entire enterprise on the pyre to stroke a few egos and plump up a few bank balances. x April 2 - April 8, 2020

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africa

international zimbabwe

PUSHED TO THE BRINK With a shambolic health-care sector and an informal economy in which people are without basic necessities, experts are wary of how effective Zimbabwe’s Covid-19 containment measures will be Chris Muronzi

W

ith Zimbabwe’s health-care sector crippled by a strike by doctors and nurses, underfunding and years of general neglect, fears are growing that Covid-19 will hit the troubled country very hard.

Already, the disease — confirmed in the country just two weeks ago — has claimed its first victim: Zimbabwean broadcaster Zororo Makamba. At the time of publication, the number of confirmed cases had reached eight, from 233 tests.

Fear has gripped the country.

Wilbert Mutaurwa, a vendor in the capital, Harare, believes infection with the virus would amount to a death sentence, given the dire state of health facilities in the country.

“We will all die of corona,” he tells the FM. “We will all die because we don’t have proper medical facilities.”

Zimbabwe’s health-care sector is, indeed, a mess. It was paralysed for more than four months last year when doctors and nurses went on strike over wages. They only returned to work in January, after Zimbabwean billionaire Strive Masiyiwa set up a fund to cover subsistence and transport costs. The telecoms tycoon stepped in again to head off a strike this week, offering financial incentives, insurance and protective clothing to safeguard medical workers from the coronavirus.

Drugs are in short supply, and depleted state coffers mean the government is unable to buy supplies for state medical facilities.

The shambolic state of the country’s health-care system was captured in a report

by UN human rights expert Hilal Elver, who visited Zimbabwe in November. She found that patients often travel 200km north of Harare to mission hospitals such as Karanda to seek health care.

For Zanu-PF bigwigs, the solution has

We don’t need body armour like astronauts — we need the very least, like masks, goggles and sanitisers Munashe Rukweva 36

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always been to bypass the local health system and seek medical attention in SA and abroad. Former president Robert Mugabe, for example, died while undergoing treatment in Singapore, and Deputy President Constantino Chiwenga has sought treatment in China.

The situation has left the country ill-prepared for the pandemic.

“We were not operating at full capacity [before],” says medical doctor Munashe Rukweva. “We didn’t have the right staffing levels and enough stocks. With this pandemic, the major issue is [that] … our screening is not up to scratch.

“We don’t need body armour like astronauts — we need the very least, like masks, goggles and sanitisers. We have frontline people telling us that they have run out of supplies. They are telling us that they don’t feel safe.”

For the Makamba family, the health authorities have also shown themselves to be negligent. By their account, the Wilkins Infectious Diseases Hospital — the designated Covid-19 quarantine centre, where Zororo died — is as good as a death trap.

The hospital did not have a ventilator available for Zororo, and the family was told to pay $120,000 to obtain one, says Tawanda Makamba, his elder brother. And, he says, the hospital didn’t have medication to help his brother. “The only medications available were the ones we bought from SA.” The family ended up sourcing a ventilator privately, taking it to the hospital at 2pm on March 22, says Tawanda. “When we got to Wilkins [Hospital], the portable ventilator had a US plug. They told us to get an adapter because they only had round sockets at the hospital. I then rushed to buy an adapter and came back, but they never used it. I asked why and they said there were no plugs in the room.”

Unsurprisingly, concerns around the preparedness for the pandemic have Zimbab-

What it means: It will be a tough call for Zimbabwe’s underfunded government to contain the spread of Covid-19 weans worried.

“Right now, HIV-positive people cannot access their antiretroviral drugs,” says Harare resident Jabulani Gwenzi.

President Emmerson Mnangagwa has also voiced concerns about whether the country’s high HIV prevalence will complicate the fight against Covid-19.

“With our HIV prevalence of 14% or slightly below and malnutrition and other noncommunicable diseases, especially among children, we are deeply concerned,” he said on launching the country’s coronavirus preparedness policy two weeks ago.

“This situation is a real threat to the citizens of our mother country.”

The threat could not have come at a worse time. The country is in the throes of an economic crisis. Professionals are struggling to make ends meet as earnings lose purchasing power at unbelievable rates. At the time of going to print, the Zimbabwe dol-

whole world is on lockdown — it’s the right thing to do. But without water it’s a futile and grave exerGetty Images/AFP/Zinyange Auntony cise,” she said, explaining how at 4am, for example, hundreds of people queue for borehole water in the district of Mufakose, Harare.

The Zimbabwe Human Rights NGO Forum, along with the Zimbabwe Association of Doctors for Human Rights and Zimbabwe Lawyers for Human Rights, says the government needs to do more.

For a start, it suggests early detection and mitigation through “robust” screening at all major ports of entry. It also says the country needs a clear referral pathway, and must request backup diagnostic kits, personal protective equipment and expertise.

Testing has, until recently, proved problematic. Two weeks ago, Norman Matara, secretarygeneral of the Zimbabwe Association of Doctors for Human Rights, bemoaned the country’s lack of action, saying only 16 people had been tested.

It’s an issue Moyo is aware of. In February already he said his ministry had identified equipment for testing for Covid-19. “The equipment is there, but what is missing are test kits so that we do not continue to send samples to SA.” referral hospitals, as quarantine facilities. He Last week, Chinese e-commerce giant also closed the country’s border, allowing Alibaba and other Chinese organisations only goods to enter. donated protective wear, diagnostic kits and other aid to help African countries manage Then on Friday he announced a 21-day the outbreak. lockdown, to take effect this week.

But government measures have not “All citizens are required to stay at home, allayed citizens’ fears. with the exception of those seeking health Posting on Facebook, businessman Vimservices, buying food, medicine and vital bai Chakanetsa says the current “extraordisupplies, and those manning our essential nary circumstances” require extraordinary services,” he said. “I know these measures measures. “The current response to the may seem drastic and will upset all our daily coronavirus pandemic by the Zimbabwean lives, but there is no other way.” government is too weak and shall lead this However, experts and NGOs are wary of nation to dire consequences,” he writes. how effective government’s containment Rairo Gunguwo is another who believes measures will be. the authorities have to do more.

Shami Fred, an epidemiologist who “We have been watching the horrible chaired Abu Dhabi’s pandemic committee effects of Covid-19 in Europe and recently during the 2009 swine flu outbreak and SA, among other countries. We had much who worked with the United Arab Emirates time to prepare and put in place measures National Emergency & Crisis Management for prevention and containment in ZimbabAuthority, believes it will be a tall order to we,” she told the FM last week. lock down an informal economy in which “The only notable thing our country has people are without water and necessities. done so far is ordering the closure of schools “It’s not practically possible … without any and erecting a few wash basins in the Harare form of relief to the needy,” she told teleCBD.” x vision news channel Al Jazeera. “Yes, the Taking action: A man walks past deserted vending stalls as Zimbabwe goes into lockdown

lar was trading at Z$42/$ while inflation measured 540% in February and salaries are stagnant.

Crippling power shortages occur frequently, with outages stretching to 17 hours a day. And more than 8-million people could face food insecurity this year, Elver warned after her visit last year.

It’s not that the government has been inactive. In February, health minister Obadiah Moyo told parliamentarians that the country had “adequate thermal scanners at our borders. As far as isolation is concerned, we make sure that all visitors are well checked and, should there be symptoms, we will put them in quarantine. The best quarantine facility is in Victoria Falls, where there are tourists.”

Two weeks ago, Mnangagwa declared a state of national disaster to contain the spread of the virus. He banned all public gatherings of more than 100 people — including church services and international sporting fixtures — for 60 days, closed schools, and designated Wilkins Infectious Diseases Hospital and Beatrice Road Infectious Diseases Hospital, along with some

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IN GOOD FAITH BY CARMEL RICKARD

ASKING TOP DOLLAR Harare’s high court has ordered the government to honour its commitment to provide a pension of $2,000 a month to the country’s war veterans

I

magine the confusion in Zimbabwe following last week’s reintroduction of the US dollar. The courts have spent months bashing any notion that the US currency has a place in Zimbabwe, and maintaining that, for the purposes of contracts entered into previously, the US dollar and its replacement are on par.

When the US dollar was reintroduced last week, however, the reserve bank governor had to admit reality: the exchange rate for local transactions would be fixed at Z$25 for every US dollar.

@carmelrickard

123RF/dervish37/chekat

War veterans are not paid $2,000; they receive $246.60 38

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At the time of that announcement I was reading a new decision by the Harare high court in a case brought by the War Veterans Pressure Group against the minister of defence & war veterans affairs and the minister of finance.

The war vets put up what was obviously an unanswerable case — though, it being Zimbabwe, you can never be completely certain.

For its part, the government persisted in resisting the case, no April 2 - April 8, 2020

doubt because of the potential financial consequences involved.

In 1997, the government enacted the “Statutory Instrument of 1997”, giving rights to veterans.

Part of the promised deal was this: “A war veteran shall, with effect from January 1 1998, be entitled to a monthly pension at the rate of $2,000 … payable until the death of the war veteran.”

The reality, however, is that vets are not paid $2,000; they receive $246.60 (the judgment doesn’t indicate what kind of dollars it refers to) — the equivalent of the salary of “a warrant officer class one” in the Zimbabwe army.

It was this shortfall that the war vets took to court.

In the judgment, presiding judge David Mangota was unimpressed by the ministers’ objections to the case being heard. He said the vets’ standing to bring the matter was “not debatable. It is as clear as night follows day.”

The ministers did not dispute that the vets were supposed to get a monthly pension, said the judge. “What they dispute is the quantum which they should pay.”

However, there could be no dispute about the amount due, said Mangota, because the instrument forming the basis of the vets’ case “is law”.

“The legislature enacted it at the instance of the executive.”

The provision remains on the statute books, and has not been amended or repealed, he said. So any denial of the vets’ rights to that pension infringes the country’s constitution.

The judge further said the ministers did not justify the amount

paid to the vets by referring to any law. Instead, they cited the government’s “monetary policies” aimed at addressing Zimbabwe’s economic situation.

The ministers claimed that the Pension Review Tribunal consulted with various authorities and agreed on the policy of equating the vets’ pensions with the salary of a particular army rank.

Government to blame The ministers’ argument “cannot hold”, for three reasons, said the judge: first, “policy cannot override the law”; second, affected vets were not consulted when the decision was made; and, finally, the law stipulating the amount of their pension had been neither amended nor repealed.

The ministers should have realised they would need to bear the legal instrument in mind when they “hatched policies” to address the challenges that the economy faced “at all stages of its transition from the Zimbabwe dollar of 1997 right through to the bearer cheque, the multiple currency [and] the real time gross settlement or Zimbabwe dollar of 2019”.

The government was to blame for not considering the implications as the economy moved through these “stages”.

Because the legal instrument remains applicable, said the court, the war vets must be “accorded what the law confers upon them”.

What will the government do now? Whether the vets are paid in US dollars or Zimbabwe dollars, the disparity between their $2,000 monthly pension and the salary of rank-and-file soldiers is so great it will surely soon cause considerable problems. x

money& investing Analysis and coverage of SA's top companies and investments - the guide to where your money should be

Grant Pattison: The government needs to legislate a way to resolve the payment impasse Freddy Mavunda

EDCON

The need to take time out

Grant Pattison is not giving up and believes Edcon can survive the shutdown — if everyone hits pause Bruce Whitfield and Giulietta Talevi

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money&investing

ý In any pandemic, the weak and the vulnerinto tears. able go first.

The call was recorded by a supplier and disIt’s equally true for the humans it makes sick tributed on social media. and the companies that cannot trade because of Pattison tells the FM that “the reason I was it, and Edcon may be the first retailbeing so definitive is because those er to hit the wall thanks to the suppliers have to decide if they’re All we needed national lockdown. going to buy fabric and cut it for us. to do was get “We’re not giving up,” says CEO Suppliers were asking: ‘Grant, are we Grant Pattison. But Edcon’s fate now the fashion buying the fabric for next summer right for winter largely depends on assistance proyet?’ So it was my obligation to say: ‘ I and we felt grammes available from the govcan’t answer your question.’” confident ernment, finance agencies, banks, Edcon’s biggest asset right now is about that landlords and suppliers. the R3.2bn in stock that is sitting in its Grant Pattison In fact, says Pattison, Edcon “is a shops. window to what’s coming”.

“We’ve got to open and sell that Pattison broke the news to supstock,” says Pattison, “we just have got pliers in an emotional conference call the day to figure out how to do that.” before the national lockdown began, making it In a way, it’s that simple: get a payment holclear that there were no guarantees they would iday from all your suppliers, service providers be paid for any work they did for the group. and landlords, and open your doors to the pub“Any future trade between us may be depenlic on April 16. dent on your assessment of our ability to pay for both arrears and future purchases and orders Whether they all play nice, is the issue. and services,” he said. “In the midst of our stress “Some companies have phoned us and said: and fears, we acknowledge the material impact ‘Grant, we understand where you are — we’ve our financial situation has on you and your got your back and will work for you for free.’ businesses and the devastating impact our deciAnd other companies have phoned and said: ‘If sions will have on your operations. We can only you don’t pay us by the end of the day, we’ll sympathise with you,” he said, before breaking shut it down.’”

So, how do you get everyone to stand still?

Pattison says the government needs to legTFG islate a way to resolve the payment impasse, “a BUY way to press pause” — from retailers’ rents to municipalities’ rates to the National Treasury’s Target price: R162.45 taxes.

Potential upside: 146% “You can’t leave this to the capitalist system, * Based on analysts’ consensus forecast I’m afraid,” says Pattison. “You’ll never get a co40

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ordinated response unless it becomes legislation.”

The corollary to that is collapse if everyone calls in their debts.

“If that starts, we’re done. So you have to suspend that process for a while.”

This is why, says Pattison, the Reserve Bank’s announcement over the weekend that it is freeing up bank capital requirements is such a critical step.

That, and its entry into the secondary market to buy government bonds. Put another way, the Bank is printing money.

“All you do is accumulate your expenses that are unpaid in the closed period, and then you start again and start paying from there onwards; everyone owes everyone money so it’s financed backwards by the government,” says Pattison.

The caveat is that “you have to convince everyone to just sit and wait”.

Edcon was already on life support when the lockdown began. In fact, it’s just a year ago that the retailer received a R2.7bn lifeline from existing lenders as well as a cash injection from the Unemployment Insurance Fund (UIF), the Public Investment Corp and support from landlords.

To put it into perspective, says Pattison, “the UIF gave us R1.2bn — that was to last us three years, and we lost R1.2bn in a month”.

Truworths BUY Target price: R47.60 Potential upside: 91% * Based on analysts’ consensus forecast

2020

SA’s commercial property sector, whose main players include the SA Reit Association, the SA Property Owners Association and the SA Council of Shopping Centres, has created the Target price: R182.80 Property Industry Group to address the impact Potential upside: 66.5% of the crisis collectively. * Based on analysts’ consensus forecast More than 600 people dialled into an emergency conference call on Monday to be updated by industry associations on the steps they were Comparable turnover fell 45% in the week taking to mitigate the fallout of the lockdown. after President Cyril Ramaphosa’s March 15 “Our priorities at the moment are finding a announcement that the country was operating sustainable solution for our clients and cusunder a state of disaster. Turnover was R400m tomers who have been impacted most by the below internal forecasts for March and when lockdown provisions, mainly small, medium the lockdown came, Pattison warned that the and micro-enterprises, and to assist them in firm would lose a further R800m. managing their cash flow and protecting jobs.

“It was terrible timing for us and devastating We hope to achieve this by providing some sort given all the effort” that Edcon put into its of rental relief measures which the industry restructuring plan, says Pattison. hopes to be able to announce to the market in “It was just as we were coming right — so the next couple of days,” says Growthpoint CEO the restructuring plan was finished and done Norbert Sasse. and all we needed to do was get the fashion Industry players will not comment specifiright for winter and we felt confident about cally about Edcon at this stage, but it’s clear that that,” he says. landlords are dealing with considerable comNedbank CEO Mike Brown tells the FM that plexity across multiple clients and have already while the effects of the shutdown will be widely made substantial sacfelt, it is difficult in the rifices to keep Edcon short term to assess the OVER A BARREL going until now. impact of an Edcon fail- JSE general retailers index – daily Redefine not only ure on the broader 5,500 agreed to rental economy. reductions amounting “Bankers will have to R13.8m at the time to distinguish between 5,000 of the March 2019 solvency and liquidity rescue deal, but also issues — and to the 4,500 contributed R54.6m of extent clients of historequity, while Hyprop ically good standing 4,000 agreed to substantial with good businesses space reductions. experience temporary Hyprop and Liberliquidity challenges as a 3,500 ty Two Degrees, ownresult of Covid-19, er of iconic malls banks will provide 3,000 such as Sandton City finance to bridge these and Melrose Arch, challenges,” he says.

Jan07 16 20 27 Feb 10 17 24 Mar 09 16 23 were still smarting But Edcon, with Source: Infront from the Stuttafords about 1-million square collapse in 2017 and metres of lettable space were keen to avoid a much bigger failure. across its Edgars, Jet and CNA brands, isn’t the Edcon’s sale of stationery retailer CNA is, only retailer scrambling through the shutdown. however, going ahead.

TFG, which occupies about 750,000m² Newly appointed CEO of the chain Benjamin across its 21 brands, announced it has unilatTrisk says the sale of CNA will proceed as erally suspended rental payments, and others planned on April 7 and assurances have been are likely to follow suit. given to staff. The sale of its 167 stores to MauMr Price has also revealed that its sales have ritius-based Astoria Investments was concluded fallen by nearly a quarter since the state of disin the nick of time and will give the 124-yearaster was declared, and it is worried about the old stationer a chance of survival. While the likely increase in defaults in its R2.1bn debtors value of the February transaction was not book. disclosed, it won’t bring in enough cash to save The group is now negotiating new delivery the parent. dates to prevent a build-up of stock and will put But Edcon is unlikely to be the only casualty, the brakes on planned expansion. It, too, is especially if SA’s enforced stoppage persists. x seeking rent relief.

MALL OWNERS

Averting a retail meltdown SA’s listed property players are scrambling to stay afloat as the national shutdown kicks in Joan Muller mullerj@fm.co.za

ý SA’s listed property sector appears to be heading for a bloodbath, as a national shutdown is set to dry up already feeble revenue streams.

“The coronavirus has turned the perfect storm into the perfect hurricane,” is how Estienne de Klerk, chair of the SA Reit Association and SA CEO of sector heavyweight Growthpoint Properties, puts it.

In fact, the three-week trading ban on nonessential businesses couldn’t have come at a worse time for the sector.

De Klerk says the impact will be particularly dire for shopping centre owners, whose earnings have already taken a sizeable knock from rising rental arrears and bad debt on the back of a growing number of retail store closures.

The problem is that the JSE’s property sector is overweight in shopping centres, with a 56% exposure (in terms of asset value) to retail property versus offices at 25% and industrial/logis-

IN THE TRENCHES

JSE all share index vs JSE listed property index – daily Based to 100 100 90 80 70 JSE all share index

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money&investing estate investment trusts (Reits), which DISAPPEARING DIVIDEND GROWTH account for 47% of the sector’s assets, SA listed property sector average won’t provide a buffer against the 15 impact of the virus either, given that 13.9 Target price: R52.29 this sector is largely exposed to Potential upside: 189% 12 12 11.4 11.5 11 Europe, the epicentre of the pandemic. * Based on analysts’ consensus forecast 9.5 JSE-listed property companies 9 9 8.5 8 active in Central and Eastern Europe 7.6 7.5 include Nepi Rockcastle, EPP, MAS tics at 17%. The remaining 3% comprises rental 6 6.5 6 5.5 5 housing and hotels.

Real Estate, Redefine, Growthpoint and Hyprop, while 50% of Vukile’s retail Keillen Ndlovu, head of listed property funds 3 3 at Stanlib, believes the cash flow of property assets are located in Spain. Most of companies will drop further over the coming these countries are also in lockdown.

0 01 The unfortunate upshot for Reits weeks and months as many retailers are bound -3 to ask for rental reductions or deferments. shareholders will be a sharp drop in dividend payouts, which could deal a Though tenants may well have a legal right -6 devastating blow to many retirees and to a rental rebate during the 21-day lockdown period, any concessions agreed between landother income-dependent investors -9 who are heavily exposed to the sector. lords and tenants thereafter will depend on the Ndlovu is now forecasting dividend terms of individual lease agreements.

-10 growth for the sector as a whole to fall -12 But Ndlovu says most landlords will have no 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 by at least 8% this year. That’s well choice but to offer some form of relief — or face Source: Stanlib below the 3% achieved in 2019 and a losing more tenants. far cry from the 7%-14% growth still delivered Even so, vacancies and rental arrears are That poses the risk of companies losing their between 2005 and 2017 (see graph). likely to rise as some restaurants and retailers Reit status as the legislation compels Reits to won’t survive a three-week fall in sales. pay out a minimum of 75% of their distributable But he warns: “Growth estimates for the The income mall owners generate from income in the form of biannual dividends (or next 12 months are a moving target, particularly parking will also take a hit, albeit perhaps only distributions) within four months after the comgiven the renewed possibility of Edcon failing.” in the short term. pany’s financial year-end. Reits also incur a Despite Edcon already closing about 150 stores “Meanwhile, landlords’ operating costs will higher income tax liability if the portion of over the past 12 months, the fashion retailer continue to rise on the back of the increased retained earnings increases. remains one of SA’s largest tenants in terms of expenditure to sanitise However, in a letter sent to listed property floor space. There is also still the risk of Massbuildings and introduce companies and their corporate sponsors last mart closing some Game stores following the other hygiene meaweek, the JSE said given that the Covid-19 panrecent demise of its DionWired brand. sures. Landlords also demic has “unforeseeable and unavoidable” This year will be the first time in history that still need to pay rates consequences for Reits, it is in talks with the SA the sector posts negative dividend growth, and taxes and serReits Association to find ways to help prevent which Ndlovu says explains the staggering vice their debt,” property companies potentially breach listing share price losses property investors have sufsays Ndlovu. requirements and risk losing their Reit status. fered in recent months.

Sadly, this time Craig Smith, head of research at Anchor The SA listed property index has shed close around the offshore Stockbrokers, welcomes the move. “A sustainto 50% year to date, which has pushed average interests of JSE-listed able solution to the situation can only be real dividend yields to an unprecedented high of property stocks or achieved if there is a co-ordinated approach 20% and a discount to NAV of about 50%. between various stakeholders from landlords, “These are the worst numbers we have ever tenants, financiers, municipalities, governseen,” he says. ment/utility providers and insurers alike.”

The list of JSE-listed Reits that Smith says Reits with exposure to the office, have already postponed interim div- student accommodation, residential and hospiidend payouts for their respective tality (likely to suffer the most pain in the short December reporting periods conterm) sectors will also not escape unscathed.

Estienne de Klerk: tinues to grow: Redefine ProperHowever, he reckons the one sector that Impact will be dire for shopping centre ties, retail-focused Hyprop Investshould be least affected and even stands to gain owners ments, Polish play EPP, Fourways over the short to medium term is the logistics Mall owner Accelerate, and Texsector (modern warehouses and distribution ton. Others are likely to follow facilities) as more people start to shop online. suit, as property companies are “The extent of the potential upside for logisforced to hold back larger portics-focused Reits will, however, be tenant-spetions of their cash to service debt cific and based on their operations and supply and shore up balance sheets. chain efficiency,” he notes. The JSE’s largest Some may even skip dividend logistics property owners include Equites, payments altogether.

Fortress and Investec Property Fund.

Hyprop HOLD

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Another key worry for property companies, especially those that have relatively high loan to values (LTVs), is potentially breaching interest cover ratios and loan covenants. When that happens, banks may start to call in loans and repossess properties, which may ultimately lead to a number of company failures.

However, Nedbank CIB property analyst Ridwaan Loonat says the Reit sector as a whole still sits with a relatively healthy interest cover ratio of an average 3.5 times — bank covenants are generally breached when the ratio dips below 2. Still, there is the risk that property values could adjust downwards, especially if tenant defaults increase. Lower asset values would translate into an increase in LTVs. But Loonat says the general view is that banks could be more lenient under the current circumstances.

Meanwhile, it appears SA’s biggest landlords have launched a co-ordinated effort to help secure the survival of both tenants and landlords. The SA Reit Association, which represents about 50 of the JSE’s largest property companies, the SA Property Owners Association and the SA Council for Shopping Centres met last week in a bid to come up with ways to avert the “retail apocalypse” scenario seen in many areas across the UK and US. Speaking on behalf of the SA Reit Association, De Klerk says mall owners cannot afford to lose more tenants.

“So collectively, as an industry, we need to help SMEs navigate this tumultuous period.”

The contractual terms of lease agreements between landlords and tenants differ, so it is up to individual property owners to negotiate potential relief with struggling tenants.

But De Klerk says deferred rental payments and concessions in trading hours are some of the measures landlords are considering.

Of course, the trick will be to balance the interests of tenants with those of landlords. As De Klerk notes: “The difficulty is that property owners still have to pay their own overheads including debt servicing costs, municipal rates, staff salaries and income tax.”

Ultimately, it seems that the only way to minimise the fallout for the listed real estate sector is if the pain is shared equally by landlords, tenants, banks, municipalities, government/utility providers, insurers and the Treasury. x

Growthpoint HOLD Target price: R22.06 Potential upside: 89.5% * Based on analysts’ consensus forecast

SHAREHOLDER ACTIVISM

RCL does a dirty with exec plan Remgro-owned RCL has incensed shareholders with its decision to splash scarce cash on an incentive scheme Marc Hasenfuss hasenfussm@fm.co.za

ý RCL’s decision to help top executives cash out of a supposed long-term share incentive scheme has infuriated shareholder activists and embarrassed parent Remgro, which has described the plan as an “administrative nightmare”.

In short, RCL Foods — a perennial underperformer — is set to fork out R149m to buy executives out of a conditional share plan after just three years, during which time its share price has fallen by more than a third.

The 14.5-million shares will be transferred to the relevant RCL executives this week, including long-serving RCL CEO Miles Dally, who receives 3.6-million shares, and financial director Rob Field, who receives 500,000 shares, while 10.4-million shares will go to other participants.

RCL argues that the company’s “extremely limited free float, low trading volumes and lack of tradability severely restrict the ability of the participants to trade in these shares”.

But shareholder activists have slammed the scheme as unfair for affording executives special treatment that will not be extended to other shareholders.

Supposedly, RCL’s conditional share plan (CSP) is meant to attract individuals or retain employees with an award of shares in the company and encourage their continued service.

But activist Theo Botha asks: “How do we encourage continued service by these top employees if we are facilitating a payout? This defies logic.”

Botha says Remgro — which holds a commanding 77.5% stake in RCL — should act more responsibly. “If directors want to sell, they need to come to the market. It was not approved by shareholders that RCL is the buyer of last resort.”

Activist Albie Cilliers, who is also a shareholder in RCL, believes the share buyback sends the wrong signal to investors. “For me, the RCL executives decided to be paid in shares.

But now they want to exit with the company paying them out for these shares. I can’t exit my shares in this manner … if I want to sell, I need to accept a discount to the buyback price.”

Remgro CEO and RCL chair Jannie Durand said the CSP had become an administrative nightmare.

He explained to the FM that the participants in the CSP needed to sell shares to cover a tax liability associated with the share award.

With the risk that the RCL share price could go lower, its participants might not be in a position to cover the tax liability.

Durand said there was an initial suggestion that some of the executives sell Remgro shares in the market to raise capital to cover the tax liability, but this was not possible since the group was in a closed period.

Remgro is also trading under cautionary,

Miles Dally: Will receive 3.6-million shares Leon Grove

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money&investing LOSING FAITH

RCL SELL

UNIT TRUST PERFORMANCE

Target price: R10.92 Potential upside: 15% * Based on analysts’ consensus forecast

Remgro BUY Target price: R182 Potential upside: 54%

And now, we tally the cost

* Based on analysts’ consensus forecast

related to the proposed unbundling of its interests in RMBH and FirstRand. Durand said this meant Remgro could not buy back the RCL shares “as much as we would have loved to”.

In retrospect, Durand conceded RCL’s CSP should have offered a cash option.

Of course, it could be argued that a share buyback should benefit shareholders by increasing NAV and earnings a share by reducing the number of shares in issue. But what the buyback does mask is that top RCL executives are selling their shares — a development that probably won’t fill shareholders with much confidence.

What is also highly debatable is whether RCL — especially when the full economic effects of the Covid-19 pandemic have not been fully quantified and other companies are holding back dividends as a precautionary measure — should be lavishing R149m on its top management.

The proposed buyback of the CSP shares represents 1.5% of RCL’s issued shares, and the offer will be pitched at R10.29 a share.

Shareholders will be asked to vote on the proposals in late May. x

NAUGHTY RCL share price (R) – weekly 19 18 17 16 15 14 13 12 11 10

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The latest unit trust performance stats appear to vindicate SA’s notoriously risk-averse retail investors Stephen Cranston cranstons@fm.co.za

ý Investors withdrew R13.5bn from equity unit trusts in 2019, against the advice of many experts who believe in maintaining a high equity exposure through thick and thin.

And yet, given 2020’s market rout — the JSE all share index has lost about 24% year to date — maybe they were, in fact, right.

“SA investors are more risk averse than their global peers,” says Sunette Mulder, senior policy adviser at the Association for Savings & Investment SA. “Internationally, equity funds make up 44% of mutual fund assets; in SA, it is just 18%.”

But during the coronavirus crisis most investors will be relieved to have more diversifed portfolios, with almost half of the R2.1-trillion in multi-asset funds diversified between equities, bonds, cash and property; a further 30% in interest-bearing funds, including money market funds; and a shrinking 3% in real estate funds.

It is hard to exaggerate the devastation to equity markets over the past six months.

According to FundsData, the average general equity fund has lost 22% in value.

JSE all share index – daily 000 60 58 56 54 52 50 48 46 44 42 40 38 Jan07 13 20 27 Feb 10 17 24 Mar 09 16 23 2020 Source: Infront

Only one fund — the tiny R57m IFM Technical Fund — gave a positive return, with a rise of 6.8% driven by a substantial 37% holding in foreign shares.

But that is above the legal limit, so it will need to repatriate assets to get back to the maximum 30% cap allowed.

Other good performers have been 36One Equity, which lost just 3.7%, Methodical Equity, down 6.4%, and Counterpoint SCI Value, which shed 6.8%.

Counterpoint now has the benefit of a stronger team since it merged with Piet Viljoen’s RECM. It has also proved to be a reasonably good time to be in sharia funds, which cannot invest in sectors such as financials: Oasis Crescent, the blue chip in the sector, was down 3.5%.

But with local bonds losing about 8% of their value so far this year, multiassets were certainly no safe haven either.

In fact, balanced, high-equity funds (which can invest up to 75% in shares) did just as Rob Spanjaard: Sometimes we just have to sit on the sidelines to protect client capital The Herald/Brian Witbooi

Anet Ahern: Market cycles and movements are outside our control Hetty Zantman

remained in the market have been caught on the back foot: Bridge Managed Growth and PSG Balanced have lost a quarter of their value over six months. PSG Balanced still has a huge 70% exposure to equities, and 4% to property. Its two largest domestic shares, Discovery and Old Mutual, have lost half of their value.

“Market cycles and movements are outside our control,” says PSG Asset Management CEO Anet Ahern, “so we focus on the business moat of a company — factors such as brand strength and barriers to entry, the management team’s track record and the inherent margin of badly as pure equity funds, falling 22.5% over safety in the price.” six months.

Unfortunately for PSG, many of the shares at There were a few more positive performers “rock bottom” now appear to have a basement such as the Gryphon Prudential Fund of Funds too. (up 8.6%), Rezco Managed Plus (up 5%) and the And big household names have hardly covlittle-known Olympiad BCI Managed Fund of ered themselves in glory either.

Funds (up 1.8%).

The Allan Gray SA Equity Fund was among Says Rezco chief investment officer (CIO) the poorest performers, losing 29%, while the Rob Spanjaard: “We were flagging possible outAllan Gray Equity Fund, with access of up to comes of the coronavirus to clients back in Jan30% to offshore assets, was down 23%. Says uary. We felt that the risks were asymmetrical, CIO Andrew Lapping: “We hold platinum as the potential downside risk was out of proexchange traded funds in our portfolios to portion to the potential upside in the market, diversify risk, but even these have fallen by especially as global markets were at record more than 20% in rands as precious metals highs.” have not been spared.”

Lapping believes there is likely to be worldRezco switched heavily out of cash and wide inflation and weakness in developed bond bonds, investing as much as the mandate permarkets, as countries struggle to fund their mitted into US Treasury bills, which usually stimulus packages. appreciate in value during a crisis.

“We are carefully buying assets that we think The two Rezco balanced funds now have just are undervalued,” he says. “But we need to be 13.5% exposure to equities. aware that there will be a sharp increase in “Sometimes we just have to sit on the sidebusiness failures.” lines to protect client capital,” says Spanjaard.

Lapping says the important question to ask is Balanced funds which have stubbornly whether these losses are permanent.

OUCH! For example, Ten worst performing general equity funds “Sasol’s price decline over six months to March 27 (%) could be permanent if the company can’t -29.2 Perpetua SCI Equity navigate the current oil -30.4 Integrity Equity crisis”. But, he says, “we still hold the share -30.4 Steyn Capital Equity as we believe there is -30.8 Momentum Value Equity significant option value -31.4 PSG Equity if the oil price recovers sooner than expected”.

-31.4 New Funds Low Volatility Equity Sasol now repre-31.6 Nedgroup Investments Growth sents just 0.5% of the Balanced Fund’s assets, -33.6 Excelsia Equity down from 3.2% in -35.8 NewFunds Value Equity January.

Clearly, it will be a -37.5 PSG SA Equity long road back to bet0 -5 -10 -15 -20 -25 -30 -35 -40 ter days. x Source: FundsData

QUANTITATIVE EASING

If it looks like a duck …

The Reserve Bank’s intervention in the bond market may see it become the player of last resort for a very long time Warren Thompson thompsonw@businesslive.co.za

ý The Reserve Bank’s version of quantitative easing (QE) could go on “indefinitely”, according to deputy Reserve Bank governor Fundi Tshazibana.

Or at least until market conditions return to normal.

By Tshazibana’s description, that will be when bond yields and the spreads between the bid and offer on bonds normalise. Given the unprecedented disruption of the Covid-19 pandemic, that could be a long way off.

Last week’s extraordinary move by the Bank to enter the secondary bond market as a buyer has also divided opinion on whether this is SA’s version of QE — the monetary policy adopted by the US Federal Reserve to increase money supply and boost lending following the global finan-

Fundi Tshazibana: Reserve Bank’s version of quantitative easing could go on indefinitely Freddy Mavunda

April 2 - April 8, 2020

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April 2 - April 8, 2020

THERE SHE BLOWS Rand/dollar – daily 18.0 17.5 17.0 16.5 16.0 15.5 15.0 14.5 14.0 Jan 13 20 27 Feb 10 17 24 Mar 09 16 23

2019

I still think

Anchor Capital. “By doing this, the cial crisis that began in 2008. bonds offer an Bank is enabling them to sell bonds While the Bank has gone out of attractive to meet these commitments, and its way to say that this intervention investment making the system more stable by is not QE, the market thinks otheropportunity and doing so.” He welcomes the move. wise. yields should Wapenaar says asset managers As Intellidex economist Peter continue to have been facing a tide of redempAttard Montalto put it: “If it looks like recover tions as the catastrophic fall in world QE, and quacks like QE, it’s probably Nolan Wapenaar equity markets has caused investors QE.” to flee for the safety of cash.

The decision was part of a raft of And with the economy grinding to a standmonetary policy and prudential interventions to still as a result of the lockdown, consumers confront the tsunami effects of the Covid-19 have been accessing savings to tide them over. pandemic. The Bank’s primary purpose was to “This should calm investors,” says Wapenaar. respond to the dislocation that had built up in “I still think bonds offer an attractive investment the bond market before and after the weekend opportunity and yields should continue to of March 21 and 22. recover.”

A case in point was the R186 bond, which The decision happened to come just before matures in six years. The yield had spiked to Moody’s cut SA’s sovereign rating to junk.

12% intraday before the Bank’s decision, and in As is the case with downgrades, the decision the immediate aftermath fell 230 basis points to 9.7%. By Friday last week, the yield was back up is communicated to governments at least two days before the public announcement is made. to 10.47%.

“Asset managers and institutional investors Investec investment strategist Chris have been under pressure to meet margin calls Holdsworth believes the timing was influenced and redemptions over the last month,” says

by Moody’s decision, which could trigger the Nolan Wapenaar, co-chief investment officer at sales of hundreds of billions of rands in government bonds by foreigners who are not allowed to hold sub-investment grade assets.

This would only add more pressure to SA’s bond yields.

“On top of this, the Unemployment Insurance Fund has allocated R30bn for people losing their jobs,” says Holdsworth. “The fund has assets of R150bn, most of which is held in SA government bonds. So they would become forced sellers in a market with not a lot of buyers.”

Holdsworth’s colleague at Investec Wealth & Investment, Prof Brian Kantor, says the move, if sustained, will both lower the cost of financing for the government and increase the government’s capacity to borrow at a time when it needs to rapidly increase spending to confront the pandemic.

“The pricing in the secondary market informs the bids in the primary market,” says Kantor, referReserve Bank governor Lesetja Kganyago: The Bank ring to the weekly bond auctions has entered the secondary at which a select group of banks bond market as a buyer called primary dealers place their Freddy Mavunda bids.

The banks are obligated to buy all instruments sold by the government at any auction.

For Kantor, the move is an alternative route for the government to confront the Depression-era economics it faces as the country’s output collapses and citizens suffer the severe

Source: Infront

socioeconomic consequences that follow.

“I feel for the people who are self-employed or casually employed — they are going to be hit the hardest,” says Kantor. “We have to give them enough money so that they can eat. You can print money as much as you like, it’s a temporary measure until things get back to normal.

So this is support for the government as we can’t carry on spending other people’s money.”

As predicted by Kantor, the Bank has also moved to lower the capital requirements of banks, which should help them to manoeuvre through an economy in shutdown.

From April 1, the threshold of the arcane liquidity coverage ratio will be lowered by 20%, which will release an enormous amount of capital. That will allow banks to roll over loans to embattled clients without having to set aside more capital.

“I am pleased that the Reserve Bank has recognised the unusual times, and that inflation targeting is, at this point, a distant ideal. It’s about GDP, not inflation,” Kantor says. x

PRICEY

R186 bond yield (%) 11.5

11.0 10.5 10.0 9.5 9.0 8.5 8.0 7.5 Jan 15 Source: Bloomberg

Jan 31 Feb 14

Feb 28 Mar 16 Mar 31

global investor by Jean Pierre Verster

Boom time for Zoom time

B

The freemium model is a powerful way to gain widespread adoption before monetising your product to a greater extent

usinesses around the world have needed to adapt quickly to the disruptive impact of selfisolation and lockdown.

Employees still need to communicate with one another, as well as with service providers and customers or clients, and nothing is as effective as meeting face to face.

Now that this is no longer possible in most cases, companies offering video communication tools have been the rare beneficiaries of less person-to-person contact and widespread adoption of remote working setups.

Consumer video apps — including Apple FaceTime, Facebook Messenger, Skype, Google Duo and WhatsApp video calls — are adequate for one-onone video chats.

But businesses usually need more extensive functionality, such as autorecording of video meetings, allowing multiple participants, screen sharing, file sending and desktop support.

The main providers of these premium video communication services are seeing an unprecedented surge in usage and a sharp increase in revenue.

Zoom Video Communications listed on the Nasdaq Exchange on April 17 2019 at $36, under the share code ZM. Now, less than a year later, it is trading at about $150 a share, giving it a market cap of more than $40bn.

It should not be confused with Zoom Technologies, a small Indian IT training firm with the share code ZOOM, which has seen a surge in its share price as traders mix up the two companies.

Zoom Video Communications follows the “freemium” subscription model, as do most cloud services companies these days, where a basic service is offered for free but premium tiers of additional services cost extra.

The freemium model is a powerful way to gain widespread adoption before monetising your product to a greater extent.

It seems to have worked well for Zoom, with recent data from Apptopia indicating that Zoom Cloud Meetings

has the largest market share of the app competitors, at roughly 20% of daily active users of video communications apps.

The challenge will be to nudge a lot more users from the free tier toward its premium paid-for services, to justify the current share price.

Microsoft, which offers video communication tools through its Skype and Teams (previously known as Skype for Business) applications, is the other major player in this market. At present, it has almost 20% market share.

While these apps might not be material to the overall Microsoft business on their own, the bundling of Teams with Office 365 helps to make it the quintessential business software suite, which has propelled Microsoft to become the most valuable company in the world.

Even with a market cap of more than $1.1-trillion, we still see value in its shares, given its strong moat, or sustainable competitive advantage.

Microsoft has also become more collaborative under Satya Nadella, recently announcing Teams’ interoperability with Slack.

Slack is a relatively recent listing, trading on the New York Stock Exchange since June 19 2019 (but still near its listing price of $26), with a market cap of $16bn.

It is primarily an instant messaging app, but with video chat functionality as well.

The Slack platform has seen a jump in usage over the past month, though its CEO has cautioned that the increase is unsustainable.

It will be interesting to see if Slack’s interoperability with Teams stimulates further

123RF/unitysphere

interest in its independent platform or whether it heralds greater integration with Microsoft in the near future.

Slack shares are trading close to fair value, in my opinion.

Cisco Systems is also a notable player in the video communication market with its WebEx service, but the service is estimated to only contribute roughly 1% of Cisco’s group revenue.

Adobe Systems, similarly, offers Adobe Connect, but its revenue contribution is a minuscule part of the group’s earnings.

These companies should therefore not be considered as investments purely because of their exposure to the video communications market.

RingCentral, with a market cap of around $20bn, is another player worth mentioning.

It has a strong position in the cloudbased business phone system market, and the imminent launch of its video product could represent fierce competition for market leaders Zoom and Microsoft.

But as is often the case in the software industry, the disruptors are probably about to be disrupted.

Whether a customer of, or an investor in, video communications providers, choose wisely. x Verster is CEO of Protea Capital Management

April 2 - April 8, 2020

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investor’s notebook by Stephen Cranston

A slow and brutal bear

T @scranston

It is hard to believe that global equities peaked as recently as February 20 2020

here has been a lot of e-mail communication from companies using the opportunity of the virus to remind their clients that they are still around.

Understandably, much of the messaging centres on information about precautions being taken and assurances to customers that plenty of hand sanitiser will be available.

But there has been remarkably little about what might happen in the markets. Perhaps all we can do is borrow that bumper sticker from the 12-Steps groups such as Gamblers Anonymous that says: “This too shall pass.”

Alwyn van der Merwe, head of investments at Sanlam Private Wealth (SPW), has, to his credit, been prepared to give more detail. He says the severe price decline over a wide range of financial assets has allowed SPW to review clients’ asset allocation and to redeploy cash into equities and selected bonds.

It is hard to believe that the peak of the MSCI world index was reached as

recently as February 20 — in 2020, not 2019. Van der Merwe expects that many small businesses will not survive, and in SA we do not have the luxury of throwing $2-trillion at the problem as the US congress is doing.

SA’s economy used to be countercyclical, as the gold price would increase in times of uncertainty. But even the gold price has not been immune. SPW did not look so clever in 2019 as it reduced its equity holdings in a year in which there were real returns on the JSE. It cut back on platinum shares, as well as on BHP and Anglo American.

But I don’t blame the company.

Institutional fund managers, such as SPW’s sisters in Sanlam Investment Management, can’t avoid focusing on the benchmark and the peers. But for private client managers, the ironclad rule is: “Thou shalt not lose thy client’s money.” Most of SPW’s clients are over 60 and don’t have time to take a classic “patient” approach.

Of course, SPW could not be immu-

nised, so to speak, from the effects of the virus. But at least Van der Merwe apologised for client losses. Try to get that out of Allan Gray or Coronation.

Not a typical crash In terms of individual shares, SPW has had a change of heart over Anglo American, which it considers to be on a deep discount to intrinsic value, even taking into account low commodity prices. SPW is also buying Bidcorp again, which it sold at R320; the share now trades below R200. Bidcorp’s core business of wholesale food delivery will continue through the lockdown in its main market, though its lucrative sales to restaurants will be severely curtailed.

SPW has increased exposure to longer-dated SA bonds, and with the Reserve Bank pulling out all the stops that might turn out to be a safe option.

The problem is that this market rout does not look like a typical crash. Previously, crashes have been short, sharp shocks — the worst being the 46% decline in 1969, closely followed by the 40% fall in the 2008 global financial crisis. But each of these cases was the healthy resetting of overvalued share prices. The current bear market is likely to be far longer.

Van der Merwe believes markets will remain brutal until a coronavirus vaccine is rolled out, which is optimistically seen as possible in about 18 months, Daniel Salter, head of equity strategy at Renaissance Capital, believes the large developed markets such as the UK, US and Germany are best placed to recover. He is most concerned about SA, Nigeria, Egypt, Pakistan, Turkey and Romania, which have little capacity to finance deficit spending. x

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KA-CHING!/ SHARES IN CHINA’S DAWN POLYMER, WHICH MAKES SURGICAL MASK FABRIC, ARE UP 417% SINCE JANUARY 48

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April 2 - April 8, 2020

market watch by Marc Hasenfuss

I probably can’t — thanks to our soil — diversify into tobacco, which means I will hold on to my BAT shares for now

GLOBAL MARKETS

P

Bond bonanza

lague diary, week 2: The best growth in the past week came from my vegetable patch. At a time when real estate is getting knocked sideways, there is some reassurance in having an agricultural angle. With the entire family home there is always a sentry, armed with an unloaded pellet gun and a less-than-obedient trio of Jack Russells, to fend off the baboon raids that are an irritatingly regular occurrence in Kommetjie.

There is quite a spread of crops, and we are able to make our own salads (even if the peppers are on the sharper side of tangy and the rocket bitter). Still, it feels good to be doing my bit for food security in these anxious times.

I probably can’t — thanks to our sandy soil — diversify into tobacco (though my son seems confident of raising a cannabis crop), which means I will be holding on to my British American Tobacco (BAT) shares for now.

The restrictions on the sale of cigarettes in locked-down SA aside, I still get a warm glow from the recent statement from BAT FD Tadeu Marroco that the group is committed to consistent and sustainable long-term revenue growth of 3%-5%. This, he maintains, can deliver “high single-figure earnings growth” while targeting a minimum of 95% cash conversion and a dividend payout ratio of 65% over the medium to long term.

We have also assembled a home gym. I don’t mind lifting weights, planking and tossing around a medicine ball.

But it takes a special kind of determination to fashion a jogging circuit around the property — risking a garrotting on the washing line, slipping on loose paving stones or concussion from an overhanging branch.

With the local Virgin Active chain in lockdown, I do wonder how Brait will handle the cash flow from its most reliable profit generator drying up.

Last week I noted I was light on SA Inc stocks. Nothing much has changed, except for a quick in/out at private edu-

cation stocks AdvTech, Curro and Stadio — which all chalked up big bouncebacks last week. My Adcock Ingram looks a little perkier, and I still have hopes for a recovery at Ascendis. I also started nibbling at niche financial services business Capital Appreciation (Caprec) after some encouraging purchases by one of the executives. Caprec still has a meaningful cash pile even after buying back shares from a key business developer, and I think the company plies an essential niche that will be as relevant as ever when (I’m not going to “if”) normal business conditions resume.

Clever Johnny I also took a small position in Hosken Consolidated Investments (HCI) despite my misgivings about the investment portfolio value shrinking even as its not-insubstantial debt holds fast. I have enormous respect for CEO Johnny Copelyn — especially his ability to be seven steps ahead of anyone else in the corporate chess game. I have to believe Copelyn will play his assets smartly in a time when events beyond the control of management can (and probably will) topple many well-regarded companies.

Other additions to the portfolio were hedge instruments NewWave USD ETN, Sygnia Itrix 4th IR, CoreShares Global Dividend Trax, Satrix Nasdaq and Reinet Investments. At the time of writing the market was taking the (inevitable) Moody’s downgrade better than could be expected.

I’m watching a couple of positions with interest … I’d relish the chance to snap up some Astral Foods and Afrimat shares — two companies led by very capable CEOs. Lean and mean Quantum Foods, which is mainly involved in poultry and eggs, and innovative Libstar, with a strong dairy offering and a supermarket brand manufacturing niche, also stir my interest. Investment company Sabvest’s N shares have slipped below R30. And Remgro — one company that I doubt will recall its dividend — is also drifting towards a price range that demands my attention. x

The world’s highest-rated companies, including Disney and Warren Buffett’s Berkshire Hathaway, have swallowed higher borrowing costs to raise hundreds of billions of dollars of debt.

Global corporate bond issuance by “investment-grade” companies surged to $244bn in March, the highest monthly total since a record $252bn was sold in September, according to Dealogic. Financial Times

Bloomberg/Houston Cofield

@marchasenfuss

As ye sow, shall ye reap

CASH DASH The Covid-19

pandemic has prompted a general dash for cash from companies around the globe, with groups drawing down emergency credit lines alongside the spate of debt issuance

Crude collapse US crude oil prices fell below $20 a barrel shortly after trading reopened on Sunday, close to their lowest level in 18 years, as traders bet that production would have to shut to cope with the collapse in demand because of the Covid-19 pandemic.

With supply accumulating at the same time because of the price war between Saudi Arabia and Russia, traders believe the surplus could approach 25-million barrels a day next month, a level that could overwhelm storage capacity worldwide within weeks. Financial Times April 2 - April 8, 2020

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jse top stocks COMPANY

CLOSING PRICE (MONDAY) (C)

PROSUS NV BHP GROUP PLC ANHEUSER-BUSCH INBEV BRIT AMER TOBACCO NASPERS LTD-N ANGLO AMER PLC GLENCORE PLC FIRSTRAND LTD VODACOM GROUP ANGLO AMERICAN PLATINUM STANDARD BANK GROUP MONDI PLC ANGLOGOLD ASHANTI SANLAM LTD SOUTH32 LTD CAPITEC BANK HOLD KUMBA IRON ORE GOLD FIELDS LTD MTN GROUP LTD SHOPRITE HLDGS BID CORP LTD SIBANYE-STILLWATER CLICKS GROUP LTD IMPALA PLATINUM ABSA GROUP LTD OLD MUTUAL LTD DISCOVERY LTD QUILTER PLC BIDVEST GROUP NEPI ROCKCASTLE ASSORE LTD MEDICLINIC INTL PLC ASPEN PHARMACARE MULTICHOICE GROUP PEPKOR HOLDINGS NEDBANK GROUP GROWTHPOINT PROP EXXARO RESOURCES NORTHAM PLATINUM SPAR GRP LTD/THE TIGER BRANDS LTD INVESTEC PLC PICK N PAY STORES MR PRICE GROUP WOOLWORTHS HLDGS LIFE HEALTHCARE AVI LTD HARMONY GOLD MNG AFRICAN RAINBOW DIS-CHEM PHARMACIES NETCARE LTD SASOL LTD VIVO ENERGY PLC LIBERTY HLDGS TFG REDEFINE PROPERTIES BARLOWORLD LTD FORTRESS REIT LT A FORTRESS REIT LT B RESILIENT REIT SAPPI LTD TRUWORTHS INTL EQUITES PROPERTY TELKOM SA SOC LT RCL FOODS LTD/SO ASTRAL FOODS LTD OCEANA GROUP LTD VUKILE PROPERTY ROYAL BAFOKENG PLAT

50

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Market Cap — Global market capitalisation. YTD — year to date. EPS — Earnings per share. Trailing EPS — EPS at the time of the most recent annual results presentation. Est. forward EPS — EPS as estimated by analysts at the time of the next annual results presentation. * — SA companies quoted in rand, otherwise in reporting currency. Div Yield — Dividend yield as at most recent annual results. Forward Div Yield — Dividend yield as at next annual results. Three-year average RoE — three-year average return on equity. Forward RoE — Return on equity as at next annual results.

MARKET CAP SHARE (Rm) PRICE RET. YTD (%)

122,575 27,000 76,200 58,276 250,888 29,350 2,675 3,749 11,413 71,884 9,599 29,450 33,813 4,882 2,021 82,818 28,375 9,988 4,060 12,068 20,500 2,403 25,104 7,559 6,330 1,097 7,312 2,500 13,700 7,175 30,006 5,662 9,000 8,464 1,060 7,320 1,164 9,802 6,740 17,810 17,880 3,184 6,155 10,979 2,708 1,770 6,923 4,249 10,168 2,575 1,400 3,150 1,500 6,361 6,582 240 6,250 988 163 3,183 2,288 2,490 1,600 1,859 950 18,306 5,450 666 2,319

April 2 - April 8, 2020

2,012,714 1,556,768 1,538,662 1,336,959 1,095,056 367,015 356,425 210,300 209,527 193,819 155,497 144,538 141,214 114,402 98,610 95,760 91,392 88,227 76,501 71,363 68,758 64,280 62,424 60,399 53,663 51,653 48,134 46,922 46,618 42,034 41,890 41,743 41,081 37,454 36,971 36,701 35,182 35,160 34,359 34,302 33,940 32,698 30,372 29,697 28,395 25,972 23,250 23,058 22,586 22,147 20,147 19,720 18,991 18,205 15,583 13,904 13,704 13,555 13,555 12,736 12,535 11,030 9,556 9,502 9,111 7,857 7,109 6,368 5,966

16.3 -15.24 -34.04 -0.39 9.52 -24.62 -38.34 -40.3 -1.01 -42.97 -42.97 -9.74 7.41 -38.28 -22.73 -42.73 -27.75 5.17 -50.78 -2.86 -36.9 -33.05 -0.96 -46.19 -57.6 -44.2 -38.54 -14.68 -31.81 -39.66 12.8 -26.63 -24.51 -27.35 -40.61 -65.84 -47.35 -25.26 -45.48 -9.83 -13.37 -51.56 -3.66 -39.84 -42.87 -28.19 -22.19 -17.01 -34.37 -2.83 -25.79 -89.62 -34.41 -42.51 -55.97 -68.25 -41.68 -42.3 -70.45 -50.99 -47.61 -46.4 -20 -46.61 -14.03 -13.99 -11.45 -65.67 -53.26

TRAILING EST. EPS (*) FORWARD EPS (*)

NA 1.86 4.54 2.49 10.93 2.76 -0.03 5.5 9.34 70.18 15.85 1.67 -0.03 3.42 -0.03 49.84 50.49 0.19 4.91 5.9 13.48 0.01 6.72 3 17.15 2.04 9.57 0.08 9.35 0.71 49.38 0.17 13.48 -1.2 0.62 24.62 2.08 32.88 3.63 11.19 24.53 0.48 3.03 10.64 -1.48 1.75 5.94 -2.64 22.34 0.65 1.75 -10.4 0.11 11.14 11.6 0.62 11.47 1.39 1.39 13.84 0.27 2.05 1.9 4.53 -0.18 16.58 4.86 1.84 0.05

2.66 1.71 3.27 3.42 7.74 2.4 0.15 5.13 10.08 113.9 18.43 1.48 2.07 5.39 0.11 64.63 39.71 0.52 6.94 7.29 14.85 8.93 8.05 28.89 18.95 2.33 8.74 0.08 14.56 0.6 42.11 0.28 14.28 8.16 1.18 25.4 2.2 22.92 14.35 12.43 13.61 0.52 3.38 11.04 9.23 1.63 5.38 10.1 24.98 1.01 1.77 14.04 0.13 13.41 12.04 0.96 11.28 1.6 1.5 6.07 0.3 5.61 1.75 4.47 0.89 24.31 6.03 1.94 9.36

DIVIDEND FORWARD YIELD (%) DIVIDEND YIELD (%)

NA 9.48 4.2 11.7 NA 6.58 13.57 7.95 6.97 1.53 10.36 5.52 0 6.84 3.5 2.26 16.49 1.94 13.55 2.64 3.22 0 1.77 0 17.77 10.94 2.94 3.07 4.38 15.53 7 3.11 0 NA NA 19.33 18.75 5.77 0 4.17 5.93 17.01 3.81 6.71 6.92 2.99 5.92 0 9.83 1.33 7.93 55.05 3.25 11.19 11.93 42.08 7.71 16 16 16.82 0 15.42 9.05 20.13 2.63 4.92 6.66 27.66 0

0.12 7.83 4.69 8.56 0.39 6.05 11.16 8.19 7.33 6.99 10.93 5.21 1.3 7.29 4.67 3.03 11.7 2.83 14.58 2.9 3.32 12.74 2.14 12.68 17.56 11.75 3.24 4.54 4.65 16.24 5.88 3.2 2.58 7.5 3.75 19.28 19.07 13.34 NA 4.87 4.5 14.99 4.03 6.62 6.47 6.56 6.26 0.81 12.12 1.63 8.51 25.25 4.82 12.7 11.86 37.8 7.47 20.04 129.01 18.22 2.6 15.16 10.17 13.26 3.13 7.35 7.72 29.41 4.65

3-YEAR FORWARD AVERAGE ROE (%) ROE (%)

NA 12.49 10.19 42.37 37.51 14.99 6.16 23.76 21.69 18.16 15.6 21.18 -0.86 16.16 7.78 26.59 37.45 -2.17 8.29 19.15 15.66 -10.74 39.65 -9.61 13.12 NA 15.23 NA 17.27 NA 20.69 -3.84 12.23 NA NA 14.38 8.74 19.5 0.35 28.76 19.03 10.96 47.79 38.99 -2.25 11.82 36.11 -8.62 15.68 55.97 24.39 4.52 NA 12.58 19.74 8.06 12.35 0.92 0.92 4.16 15.01 20.35 12.98 10.18 4.77 29.18 15.3 11.69 -1.76

11.61 17.39 8.95 11.72 10.8 11.31 2.52 20.96 21.75 39.51 17.16 16.33 22.95 15.37 4.58 27.23 33.3 15.34 14.1 15.73 14.18 54.56 36.77 31.21 14.8 13.9 11.09 8.17 19.9 12 12.23 6.08 10.19 30.27 6.74 14.23 9.58 16.75 39.94 29.41 13.47 11.61 45.52 28.93 35.21 13.91 34.34 18.13 14.7 30.71 23.65 5.14 18.79 13.74 18.98 9.73 9.68 NA 15.55 11.32 7.48 26.68 NA 7.62 6.58 23.42 14.41 11 14.48

P:E FORWARD P:E

NA 8.07 9.71 10.55 25.85 5.9 NA 7.37 12.1 10.14 5.43 8.98 20.7 14.12 NA 16.6 5.59 27.82 8.81 17.93 14.08 NA 36.71 13.77 3.62 5.27 7.62 NA 10.65 4.63 5.55 14.87 5.01 NA 10.78 2.81 4.42 3.24 18.56 15.77 13.52 2.93 19.59 9.82 8.08 19.95 13.75 9.84 3.79 39.8 8.18 2.38 7.71 0.55 5.45 6.07 7.21 7.24 7.24 5.33 3.86 4.4 10.55 3.69 26.1 10.94 10.01 4.76 46.01

25.67 8.81 12.96 7.66 18.06 6.8 9.78 7.31 11.32 6.31 5.21 10.08 9.1 9.06 10.28 12.81 7.15 10.62 5.85 16.55 13.8 2.69 31.18 2.62 3.34 4.71 8.36 13.94 9.41 6.08 7.13 8.99 6.3 10.37 8.95 2.88 5.3 4.28 4.7 14.33 13.14 2.74 18.21 9.95 2.93 10.83 12.86 4.21 4.07 25.59 7.89 2.24 6.33 4.74 5.47 2.49 5.54 6.16 1.08 5.24 4.27 4.44 9.17 4.16 10.64 7.53 9.05 3.44 2.48

TOTAL SELL

TOTAL HOLD

TOTAL BUY

0 2 3 1 0 1 1 2 4 1 0 1 2 0 0 1 8 0 1 4 1 0 4 1 0 0 1 1 0 0 2 1 2 0 0 3 1 0 0 0 6 0 3 4 3 1 2 0 0 1 0 1 0 1 1 1 5 2 2 0 1 2 1 1 3 0 0 1 1

1 14 12 5 0 11 6 6 4 7 4 4 4 3 9 8 1 7 2 3 1 1 4 2 4 4 1 1 4 0 2 6 4 2 3 3 3 1 1 7 4 1 4 3 2 5 3 3 4 4 5 4 0 2 3 6 2 3 0 3 3 4 1 7 0 2 1 1 0

13 10 18 17 14 12 17 5 5 1 9 11 4 1 12 2 3 4 9 4 5 7 1 6 8 2 2 8 6 5 1 4 4 6 3 7 3 9 7 4 1 3 4 3 6 3 5 3 5 4 4 5 9 1 6 1 4 0 2 3 5 4 3 4 1 3 4 4 6

jse top stocks COMPANY

CLOSING PRICE (MONDAY) (C)

MASSMART HLDGS MOTUS HOLDINGS IMPERIAL LOGISTICS SUPER GROUP LTD ECHO POLSKA PROP HYPROP INVESTMENTS KAP INDUSTRIAL LIBSTAR HOLDINGS RFG HOLDINGS LTD EMIRA PROPERTY FUND THARISA PLC SA CORPORATE REAL EST MPACT LTD MERAFE RESOURCES NAMPAK LTD

zar x exchange DALE CAPITAL GROUP LIMITED RUNWAY PROPERTY GROUP LIMITED SENWES LIMITED TWK INVESTMENTS LIMITED SENWESBEL LIMITED TRANSFORMATION INVESTMENT PORTFOLIO LIMITED

2,702 2,880 2,574 1,290 520 1,804 164 644 1,400 606 1,130 118 800 31 100

P:e — Price:earnings ratio as at recent annual results. Forward P:e — Price:earnings ratio at next annual results. Tot Sell/Hold/Buy — number of buy, hold, and sell recommendations. Sum of sells, holds and buys — number of analysts following company. All information provided by Bloomberg and Bloomberg sources. The FM undertakes to transmit the information as accurately as possible and is confident it is correct, but is not able to warrant its accuracy. Companies not being tracked by analysts will not appear in the above listing, market capitalisation notwithstanding.

MARKET CAP SHARE (Rm) PRICE RET. YTD (%)

5,921 5,552 5,180 4,792 4,721 4,616 4,276 3,921 3,679 3,167 3,051 2,986 1,386 778 690

ISSUED SHARES

TRAILING EST. EPS (*) FORWARD EPS (*)

-47.35 -64.75 -53.22 -54.64 -69.68 -67.81 -60.95 -15.15 -4.56 -54.13 -28.25 -61.44 -46.31 -59.15 -85.36

-4 9.72 -10.15 3.26 0.07 NA 0.37 0.47 0.83 1.55 0.04 0.09 -4.81 -0.54 -1.33

-0.6 9.45 6.21 3.34 0.12 6.47 0.41 0.92 1.17 1.53 0.18 0.39 2.42 0.14 1.21

PREVIOUS CLOSE

DIVIDEND FORWARD YIELD (%) DIVIDEND YIELD (%)

0 NA 10.72 0 0 NA NA 3.88 1.45 25.18 3.97 32.24 5.25 12.9 0

CLOSING PRICE

0.18 15.23 11 NA 45.66 33.81 8.74 4.22 2.78 25.15 7.62 32.86 9.94 47.64 17.61

CHANGE

3-YEAR FORWARD AVERAGE ROE (%) ROE (%)

7.76 NA 14.05 12.04 NA NA 11.13 4.65 9.79 8.84 13.48 6.87 -2.18 0.95 -0.46

VOLUME

-3.82 15.34 14.83 10.74 12 7.81 9.84 9.37 11.29 NA 19.31 NA NA 7.8 7.31

VALUE

P:E FORWARD P:E

NA 2.72 NA 3.66 3.55 NA 3.96 11.56 16.67 4.29 12.59 3.4 4.31 NA NA

NA 3.05 4.14 3.86 2.19 2.79 4.02 7.03 11.97 3.97 3.48 3.04 3.3 2.22 0.82

MARKET CAP (R000)

YEAR HIGH

TOTAL SELL

TOTAL HOLD

TOTAL BUY

3 2 0 1 0 1 1 0 0 1 0 1 0 0 2

2 2 2 2 1 4 2 0 3 1 2 1 1 0 1

2 2 6 4 3 2 4 5 4 3 5 2 3 4 2

LAST BID

LAST OFFER

YEAR LOW

TRADE DATE

202,040,920

0.00

0.00

0.88

0.88

0.00

0

0

177,796

0.90

0.80

30/03/2020

47,995,092

10.50

0.00

10.00

10.00

0.00

0

0

479,950

10.00

10.00

30/03/2020

180,789,308

10.00

12.90

13.00

13.00

0.00

0

0

2,350,261

13.10

6.50

30/03/2020

35,100,993

0.00

29.60

29.60

29.60

0.00

0

0

1,038,989

30.90

12.33

30/03/2020

116,091,853

4.15

5.50

4.50

4.50

0.00

0

0

522,413

6.00

3.70

30/03/2020

2,010,500

0.00

1.10

1.01

1.01

0.00

0

0

2,030

1.10

1.00

30/03/2020

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economic indicators AFRICA TOP STOCKS (EXCL SA) Maroc Telecom Safaricom Attijariwafa Dangote Cement Commercial Intl

ECONOMIC INDICATORS

Country

Market Cap ($000s)

Price Total Return Ytd

Morocco

11,173.98

128.00

-16.34

Kenya

9,945.72

26.05

-17.30

Morocco

7,750.27

371.90

-25.47

Nigeria

5,735.74

129.70

-8.66

Mar 27 4.5

Prime

8.75

9.75

Producer price index

Feb

4.5

4.6

NCD*

5.95

6.58

7.23

Repo

5.25

6.25

6.75

Jibar*

5.68

6.51

7.15

Safex†

5.31

6.31

6.73

Credit Aggregates (% change y/y)

5,515.67

59.13

-28.78

217.00

-21.80

Vodafone Egypt

Egypt

2,338.88

153.48

137.29

Morocco

1,877.93

1,310.00

-21.08

Industry (% change y/y)

Claims on the domestic pvte sector

Feb

5.09

5.01

Total loans and advances

Feb

4.54

4.81

Total domestic credit extension

Feb

4.17

4.38

Egypt

1,751.53

12.26

-21.31

New passenger car sales

Feb

7.6

-5.1

Morocco

1,651.38

176.00

-19.60

New commercial vehicle sales

Feb

-14.9

-14.9

Nestlé Nigeria

Nigeria

1,573.67

765.00

-47.96

Retail sales

Jan

1.2

-0.5

Guaranty Trust

Nigeria

1,367.19

17.90

-31.50

Wholesale sales

Jan

1.9

2.5

Egypt

1,237.11

15.44

-26.16

Manufacturing production

Jan

-2.0

-5.9

Mining production

Jan

7.5

0.1

Equity Group Holdings

Kenya

1,222.65

34.00

-36.45

Morocco

1,152.16

3,315.00

-15.00

Mineral sales

Telecom Egypt

Egypt

1,111.02

10.25

1.89

Trade (Rbn)

KCB Group

Kenya

1,051.82

36.00

-33.33

Imports

Wafa Assurance

East African Breweries Banque Marocaine Stanbic IBTC Societe Des Bois TMG Holding Standard Chartered First National

Kenya

1,039.90

138.00

-29.41

Morocco

775.38

588.00

-17.76

Nigeria

662,47

24,30

-36,54

Morocco

656.40

2336.00

-18.04

Egypt

6,55.14

5.00

-38.80

Kenya

585.95

178.75

-11.73

Botswana

584.10

275.00

-1.55

Jan

24.2

-5.3

Jan

103.28

88.97

Exports

Jan

101.41

102.86

Trade balance

Jan

-1.87

13.89

Gold reserves

Feb

6.53

6.36

SDR holdings

Feb

2.46

2.47

Forex reserves

Feb

45.72

45.78

Week ago

Year ago

Gross reserves

Feb

54.71

54.61

Net reserves

Feb

45.36

45.15

EXCHANGE RATES

12-mth low 12-mth high

Precious metals ($/oz) Gold

Mar 27

Month ago

Year ago

12-mth low 12-mth high

1,499

1,318

1,271

1,687

US dollar

17.62

15.36

14.60

13.87

17.99

745

613

862

602

1,028

Euro

19.63

16.80

16.46

15.49

19.82

Palladium

2,265

1,643

1,517

1,304

2,774

UK pound

21.94

19.77

19.29

17.22

22.22

Silver

14.47

12.62

15.45

12.00

19.29

Japan yen (100)

16.32

13.96

13.24

12.44

16.63

Canada dollar

12.60

11.52

10.89

10.45

12.69

1,516

1,559

1,892

1,498

1,893

Switzerland franc

18.52

15.82

14.70

13.81

18.74

Australia dollar

10.87

10.10

10.36

9.70

11.15

Base Metals ($/t) Aluminium Copper

4,783

4,805

6,336

4,625

6,537

Nickel

11,298

11,155

12,977

10,806

18,153

Lead Tin Zinc

1,694

1,643

1,991

1,566

2,286

14,315

13,980

21,400

13,335

21,524

1,868

Iron Ore

1,845

2,943

1,803

3,031

Bond yields (%) Mar 27

Month ago

Year ago

R186

8.210

7.815

8.740

R213

11.855

8.985

9.410

R208

4.950

6.065

7.040

R209

12.230

9.640

9.665

INSPIRED THINKING

Brazil real

0.28

0.29

0.26

0.25

0.30

China yuan

0.40

0.45

0.46

0.39

0.50

India rupee

4.26

4.66

4.72

4.19

5.10

83.01

81.21

76.24

118.96

Russia ruble

4.47

4.28

4.44

4.22

4.68

Brent ($/bbl)

24.54

25.72

67.15

22.04

73.89

Malaysia ringit

0.24

0.27

0.27

0.23

0.29

Coal ($/t)

78.50

63.50

80.20

58.50

87.50

Thailand baht

1.85

2.06

2.17

1.81

2.28

Botswana pula

0.67

0.72

0.74

0.66

0.76

2,737

3,206

2,939

2,457

3,981

Yellow maize

2,717

2,732

2,737

2,417

2,982

Wheat

5,217

5,211

4,680

4,347

5,450

Sunflower

5,825

5,558

5,390

4,835

5,997

Economist: Global Markets Research,

Soya

6,686

6,552

4,822

4,479

6,882

Rand Merchant Bank (tel) +27 11 282-1040 or e-mail: Mpho.Tsebe@rmb.co.za

Agriculture (R/t)

2019 SPIRE AWARDS

2019 SPIRE AWARDS

Best Forex House

Best Fixed Income and Forex House

4th Consecutive Year

3rd Consecutive Year

Developing Markets — Foreign currency unit per rand

81.97

Energy

White maize

† Overnight rate

Developed Markets — Rand per foreign currency unit

1,628

Platinum

* 3 months

10.25

Gold & Forex Reserves ($bn)

COMMODITY PRICES Mar 27

Year ago

4.6

4,358.33

Abou Kir Fert & Ch

Month ago

Feb

Egypt

Cosumar

Short-term interest rates (%)

Consumer price index

Morocco

Eastern Co SAE

Month ago

Inflation (% change y/y)

Banque Centrale

Ciments du Maroc

INTEREST RATES

Latest

1010508/FMCB

Company

The information in the commodities column is provided by Mpho Tsebe,

RMB. Solutionist Thinking.

CELEBRATING OUR PARTNERSHIP WITH OUR VALUED CLIENTS AT THE 2019 JSE SPIRE AWARDS. Clients are at the heart of our business, which is why we are honoured to have been recognised at the 2019 JSE Spire Awards – the benchmark for the South African Capital Markets. Our Solutionist Thinking is not only what sets us apart, it’s what inspires us to consistently deliver innovative solutions for our valued clients.

Corporate and Investment Banking

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April 2 - April 8, 2020

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adfocus buying habits

SHOPPING’S SEISMIC SHIFTS The shift caused by Covid-19 in buying patterns — and even in the type of products that consumers are after — is expected to endure beyond this crisis, and brands would do well to prepare themselves for this new world Jeremy Maggs jmaggs@iafrica.com

of these shifts, luxury products will be hardest future by ensuring [they] remain top of mind.” hit, while sales of products consumed socially Lynne Gordon, managing partner at — such as alcohol — will drop sharply in the Kantar’s consulting division says: “For brands short term. and business, it is a challenging time. The Moroke says: “Now is a time for brands to demands of the rapidly changing world require step up to serve consumers better.” He says fast responses and deliberate choices today.

32% of consumers want brands to offer But opportunities abound to respond to the practical help in response to Covid-19. “In these shifts — maximise impact for people, shoppers trying times, it is not enough for brands to offer and organisations, and emerge prepared to personal benefits to consumers — great play a leadership role in the recovery.” x brands will reach Early signs indicate SA consumers preparing beyond their functional promise for “eye of the storm”, worrying about the future for individuals to Concern and Current Economic and demonstrate their impact preparedness financail impact positive impact on Concerned about Being prepared Need to be more society as a 74% Covid-19 66% proactive about and informed is whole.” Brands fundamental financial planning will also need to Day-to-day life Ready to take this Will have long-term 58% 16% 62% consider how to impacted head on economic impact invest effectively during this The pandemic is changing media and unusual time. social connection habits “Already, we Increased media use Social connection Trusted media see consumer in past month in past month sources media-behaviour Digital and Consumers increasing Despite increased shifting broadcast media personal connection use, only 1 in 4 trust significantly as increasing due to via social networks social media people isolate self-isolation 65% themselves in 50% their homes.

41% Digital media 35% 23% usage is up with over 40% of Social My National people spending 43% 45% media doctor media channels more time on websites, social Only 2% of South Africans feel advertising media and should stop. Be tone-sensitive to offer security WhatsApp to stay in these testing times. SA feels brands and connected and inform themselves companies should Companies on the status of Reassure 81% should worry 83% the world around SA feels brands need agree about to be practical them. Smart employees’ Inform 86% and realistic and help brands need to health consumers in their maintain presence everyday life Be helpful 88% High expectation for and awareness companies to fulfil responsbilities during the crisis, 32% Do not exploit 80% as employers and in wider community preparing Source: Kantar's SA Covid-19 barometer themselves for the

2

3

Brand expectations

April 2 - April 8, 2020

Changing media habits

Situation 14-16 March

1

ý Covid-19 is having a radical impact on how South Africans shop. As week 1 of the lockdown ends, 22% of them say they are now using online shopping more frequently, according to new analysis from research agency Kantar.

Ivan Moroke, CEO at Kantar’s insights division, says: “This new reality is overwhelming for brands and businesses. It’s now essential for marketers to tap into how consumers’ needs and purchasing habits are changing, to ensure these are well met when we finally start to come out the other side.”

According to the Kantar research, 42% of people under 35 say they are shopping less at physical outlets in favour of e-commerce.

Online delivery services from major retailers are flourishing, and smart retailers are rapidly expanding their offerings. Online florist Netflorist has launched next-day delivery of fresh produce, with prepared meals coming soon.

Furthermore, Kantar predicts consumers will increasingly shop closer to home, with a shift from crowded malls and chains to local convenience channels.

The agency believes once the crisis is over retailers should expect that some new habits will endure, and brands will need to be ready for new omni-channel behaviours as shoppers explore, compare and buy interchangeably across online and bricks-and-mortar stores.

Kantar says we’re also likely to see a shift in the types of products purchased during and after the crisis. “Even consumers focused on fashion, luxury and beauty purchases prior to Covid-19 are now shifting their wallets towards toilet paper, hand sanitiser and staples,” the agency says.

“While panic buying will lead to short-term spikes, it is the more fundamental shift towards essentials that will prevail. Concerned about their physiological needs, consumer-spend will move towards categories like groceries, cleaning products and airtime.”

Faced with uncertain times, 66% of South Africans are expressing fear about money — and are likely to become more open to financial services products to be better prepared for the future. Kantar says in the face

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life

Macaulay Culkin and singer Lizzo

A look at how to spend your downtime — from music, to sport, books, the theatre and the screen PODCASTS

NOW LISTEN HERE! A pick of podcasts for these surreal days of flitting from couch to bedroom to kitchen and back Jo Buitendach

ý If you haven’t already flung yourself into the podcast vortex, the national lockdown and having a whole lot of time on your hands may change that.

And just in case you have been living under a rock, a podcast is a recording of an audio discussion that can be downloaded or streamed via apps like Apple Podcasts or Spotify.

You may find podcasts to be the perfect distraction if you should start to feel a little stir-crazy after being stuck indoors. Here are some of our favourites:

123RF/zodchiy

Famous and opinionated It’s not just us ordinary mortals who’ve jumped on the podcast train — celebrities have also. And the benefit of being a star, other than having money and fame, is that you know a lot of other celebs you can interview.

Bunny Ears is the creation of former child star Macaulay Culkin (yes, he of the Home Alone movies). And Mac, as he calls himself, is a lot more normal and interesting than you would think. He talks pop culture and chats to famous friends like singer Lizzo and skateboarding icon Tony Hawk.

Feisty comedian and host of Netflix hit Nailed It! Nicole Byer presents Why Won’t You Date Me?. The podcast is a comedic exploration of the reasons no-one will date her and looks at dating in the modern world.

From creating the perfect Tinder profile to moving on from a nasty relationship, Byer and her guests handle them.

Jad Abumrad, creator and host of Dolly Parton’s America, says that in today’s divided America the one thing people can agree on, whether they are Republican or Democrat, conservative or liberal, is that Parton is awesome.

This nine-part series delves into the “Dollyverse”. Parton herself, academics and fans talk about topics like feminism, politics (they call it “dollitics”) and, most important, the meaning behind Parton’s song Jolene.

Music to your ears If you are a music fan and looking to begin your podcast journey, a good starting point is the BBC radio classic Desert Island Discs. It was first broadcast in 1942, and each episode (there are over 3,000 to work through) features a guest, or April 2 - April 8, 2020

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55

Team Ear Hustle (L to R): Sam Robinson, Antwan Williams, Earlonne Woods and Nigel Poor Eddie Herena

“castaway”, who has to name eight songs, a book and a luxury item they would take with them to a desert island. The long list of guests has included actors, pop stars, sports personalities, cartoonists and scientists. And their tune choices are even more varied, ranging from opera to heavy metal and everything in between.

Pop culture and music magazine Rolling Stone has branched out to the podcasting world with Rolling Stone Music Now. Weekly

episodes feature writers and editors chatting about the biggest stories in the music world, who is at the top of the charts and who you should be listening to in the mainstream and indie music world.

Just like the rest of us, the music business is feeling the impact of Covid-19. An episode titled “Cancellations, Chaos” delves deep into the way the pandemic has halted the music and concert industry. If that sounds a little depressing, rather focus on something like “The Magic of BTS — and the History of Boy Bands”, which puts the spotlight on BTS, a sevenmember South Korean boy band who have taken the world by storm.

Just ask your kids; these guys are HUGE. Feminist 101 Stuff Mom Never Told You discusses issues around feminism and womanhood, and challenges perspectives on gender, race and class. This podcast has been in production for over a decade, so there is a great back catalogue to keep you busy. It examines important subjects like gender-neutral, nonbinary pronouns, female firsts and historical figures.

For more light-hearted

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April 2 - April 8, 2020

subjects during these dark times, take a listen to the episodes on women in puppetry or the feminist book and movie club.

Something different If you are wanting to get out of your bubble of isolation and understand what a lockdown really is, listen to Ear Hustle. This remarkable podcast is created, produced and presented by prisoners at the notorious San Quentin State Prison just north of San Francisco. For some of us who have never experienced life inside, prison holds a dark fascination — just think of the popularity of television programmes such as Orange is the New Black or Prison Break. But this podcast shares with us what prison is like as inmates tackle subjects like pets, fashion and starting a family. More recent episodes mirror the concerns that those of us on the outside have regarding Covid-19. But these prisoners’ fears are multiplied by the prospect of going into a 60-day lockdown because of the virus, which would mean no visits or communication with the outside world. They worry for the lives of older inmates, or for their families on the outside with whom they will have no contact. It’s a must-listen.

A podcast centred on the idea of interviewing an inanimate object sounds like a dreadful topic for a school essay — but Everything Is Alive is brilliant. In each episode host Ian Chillag interviews a new “object”, played by an actor or actress, so you could be getting to know “Shannon, Bath Towel” or “Louis, Can of Cola”. In the case of an emotional “Emmy, Pregnancy Test”, the lifespan of a pregnancy test is discussed (it’s three minutes, by the way). Then Emmy dies, and her pain while recounting her story is obvious. It’s melancholy yet fun, and definitely worth listening to. x

life inbox DRINKS South Africans scoop the gold

PRIZE-WINNING GNT ANYONE? ý The people who gave us Frankie’s Olde Style Soda have, in less than a year, produced a gin that has garnered a global award.

Mike Schmidt and his wife Paula opened Hout Bay Harbour Distillery two years ago, and have produced a navy-strength gin which was voted Best Navy Gin in the world, (very strong at 57% alcohol content) at the World Gin Awards 2020 in the UK in February.

They were up against about 40 other gins from around the world in the category, while the awards as a whole attracted about 450 gins — the most entries in the awards’ seven-year history.

Schmidt is the gin’s founder and master distiller but the couple started Frankie’s Olde Soft Drinks in 2006.

The stylishly packaged and popular craft soda made national headlines when it took on Woolworths in a “David and Goliath” battle after Woolworths copied its packaging a few years ago — they won, forcing the large listed retailer to can that range. The couple subsequently sold the business to Clover in 2015, and moved from KwaZulu Natal to Cape Town.

It may seem they have a keen interest in liquids but, to Schmidt, it’s about creating brands. “The Frankie’s thing was about looking around the marketplace and realising there were no craft soft drinks in SA. After the sale of Frankie’s to Clover SA we looked around for another opportunity and decided to get in on the worldwide popularity of craft gin.”

So how did they make the change to booze? They went on a few courses to learn the basics of distillation. “We’re a pretty creative family but it’s really about selecting ingredients that you are familiar with,” he says. Coming from KwaZulu Natal, Schmidt is understandably a big curry fan and this manifests in the

ingredients used in their gins — including cinnamon, cardamom, coriander, orange, lemon and angelica root. Above and beyond the all-important juniper, of course.

A new challenge Schmidt says the gin market is overplayed. “The craft gin market isn’t as craft as everybody is led to believe.” Many gins are produced from existing gin, with a few additional ingredients blended in and then portrayed as craft gin, he says.

“There’s so much competition and for a small business like ours, winning an award of this size is hopefully the best way to get the traction we need in a crowded market. Without it, it’s hard to get noticed.”

It’s been a struggle to find traction and distribution. Obtaining the licensing has been “something of a nightmare”. It took 20 months to obtain an excise registration from the SA Revenue Service and 14 months to get their licence to manufacture from the Western Cape Liquor Authority, which they received only five-and-a-half months ago. This meant they could produce the gin but they couldn’t sell it.

“Establishing a route to market is without doubt the most important

aspect for any new business if they are to have any chance of success. But we’ve struggled in this area.

There are so many gins out there in fancy bottles with fancy labels that fall way short in terms of quality and frankly the consumer is confused.

“The gins we produce are properly distilled using a traditional London Dry method and we feel that the quality of what we produce has been endorsed by this award.” They see their gins in the same category as Hendricks, Bombay Sapphire or Tanqueray: a good quality classic.

Their success in the awards piqued the interest of Pick n Pay, which approached Schmidt after they won the first stage of the world gin awards, walking away with “best in SA” in January.

The plan is to go national, and they are also working on potential international markets. “We’ve been

talking to people in Australia and Europe especially Germany, the UK and, until recently, China.”

Schmidt disagrees that the gin revolution has peaked and will soon be replaced with something like rum mania. Rather, what’s hurting the market is the amount of “bogus craft gin” that is on the shelves and consumers are being misled into believing that what they’re buying is handcrafted.

He says it’s not clear how large the local gin market is locally, adding that big players like Distell and KWV are clearly interested and are now doing “craft gins”, which must indicate the value that they see in this market segment.

Has he approached Woolworths to sell their product? Well, Woolworths doesn’t sells hard liquor (it only sells wine) so that avoids a possibly awkward scenario. x Adele Shevel

The family: Jessica Schmidt, Paula Schmidt, Mike Schmidt, Emily Schmidt

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a moveable feast by Fred Khumalo

REALITY BITES HARD Social distancing is a bad joke in overcrowded townships such as Alexandra, where people live hand-to-mouth. Yet the middle classes can’t understand why they won’t obey regulations by staying indoors Alexandra Township Sowetan/Veli Nhlapo

@fredkhumalo

R

emember how former president Thabo Mbeki was pilloried for pointing out a pretty obvious thing — that SA is a country of two nations: one rich and white, the other poor and black?

Never before has this theory been so palpably illustrated now that SA is in the grips of coronavirus-inspired fear and uncertainty. Some middle-class people in the suburbs can’t understand why people in the townships and shacklands won’t stay indoors and obey the regulations.

What we lose sight of is that most people survive hand-to-mouth. Living in overcrowded conditions, they don’t have enough money to buy in bulk.

Even if they had money, there would be no space, let alone fridges, to store their food. So they have to venture out almost every day to get food, with whatever money they have been able to scrape together on any given day.

To these people, social distancing and self-isolation is a bad joke. In Yeoville, it is not uncommon to find a room meant for one person being subdivided by curtains so it can accommodate three couples.

In other, even more desperate instances, people take sleeping shifts: while one person is at work during the

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day, the other uses the room to sleep.

When the first person returns from work, the one who’d been sleeping gets out of bed, dresses and goes to work.

And the bed is immediately taken over by the one who had just returned. These people are not related, they are not a couple. They just use the same bed at different times.

During the weekend, when they are both home, they can’t stay indoors. They hang out in front of the building: I am sure you’ve seen people standing around in front of buildings and you thought they were just chilling. They have nowhere to go.

I’ve always known of these dynamics.

But they have taken on a new meaning with the Covid-19 outbreak.

In Alexandra, which is just across the road from Sandton where I live, overcrowding is even worse. The latest statistics show that 26,000 people occupy dwellings that are squashed into 1km². I know it’s hard to believe. But check all available sources on this, they say exactly the same thing. If you’ve been to Alex it’s easier to believe.

Under such circumstances, social distancing is clearly impossible. And now someone has tested positive for Covid-19 in Alexandra and five people are in quarantine.

The day before lockdown began, I

said a prayer for the people of Alex.

Then I went out to buy my last prelockdown bunny chow from Curry and All at The Wedge Shopping Centre in Morningside, Joburg.

The woman after me ordered 12 bunnies.

“Having a pre-lockdown party?” I asked. She said: “I’m going to freeze them and enjoy them over the next two weeks.”

Good idea, thought I. So I bought four for my freezer.

The following day, with lockdown in effect, I drove around my neighbourhood, buying more foodstuffs for the long haul.

The two Woolies branches near me, in Morningside and Gallo Manor, had both run out of red meat. All they had was pork and chicken. Also out of stock were tinned foods.

Pick n Pay at Morning Glen Mall still had lots of red meat, but had run out of eggs.

Fizzy drinks were scarce at all the shops I went to, except for the Pick n Pay in Woodmead, which was still well stocked in that department.

I did warn you that this column would change in keeping with Covid-19 realities. We are not writing about luxury restaurants now. We are talking survival. x

life memes

Laugh or you’ll cry In the face of adversity and, well, the gigantic disaster of Covid-19, people sure get clever. And amusing. Here’s a round-up of the best local and international examples of fighting the devastating flu with the funny - WhatsApp jokes, tweets and memes included.

Sarah Buitendach

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backstory WANDILE SIHLOBO

Agricultural economist and author: ‘Finding Common Ground’

What’s your one top tip for doing a deal?

Ensure that both sides are better off. If one feels unfairly disadvantaged, it threatens the sustainability of the deal.

How do you are you planning to get through the lockdown?

It will mostly be work, reading and writing.

What was your first job?

I was a tutor at the University of Fort Hare.

What is your biggest regret?

Not doing a lot of quantitative subjects in school.

How much was your first pay cheque, and how did you spend it?

It was for R500 and I spent it on pizzas and other things students like.

What’s the most interesting thing about you that people don’t know?

I listen to a lot of hip-hop music.

Was there ever a point when you wanted to trade it all in for a different career? And if so, what would that career be?

No — I actually changed from accounting to agricultural economics.

What has been your worst purchase?

Expensive gadgets that I quickly got bored of.

How do you cope with load-shedding?

Like every other South African. It’s a constant struggle.

What is something you would go back and tell your younger self that would impress him?

I’m going to have a book published before turning 30.

If you were President Cyril Ramaphosa, what would you change, or do, tomorrow?

His response to Covid-19 is commendable. I would continue to make the tough decisions to save lives.

What is the one thing you wish somebody had told you when you were starting out?

You always need to have a strong support system around you.

What’s the most interesting thing about you that people don’t know?

I listen to a lot of hip-hop music.

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What is the one investment you wish you had made, or made earlier?

Investment in my wellbeing and taking time for myself. If you are healthy and your mind is in the right place all other things will follow nicely.